By Kathy Gibson

In contrast to most other industries, the insurance industry business model has not changed over the last century or so. Insurance is still product-centric, with a strong agent network and driven by skilled actuaries. In recent years, we have seen the introduction of some apps, but mostly for simple products.

“We haven’t seen the same pace of change in our industry as in other industries that have been transformed,” says Oliver Bate, CEO of the Allianz Group. As the world becomes more digitised, established companies are having to re-evaluate their business models and, in many instances, make sweeping changes.

“Allianz itself tracks its organisational health; and ensures that trust is still solid,” Bate says. “The company performance is good; it has just recorded another year of record profits; it retains its customer’s trust and has a high degree of resilience; and it remains a leader with skilled, motivated staff. But, unfortunately, all of this is changing.”

Some of the drivers of this change are macro-economic, he says, with ultra-low interest rates, low oil prices, volatile financial markets, demographic shifts and the rise of new economic powers all playing a part.

At the same time, politics and regulation is also changing: there are geographic uncertainties, solvency issues, tensions in the EU, and tightening regulation.

And Industry trends are shifting, with consumerism and digitisation coming to the fore, and fintech becoming more relevant, along with connected assets.

“But the key paradigm shift is not technology,” says Bate. “It is coming from the fact that technology has enabled us and others to create new services and products that better service customer needs.

“The point is to take technology and entrepreneurship, and recreate products that better suit customers. The key is not to understand technology but to understand everything about our clients.”

So Allianz is thinking hard about what this new world offers customers and how it can develop new products that work for them, Bate explains.

“We are not doing this from altruism; but because the most profitable businesses are those with high customer satisfaction. It’s not about whether the products are pricey or not, but whether we can deliver great services. For us, technology is a means to achieve higher customer satisfaction.”

The key to this, Bate believes, is personalisation. “The new world allows for a high degree of personalisation and that is the essence of innovation – to develop personalised services and meet expectations that were too expensive to meet in the past.

“Complexity used to be the opposite of efficiency, but now you can offer a high degree of specialisation at a low cost.”

In the traditional insurance models, companies sold products, he adds. “Now customers can compare products and pick what they want; and not buy what they don’t want.

“So, in addition to personalisation, there is a lot for freedom. This means we have to permanently benchmark our offerings against competitors.”

The third component is about ease of use, says Bate – a contrast to the traditional model where insurance was difficult for customers. “Nowadays, a quote for car insurance should take 30 seconds. In the past it would take three hours to get the first price point.

“This new simplicity allows the user to think about what they want as well,” Bate points out.

He says Allianz has been driving a number of new innovations, from information services, to configuring services, from new covers for products and risks not covered before to developing online services that didn’t exist in the past; and covering new risks.”

“Now we have to make sure these customer-centric assets become scalable – so we can harness the best of them globally.”

For instance, Allianz has signed a joint venture with Baidu in an attempt capture opportunities in the Chinese digital insurance market, using the digital ecosystem in China to drive opportunities.

“Technology allows you to jump the S-curves in markets you would otherwise not be able to compete. And, as you move into the digital world, you can change the game.”

There are aspects apart from the digital agenda that facilitate the journey, Bate says, and Allianz’s renewal agenda comprises five key levers:

  • True customer centricity make superior customer experience the top priority for all our actions;
  • Digital by default – move from selected leading assets to become digital by default everywhere;
  • Technical excellence – create superior margins, innovation and growth through best talents and state-of-the-art skills;
  • Growth engines – systematically exploit new sources for profitable growth; and
  • Inclusive meritocracy – reinforce a culture where both people and performance matter.

Bate points out that Allianz is integrating a number components into a single digital agenda.

“The first of these is the global digital factory,” he says. “You need to be able to scale and this means finding common platforms, designs and product development. New customer journeys will be designed though these digital factories.”

The second component is digital partnerships and ventures. “In the new world you don’t know what the new standard or products, so you need to try out new products, and have to work with innovative startups.”

The third components is advanced business analytics, says Bate. “Big data is the new buzzword and we need to leverage it. We hold lots of data, but it is often difficult to access and we often miss opportunities. So we need to be able to access data and then make sense of it. A lot the time we work with clients to find out what is meaningful or not.

The last element is the digital demand hub. “Someone needs to set priorities and decide what gets done and with which partner; and we need to define processes. This helps to achieve scale in a world where it is very essential.”

Digital transformation is a journey, Bate says, and Allianz has spent the last few years laying the foundations.

“The next step is about acceleration and embedding a digital culture. This means bringing in new people, and also leveraging the asset of our existing people – bringing the two together will make a difference.

“And hopefully, in the next couple of years, this will make Allianz a market leader.”

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