Talanx : The willingness to change and ability to adapt

9 May 2017
Digitalisation offers considerable opportunities - These must not be missed - The coming years will at times require a massive effort

Herbert K. Haas, Chief Executive Officer of Talanx AG, in conversation with Börsenzeitung on digitalisation in the insurance industry and within the Talanx Group.

Digitalisation has taken hold throughout the insurance industry. It may have taken longer than in other industries, but the fact is: digitalisation is all around us and will continue to gather impetus in the insurance sector over the years ahead. A study conducted by Oliver Wyman found that in 2015 alone insurtech start-ups secured financing in an amount of USD 2.7 billion. The figure for 2016 is likely even higher. In many instances this capital will bear fruit, delivering innovative products, greater transparency and improved service, although quite a number of ideas will not prove viable over the long term.

The industry is modernising

At the same time, insurers are themselves working successfully on digital solutions. All this will help the industry to modernise and cater better to customer requirements. Our customers rightly expect quick and uncomplicated service not only on the sales side but also in operations and claims settlement. Our products, too, need to be refined in some instances, since risks, technical capabilities and certain framework conditions have changed. In a nutshell, what all this means is that digitalisation is not a threat, but rather it offers an enormous range of opportunities. Digitalisation is no magic trick: the analogue and the digital world frequently complement one another. Insurance per se is not losing its importance. I am convinced that the ability to form risk-bearing, diversified collectives that can be balanced and to price them in a manner that commensurately reflects the risks will continue to be of great significance to the digital society. What is more, I have strong doubts as to whether insurtechs or indeed other data giants such as Google or Amazon will be able to fully amass such comprehensive insurance expertise. We therefore have grounds for optimism, provided we do our homework. At Talanx this is something we have already been doing for quite some years now - with discipline, efficiency and calm composure. Impressive progress has already been made, but we are far from finished with the implementation of our strategies.

Three-pronged advance

Our activities are moving us forward in three directions. First: We are automating our processes and internal workflows and thereby boosting efficiency. Second: We are continuously improving the interface with our customers and hence systematically leveraging the creative potential of the entire Group. And third: We are purposefully seeking dialogue and cooperation with new market players and in so doing tapping into emerging business potential. In German retail business alone we shall be investing an amount running into the triple-digit millions in automation and digitalisation by the year 2020. What this means is that we are making processes more efficient and quicker, and hence we are also becoming more profitable. Starting last year customers of HDI have been able to manage their claims simply and directly using an app. This service has been used in more than 12,000 cases, and the trend is rising. Working together with cooperation partners, we are able to offer innovative telematics services. And more than 340 employers are now able to manage some 55,000 contracts under their company pension schemes using the online portal HDI bAVnet, which has already been singled out for multiple awards. In all instances we are substantially optimising our internal processes, while our customers enjoy greater flexibility and more timely realisation of their requirements.

Leveraging our international dimension

Furthermore, we make the most of our international dimension. Successful digital applications have been deployed in Poland, Turkey and Chile, for example. Warta, our Polish subsidiary, is focusing on a claims app that enables, among other things, the documentation of motor claims and the direct transfer of photos and documents to the loss adjuster. In this way a settlement proposal can be communicated quickly and the claim is often resolved upon first contact. The Turkish company HDI Sigorta A.S. enables customers to initiate insurance policies via Facebook Messenger. In Chile, the Latin American country with the highest rate of e-commerce, we use smart data solutions to address customers in a targeted manner and deliver offers tailored to their needs. A 'Best Practice Lab' serves to ensure the systematic transfer of innovations within the Talanx Group at all times.

New risks are emerging

These are crucial factors in an insurer's success with its customers. In no way, however, do they constitute the core of our business model. For insurance is nothing other than protection against risks through their transfer to a collective. Yet there is no indication that our world will be risk-free in the future, nor is there any reason to think that protection against risks will no longer be needed. What is more, in the final analysis, no start-up has yet succeeded in building a functioning collective on a relevant scale. The fact is: New risks are emerging in the context of digitalisation. It may well be that accidents and 'fender benders' largely become a thing of the past thanks to self-driving vehicles. But who will be liable, for example, if the computer on board a self-driving car fails? The driver? The manufacturer? And how will this change insurance tariffs? This is where we will still need insurers in the future, just as we have in the past. Cyber risks may be mentioned as another example. Broadly defined they come in many and varied forms, and can result in entire production facilities being crippled for criminal purposes - with massive repercussions not only for manufacturing industry but also for its customers. The software developer McAfee, for example, puts the annual losses caused by cyber attacks at roughly USD 445 billion worldwide. Despite the already immense volume of losses, cyber insurance products are only in the infancy of what will be a fast-paced development process. This is an area that offers enormous potential for our industry. The examples cited above make one thing above all clear: our core expertise as an insurer will continue to be needed in the future. At Talanx we make risks calculable, we diversify them and in this way we are able to insure them. This highly complex business is a strong foundation. The changes brought by digitalisation will initially be small. Insurers have proven their capacity to adapt and successfully support technological cycles.

More than 100 years ago

Back in 1903 when the Talanx Group was founded as 'Haftpflichtverband der deutschen Eisen- und Stahlindustrie', there were no computers and no Internet. The automobile had been invented only a few years earlier, traffic at that time meant primarily carriages and bicycles. At Talanx we have worked for decades as a partner to support technological advances in society both in Germany and around the world. We have no doubt as to our ability to master successfully the unfolding trend towards digitalisation as well.

Preventing surprises

We keep a close eye on the market in order to ensure that we are not caught off guard by new developments and solutions: for it is the case that digitalisation also enables us to tap into emerging business potentials by learning from new market players. The accelerator companies Startupbootcamp based in London and Plug and Play from California partner with Talanx for this reason. With their assistance, we stay on the lookout for business start-ups whose ideas and approaches can enrich us. We offer strategic cooperation arrangements and/or financial support to the most promising of these young companies. This gives the start-ups the opportunity to refine their ideas. At the same time we improve ourselves through innovative digital initiatives. Our approach here dovetails superbly with our philosophy of sustainable and strategic action. We are continuously evolving and digitalising in a considered manner, but we do not become a slave to action for the sake of action.

Not always easy

Making the leap into the new, digital world once again calls upon us to show a willingness to change and the ability to adapt. The transformation will not always be easy. Jobs will be lost as a consequence of automated processes, but new positions will also be created - albeit with different requirements profiles. In our role as managers, we must drive and shape this change and communicate it to our staff. As a company, we must show them the opportunities and, even more importantly, enable them to act on them. Further and advanced training activities will look very different, and they will become even more significant. Ultimately, staff and managers alike must not only be equipped to handle digitalisation, they must also live it - and what is more on a daily basis. The coming years will at times require a massive effort. Nevertheless, at Talanx we have a clear agenda for further digitalisation and we can already see the benefits that we are deriving from it in many areas. This is why we look towards digitalisation primarily with confidence and optimism. Or to put it another way: Digitalisation is above all a great opportunity - one which we intend to seize with both hands.

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