Interview with Mark Klein, Chief Digital Officer ERGO Group
Being a former telco executive, how does the insurance business compare to one of the most dynamic sectors around?
Mark: "There are actually several parallels between the insurance and the telco industry – such as products that seem interchangeable, and points of sales across an entire country. Telecommunication successfully switched to online while, for certain internally, telco services are very complex. And of course, for both telco and insurance digitalisation is a massive game changer."
If you have to bet on one technology that could drive this fast progress, or even revolutionise insurance, what would that be?
Mark: "We have to focus on the big question: How can we use digital technologies to transform our business model? We have to get on with it, like every other insurance company. We need to improve our processes and respond much more effectively to the needs of the customers. Any insurance company that fails to do that closes the door on fifty percent of the future market. Those companies will certainly not be attractive to the customers of the future: the hybrid customers who consult a variety of information sources and channels before they buy insurance. They do not compare us with other insurance companies. But what they expect of us to offer exactly the same processes that they are used to when they buy from companies like Amazon: easy-to-understand information, a transparent product, a straightforward buying experience and – please take note – a minimum of after-sales service. At the risk of exaggerating: no service is good service. The initial online contact between the customer and an insurer must be so intuitive, so transparent and so straightforward that the customer has no need to call our service personnel. From this perspective, all kinds of solutions that help to save processing time can help us, such as chat bots or other examples of artificial intelligence."
In our latest book ‘Reinventing Customer Engagement. The next level of digital transformation for banks and insurers’ we argue that financial institutions should leverage technology not to replace staff, but to empower front liners.
Mark: "Yes, digitalisation opens up great opportunities for insurers to serve the customer best, particularly in difficult situations. One example: automated processes designed to save processing time and the use of artificial intelligence, e.g. through chat bots, can lead to more personal contact between the people inside and outside of an insurer. They allow us to focus more on the emotional aspects of our customer-facing role. A customer who just had an accident will have a more positive emotional experience with his or her insurer.”
A range of new entrants are offering new attractive business models that tap into the frictions customers experience when dealing with incumbents. Should the established carriers be worried?
Mark: "At the moment new entrants mainly focus on the sales aspect of insurance; also artificial intelligence plays an important role. I am excited about these players since I am convinced that these players help us to improve our value chain. The key to success is for me not change for change’s sake, but to fine-tune our existing business model to take into account the latest technologies and changes in customer behaviour. It is more evolution than revolution."
Can you describe how your team is driving this evolutionary change within the ERGO Group?
Mark: "As Chief Digital Officer it is my main duty to oversee the digital transformation of ERGO’s traditional lines of business both at home in Germany and abroad as well as setting up new digital business models. Driving this digital change starts for me always with the employees. We have to engage with them, be transparent and let them know what we are doing. To prepare them for the new digital world, we rely on agile working projects: Specialist departments and IT collaborate closely right at the start of a technical requirement and get together often and regularly to review the process. Here the department involved must learn to define the minimum product needed – and not, as often used to be the case with IT-projects, order a large-scale solution that covers every eventuality thus for example if you want to obtain a vehicle from IT you should try ordering a scooter before asking for a car. A scooter delivers transport too. Then you can start collaborating on a motorcycle and eventually a small car. You certainly should not start out asking for a luxury saloon just to be sure that you at least get a small car. Quite often, the technology is already available. It is simply a matter of making it productive quickly and deploying it in real-life scenarios. Our goal is to translate our plans into action, achieve quick successes and encourage lots of people within ERGO to experience digitalisation for themselves."
Mark Klein (Ergo Group) at DIA Amsterdam 2017
What are the most important success factors of making a cooperation with insurtechs work effectively?
Mark: "First of all: It is vital to be willing to learn from each other and to work hand in hand and find solutions together in order to improve the value chain. Success depends also on the players’ ability to deliver results despite their different backgrounds and environments. Understanding your own and your partner’s behaviour and blind spots, facilitates finding a solution when a conflict occurs. Of course we also need to leverage our assets and bring them together with start-ups, e.g. available data or customers access. And it is important to test ideas as early as possible. It is therefore much more promising to test a minimum viable product quickly as a standalone solution rather than slowing down by integrating the product in existing corporate processes or IT systems beforehand. That makes it possible to test a hypothesis in practice together with great efficiency – using minimal resources. And finally, learning from it and making the solution better as we progress. I am convinced that this approach makes cooperating within our company but also cooperating with small players like start-ups most effective."
Do insurance companies have to change when dealing with start-ups and other young insurtechs?
Mark: “I surely believe we have to. Some start-up companies cannot even sign the NDA’s that are common in the insurance business because then they would be out of business. We as insurers should have responsible people on our side who drive you through our complex organisation structures with multiple departments and multiple layers, in contrast to a young company with ten or fifteen people. They are sometimes overwhelmed when they come into a meeting room with twenty people. I have seen companies that were not able to deliver anything just by the number of meetings that we held. We have to do these kind of homework! Start-ups need somebody on our side who safeguards them in order to be successful, for example a project manager in the innovation unit. All your documents need to be reviewed and your processes and your decision points. Otherwise even the best and most innovative company runs the risk of failing within your processes and your documents.”
Digital transformation is not a technology challenge but a people challenge. It is about cultural change.
Mark: "Yes, I am deeply convinced that driving the massive digital change starts with the employees. I am excited to get engaged in a conversation with them through various aspects of digitalisation. This is why we started at ERGO the “digital mornings” in which we discuss with our colleagues the manifold aspects of digitalisation. We appreciate the feedback of the participants a lot – the events are booked out just a few minutes after we sent out the invitations. We also use other formats such as fishbowl conversations; also my blog serves me as an important sounding board for all aspects of digitalisation that my colleagues engage with. For me, fostering dialogue und deepening the understanding of digitalisation is crucial on our transformation journey."
We quite often see that, positively stated, insurance carriers have a strong immune system. How do you deal with that?
Mark: “I think the corporate immune system is always pretty strong and in insurance it is extremely strong. As a step, we at ERGO created a real company, ERGO Digital Ventures, that is dedicated to innovation management. We have already founded new companies that are part of ERGO Digital Ventures and at the same time we have three well-established risk carriers in there: one for life, one for health, one for P&C. So when we want to work with a start-up, I would ask potentially some of the German or some of the Greece colleagues. They might say: Mark, this is not the priority for me. This is also kind of an immune system at work. But with ERGO Digital Ventures we can decide to implement ourselves. So encapsulate new digital initiatives, secure end to end decision power and get it out.”
Interview with Mark Klein, Chief Digital Officer ERGO Group
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