In our latest book Reinventing Customer Engagement we featured Aviva’s Digital Garages as a worldwide best practice when it comes to involving the insurtech ecosystem and spearheading the digital transformation process. Andries Smit, Managing Director Global Digital Factory at Aviva, played a pivotal role in setting up the Digital Garages. His vast experience furthermore includes the transformation at Aviva and creating lasting partnerships with key external partners.
With the UK as its home base, Aviva operates in no less than 14 markets and has about 33 million customers worldwide. Aviva launched its first Digital Garage in London mid 2015 and they have since expanded to Singapore, France, Canada and Poland. The Garages are not just innovation hubs but a business function with a P&L and accountability for trading, sales and retaining customers. Aviva runs its retail business from the Garage, while the division is also responsible for brand and how the company talks to customers. The Garages also help Aviva to engage with InsurTechs and inject their culture into the Aviva organization; by launching startups themselves, but also by partnering, mentoring and investing. Aviva Ventures is also housed in the Garage, and so are some of the startups they invest in. In September 2018 Aviva launched a new Joint Venture with Tencent and Hillhouse Capital in Hong Kong: Blue. Aviva is also one of the founding contributors to Founders Factory in London; other contributors include companies such as L’Oréal and EasyJet.
Andries Smit was one of the thought leaders who shared his vision at the 2018 edition of DIA Munich. Expect a similar level of keynote speakers at DIA Amsterdam 2019. DIA Amsterdam 2019 will take place on 25-27 June. Tickets are still available. Just click here to register.
Andries, partnerships have been in the DNA of the insurance industry for centuries. Can you elaborate on why it is different now?
Andries: “Yes, partnering in insurance is nothing new. Insurance as an industry is pretty accustomed to work with partners. The interesting nuance though, is that we are very used to 1 to 1 relationships: partnering with a reinsurer; or partnering with a bank as a distribution partner. Ecosystem partnering is very new to the industry., And although new technology is now enabling multi-partner relations, this is effectively a new skill for us to learn. The other interesting trend I’m observing is that technology is now allowing us to also partner inside our own organisations, between business units and markets: partner for operations, partner for customer experience, for customer onboarding, for document management, for financial management. Lastly, the fact that customers now always have such high expectations about their experience with your product, means it’s no longer good enough to simply hand responsibility for a part of the experience to a supplier. All parties involved now need to really partner together to ensure that the end to end customer experience is brilliant.”
Would you say that the current interest for ecosystem is just a hype or will we see this develop more in the years to come?
Andries: “I don’t think it is hype. We are seeing massive convergence into large platforms and ecosystems. Fundamentally people want convenience and value. Having it in one place is just easier, simpler and faster. To the point that we are starting to see people moving in niches within ecosystems. The economic importance of ecosystems is very simple: customer footfall. It is very expensive to acquire insurance customers. Being able to reach many is best. Humans are by nature self-optimizing to the lowest possible effort (or highest convenience). They move to where it’s simplest and easiest to do what they want done. And currently this is converging in large mobile ecosystems. There is a second advantage of partnering with a large ecosystem: better understanding what customers really want. What are people thinking when they are in that moment? This is a new skill. Rather than just assuming, ‘I am going to interrupt you with whatever you are doing, and I am going to tell you about my insurance offering’. Really speaking to customers about their wants and needs is critical.”
What is your vision on ‘ecosystems’? What kind of platforms and ecosystems do you think are key to the future of insurance?
Andries: “I believe that insurance will become integrated into large platforms and ecosystems. Very similar to how payments are integrating, for example. Insurance (like payments) is the grease in the wheels for customers to do what they want to do. Pay, manage risk, protect against uncertainty … Just think about it: today, no plane can take off without insurance, no ship can sail, no building can open, no work can be done. Insurance enables so much.
Following this logic, I foresee that there will be a set of global insurance operating systems – the basic infrastructure that underpin these customer needs and transactions. Similar to banking, this will take some effort: evolution of regtech and regulations, consolidation of industry players, majority of insurance and financial systems but I believe there is enough value in the value chain to drive towards this.”
Much is also being catered by the big tech platforms. And, of course that gives a total new dynamic. Some thoughts you could share about that new reality?
Andries: “Absolutely. Consumers are being overwhelmed: by content, apps, emails, messages, ads… with everything. Users can’t cope anymore, they are consolidating their time and focus on the five or six big platforms. Let me take Tencent in Hong Kong, who we are working with, as an example. The average Wechat customer spends four and a half hours within the WeChat app. Being within that ecosystem is no longer a choice for a business. You just have to, because that is where the consumers are.”
More and more insurers are taking a consumer perspective that reflects in moving from products to services.
Andries: “I agree. Customers don’t wake up in the morning thinking: ‘I need to buy home insurance’. They care about their home, they care about the things that are in there, they care about the people that are in there. So, the vision is to really plug in to that customer in his or her normal day and living. Not to cause a new friction or a new decision. It’s about becoming integrated in their lives, integrated into their ecosystems or platforms where they already are.”
