A Conversation with Florian Schubert and Sascha Noack

Trying to make sense of where the insurance industry stands in terms of innovation is no easy feat. A seemingly never-ending flow of buzzword-laden papers and conference presentations predicting the apocalypse makes it even harder.

So, I decided to speak with two German industry professionals who are right in the middle of the innovation vortex: Florian Schubert and Sascha Noack.

Florian is a Primary Insurance Solutions Expert at SwissRe’s Property EMEA group, where he’s responsible for product development with primary insurers and alternative partners. Before that, he spent 14 years with MunichRe as Casualty Underwriter and Regional Innovation Manager.

Sascha, who is a Specialist Business Design and Innovation at the Leipzig-based Insurance Innovation Lab, knows both sides of the insurance spectrum and is probably one of the best-connected people in the German insurance market.

The interview has been lightly edited for clarity.

“If Amazon decides to move into the insurance business on a big scale — which, I think they’re too smart to do — then we’ll have an answer to that too, as we’re aiming for cooperation in ecosystems.” Florian Schubert

Albert: Let’s try to settle an age-old question. Is the insurance industry on the brink of disruption of tectonic proportions?

Sascha: Unfortunately, the answer is not as easy. Insurance as a whole won’t change as drastically and quickly as some may think. Especially, in lines such as life insurance, which can have decade long contract spans. I think the key lies in the value proposition that insurers will provide to customers going forward. Doing things the way they’ve always been done and trying to compete on price is, in my opinion, a dead-end. Like it or not, customers’ expectations have changed and they want something simple and intuitive which they don’t need to think about much.

Florian: It is easy to publish a crude article on LinkedIn, throw around buzzwords and pat yourself on the shoulder. Luckily most of these have zero grounding in reality and there’s a lot of noise surrounding the industry. I think what we’re actually witnessing is a classical renewal process. If you simply look at the current possibilities in regards to comparing, selling and buying insurance, it’s clear that things have changed drastically. However, I don’t see a “big bang” on the horizon in the next, say, 10 years, which will wipe a big insurance company from the scene, and have everyone running to Amazon to buy insurance. Yes, people want everything digital, seamless and integrated. Yet, when it comes down to their own life, people often do prefer to speak to a real person before they sign up for homeowners or life insurance. Change is happening, but it’s coming at us gradually, more like a slow erosion process from many sides.

“Many insurers did not want to be left behind the innovation train, which resulted in ill-conceived knee-jerk reactions.” Sascha Noack

Albert: So in that case, which aspects about the changes ahead, or the industry’s response to them, keeps you awake at night?

Florian: What actually does surprise and frighten me, is how our industry is responding to change. About five years ago this whole innovation mantra has moved out of the realms of some small specialist circle, and in the past three, it has gotten really loud. Yet, we’re still not able to look at this topic honestly, openly and from a truly customer-centric perspective. There’s still a lot of focus on quick, nice looking front end solutions. But, few are thinking about how to connect all the dots and to actually provide people with a modern, target-group oriented solution that adds real value.

Sascha: Many insurers did not want to be left behind the innovation train, which resulted in a lot of ill-conceived knee-jerk reactions while trying to jump on it. Whether actual customer value would be added, which technology would make sense and how you’d even try tying it into ancient backends seems to have been of lesser concern.

“It doesn’t cease to surprise me how little thought goes into improving the actual insurance policy, its language, and terms and conditions.” Florian Schubert

Albert: Where do you think should insurers focus on instead?

Sascha: Personally, I believe that there’s a lot of untapped value in strategically combining business models and going much deeper on the cooperation side with other industries. But you can also start much closer to the roots. If you look at almost any product, there’s so much you could do to improve things by simplifying insurance terms, contractual language, and questionaries. We recently compared the contracts of some of the new players against those of incumbents, and there’s really almost no difference in terms of length and complexity. There are of course many reasons for it and listing requirements by comparison portals and brokers surely also play a role in making sure things stay the way they are.