Can you give an example?
Andries: “Sure. We had this wonderful experience in China. We have a big partner there and I had the privilege of meeting them. They talked about the six utilities humans consume every day. They eat, they go to work, they work, they talk to other customers, they buy stuff, and they need to be healthy. That are the only six things which they absolutely have to do. That really provoked something in me to think, ‘well how do we just embrace that, how do we just plug in to those six things that customers do every day, rather than trying to say to them: stop one of your six and listen to me?’. I think that the secret is to stop trying to change our customers, but rather just aligning with their daily needs and wants. That’s what all the big tech successes are teaching us … By the way, new insurtechs are realising precisely that: it is really expensive to procure people to stop them and say: ‘Look, don’t do one of those six things, listen to me. I am going to tell you about my wonderful insurance’. It is very, very expensive to buy that share of their mind as they go through their lives.”
We should really start with taking the right customer’s perspective and also becoming really part of their lives. Are insurtechs helping you with this?
Andries: “Absolutely. insurtechs are absolutely vital. It is about the new skills and capabilities we as an industry need, but it is also about actually innovating at scale. Talking from just my organisation: seventeen markets with over thirty product lines, from manufacturing, operations to distribution. This is such a complex thing to try and unravel. It is impossible to innovate in every one of those dimensions. So, one of the biggest ways in which we try and partner with insurtechs, is to try and figure out which one of those areas are priority issues for customers, and then you partner specifically for those’.”
Right, insurtechs lead the way on thinking and pushing boundaries …
Andries: “Exactly - for regulators but also for incumbents. Let me give you an example of car insurance. In one of our sessions with customers they said they would really like to be credited for or rewarded if they are good drivers. We thought about that and launched an app called ‘Aviva Drive’. The idea was, you put it on, it measures 200 miles, and then it gives you a score of how you are driving (with some premium discounts as a nice sweetener). So we build the Aviva Drive app. But then the customers told us they want more added value services from that. They also want some dashcam features, as an example. So, in that case, we looked again across this complex landscape, and we figured ‘are we the best equipped to figure out how to do dashcams and real-time cloud upload data?’ We realised, no, and decided to partner with an insurtech company. We worked with them, co-innovated and we launched an added functionality to the app in June 2018. Customers loved it. We are seeing ever increasing app upgrade and download rates. That was a beautiful example where the best of all worlds, a real problem for the customer, a real problem for the insurer, and a solution from an insurtech, came together.”
It also makes costs more variable and its speed to market is also much faster than ever, compared to what you could do by yourself probably.
Hearing how you work with insurtechs, I think it’s also important to think about how to manage such a partnership. Can you share some or your thoughts on this?
Andries: “There are different angles to what makes a good partnership. We talked about capabilities, we talked about the strategic alignment, and the cultural alignment. But, I think there is another important point here, which is around managing expectations, and being really clear in that partnership upfront, just how fast or slow you can go. Whether the money is there or not.
I had my own tech start-ups, and I had this issue with the word ‘maybe’. To be truthful, most large companies will not give you a ‘yes’ or a ‘no’ answer, it is usually a ‘maybe’. The problem is, when you have only got finite capital, then you can’t deal with these endless ‘maybes’. You simply don’t have the money to hang around and wait.”
That’s an interesting message to keep in mind, which many readers can relate with. So, how do you think insurance carriers should act in a platform or ecosystem? We have seen many cases where insurers didn’t succeed in orchestrating ecosystems.
Andries: “First of all, I think it’s very personal to a company, their IP, strengths and strategies. Moreover, I think the key thing to remember is that it is going to be clumsy at the start. When you are building a new ecosystem, or entering a new ecosystem, there is so much to learn. What I am trying to foster, is a sense of curiosity, and a sense of ‘let’s learn and find our way’. There are obvious things that the insurers can bring. We can bring capital, we have got a corporate venture capital arm. We can bring in a lot expertise; claims experience, underwriting experience, operational experiences, understanding of the value chain, and how do you engage with that. We also bring a huge book of potential customers, a balance sheet, as well as the licence and the regulatory understanding, which are all extremely complex, and some big barriers to enter into these markets. But, I can’t see just one party of these ecosystems controlling it or dominating it.”
In a way that would be going against the whole point of the ecosystem, right?
Andries: “Exactly. I would stress that I don’t think it is clear how each ecosystem part should play yet. It is a learning process, and that is probably why it has been observed as clumsy over the last couple of years. Everybody tries different things. As a company we have tried pretty much anything and everything you can imagine. We have had labs, and innovation pilots, and we had accelerators, and we invested in other accelerators, and we have a corporate ventures capital arm as I’ve said, and we had our own innovations. We tried different things to learn, and to try to understand where our strengths are best used, both for our customers and for our partners.”