Florian: It doesn’t cease to surprise me how little thought goes into improving the actual policy, its language, and the terms and conditions. This isn’t innovation on a grand, sexy scale but it brings us directly to customer centricity. I mean, look at any policy and you will find a lot of things covered which you’ll never need. This creates unnecessary complexity. There are of course insurers working on that front, but in general, it’s not a top priority.

Albert: What kind of cross-industry cooperations do you have in mind? And, why do you think progress has been slow on that end?

Florian: One example is the banking industry. A lot of useful data could be gathered through easily discernible life events which can be indicative of potential insurance needs. Ecosystems and platforms should be the game, yet we’re stuck in secrecy and isolation. Instead, resources are being poured into extracting knowledge from unstructured data, sourced from different silos, which are embedded in legacy systems. Data which — when it was collected — nobody ever dreamt of using, since it was often collected and stored due to regulatory requirements and you couldn’t wait to get rid of it as soon as possible.

“Changing to a culture of innovation is a task of herculean proportions. It will take years and we just need to accept that.” Sascha Noack

Albert: Sounds like we are looking at a considerable challenge in corporate culture. Can an inherently risk-averse industry change?

Sascha: I work in an insurance lab on truly exciting projects, with really great, motivated partners. However, I think the C-Level would still certainly echo your statement. It is primarily about culture, but the issue is not simply one of management being unimaginative — quite the opposite. However, we’re looking at large corporations in an industry that’s risk-averse at its core. Changing to a culture of innovation is a task of herculean proportions. It will take years and we just need to accept that. What’s important is that companies recognize this, and then tackle cultural change over the long term from the bottom up and top down.

Florian: There may also be a problem with top management which came up the ranks in a very different time, and quite frankly, is not used to today’s global, rapid and all-encompassing change. So, I think that this issue of culture cannot be stressed enough. It is much more relevant and potentially a bigger threat than Amazon or some other startup entering the market. No-one can bob and weave out of harm's way better than an insurance professional. We’ve been conditioned to be risk-averse, and we’re always looking to uncover risks, but not necessarily solutions.

Sascha: I won’t make myself any friends by saying this, but I also think that many C-Level employment contracts are simply incentivized badly. Especially considering that change and innovation don’t happen overnight, but rather take 8–10 years. But if your performance is measured based on results over the course of the next 3 years, we have a problem. And as long as we’re living in this 1990s world, where immediate growth and ROI is everything, it will be really hard to implement long term innovation projects.

“Ultimately, I think that what’s happening in the market and at what pace it is happening, is actually quite human.” Florian Schubert

Albert: Given the challenges, are there still signs that things are actually moving in the right direction and that the industry is responding to the changes ahead?

Sascha: Absolutely! We may have talked down on everything so far, but there are many cases of successful cooperations and innovation initiatives. One positive example is the Haftpflicht Kasse from Darmstadt. From the get-go, they decided to not go for any “me-too” products, but rather rethink their business from the ground up, move into new fields, and truly understand new technologies. They built their own lab, placed some really good people in there, and have poured considerable resources into their initiatives. Employees have been given the freedom to try new things, take risks, and also fail. Haftplicht Kasse is not a candidate you’d typically think of when it comes to innovation, but it goes to show that even as a smaller player you can utilize your speed and agility to do great things.

Florian: Ultimately, I think what’s happening in the market — and at what pace it is happening — is actually quite human. The key challenges and changes ahead have arrived on the agenda and the industry is responding to them. I don’t see a “Kodak moment” in the insurance industry, where everything it does will actually be the exact thing you shouldn’t do. Changes will be the result of a cumulation of many small events and actions. Everything — from how we view customers to our products, technology, incentives, and culture — will need to be tied together and interact in order to navigate the rough waters ahead.

And, if Amazon decides to move into the insurance business on a big scale — which, I think they’re too smart to do — then we’ll have an answer to that too as we are aiming for cooperation in ecosystems.

I hope you have enjoyed this interview. For questions or comments, or if you want to receive updates, get in touch via Email info@connectingthedots.cx or Twitter @cngthedots.