Innovation is a completely different battlefield from digitalization. Jean-Marc Pailhol, Head of Group Market Management and Distribution of ALLIANZ, says: “It is not a transformation issue but a real disruption». For this reason, he defends that an insurance company has to be “permanently innovative to understand the evolution of society”. In 10 to 15 years, the insurance market will be drastically different, «when the digital natives take over». At these moment, the companies that have not invested enough to transform and innovate will face huge difficulties. “Those who have not invested enough to transform and innovate are in danger of dying quickly despite the soundness of their finances». “On the innovation side, we need curiosity, courage and investment”, he concludes.
Jean-Marc Pailhol was named as Head of Group Market Management and Distribution of Allianz SE March 1, 2016. He has been driving innovation at Allianz since 2009, as a member of the Board of Management of Allianz France which he joined as Head of Distribution Unit. Never shy of disruptive ideas, he is convinced that innovation is the vehicle to improve human lives, he thinks in radically different solutions and platforms, while drawing on his broad experience in the banking and insurance business.
Is the insurance sector an innovative sector? As an expert in this field, how do you consider that companies are innovating in this industry?
Yes, for sure, and by default. The “job” of an insurance company is not to sell insurance or assistance products. It’s “job” is to accompany the people who buy or rent things, the people who take decisions for their families, the people who travel, start a company, invest… the people who dare to do things, the people who are curious…
That is why an insurance company has to be permanently innovative to understand the evolution of society, new behaviors, new needs, new products arriving on the market. In 2000, smartphone insurance didn’t exist. Who was talking about cyber risk or a pay-as-you-drive insurance? It is no longer acceptable not to have these insurance solutions in our product range.
The companies have to reinvent business models. They have to think beyond the borders of their traditional core business. They have to create the solutions to accompany, enable and sometimes accelerate the next technological disruptions
Which insurance fields are most susceptible to innovate: channels, products, claims management (loss management?), customer relations, etc.?
Before answering this question, we have to understand that innovation and transformation are two different topics.
The digitalization which is usually synonymous with innovation in the media is mainly a transformation topic. It is an evolution not a revolution.
To offer insurance products online, to address pricing issues with machine learning or to digitize client journeys – those efforts aim to optimize and transform our current business model, not to innovate. The main objective is to better answer the new digital behaviors of our clients to make their global insurance experience simpler, leaner, faster and more transparent.
Innovation is a completely different battlefield. It is not a transformation issue but a real disruption. The impact of sharing economy, of block chain, AI, smart tissues, 3D printers, drones or autonomous vehicles will change drastically not just the products or the journeys but the entire insurance market. These technological revolutions will oblige the insurance companies to reinvent their business model.
That is why in an insurance company which want to be innovative, each business stake holder has to be involved in the process, from the marketing teams to the preventionists, from the technical teams to the intermediaries.
There is a desire to innovate inside the companies? Particularly in the Top Management and in the Boards of Directors?
It is not a desire. It has to be seen as a necessity to prepare the future. The companies have no choice. They have to improve their current business to stay profitable and have the capacity to invest to transform this business model as fast as possible to reach the digital market segments. But at the same time the companies have to reinvent business models. They have to think beyond the borders of their traditional core business. They have to create the solutions to accompany, enable and sometimes accelerate the next technological disruptions.
This vision needs to be shared at all the hierarchical levels of a company to allow the change and balance correctly the budget to improve, transform and innovate.
The majority of the companies are profitable and smart enough to invest in digital transformation and innovation. But, they have to come back to the origin of the insurance business, remember that without clients there are no insurance products
In 10 to 15 years, the insurance market will be drastically different
Where the future of the sector will go? How will it improve in comparison to the current environment?
Pushed by competition from online attackers and the increase in clients demands allowed by aggregators, the immediate future will see the insurance sector focusing on digital transformation. The retail business will be more and more digital: fewer and simpler products, more transparent in the cost structure, the risk coverage and services, individualized to fit to clients’ behaviors and with a perfect and fast customer experience… to reach these objectives the companies will have to invest a lot in data collection and data mining and on the transformation of their distribution structure from multi-channel to cross-channel…
At the same time, insurance solutions will go beyond the borders of the core insurance products. In addition to the assistance products, some insurers have started to invest in additional services like insurance “conciergeries”, mobility apps or intermediaries platforms for example. New prevention solutions based for example on smart tissues to prevent heart disease or on nanotechnology to improve fire claims are already on the market supported and distributed by few insurance companies.
And last but not least, if we have drone taxis in the sky, 3D printed autonomous vehicles on the street, electric vehicle charging infrastructure in megacities, car, bikes, scooters or even wheelchairs on demand everywhere, smart homes managed by Alexa or Watson, and the increase of cyber risks, in 10 to 15 years, the insurance market will be drastically different.
Are companies prepared for it?
The majority of the companies are profitable and smart enough to invest in digital transformation and innovation. But, they have to come back to the origin of the insurance business, remember that without clients there are no insurance products, without risk there is no insurance need. Companies must use their great technical expertise to understand future risks and find their way to enable the digital and technological innovation they are facing. It is the only way to continue to reach a profitable growth. And to surf on these disruptions, a clear vision and a full commitment of the management are the rules of the game.
The digital natives will change the insurance market
Is all this process going to be disruptive or there will be an essential bases of the sector that can’t be lost? Which of them?
The disruption will be visible in 5 to 10 years when the digital natives and the digital natural will take the power, impose their rules, behaviors and needs and change the insurance market. At that moment, on the retail market, the companies that have not invested enough to transform and innovate will face huge difficulties. Without legitimacy in a volatile market, without enough data, without knowledge of the new risks, and without enough time to adapt, they risk perishing quickly despite strong finances.
What role are going to play (or are already playing) the insurtechs in the future of insurers?
Enabling and accelerating innovation. Co-shaping the regulation.
Customers have taken the power and we have to accept that
What position should companies adopt against insurtechs? And in front of the arrival of potential new digital competitors (Google, Amazon, Facebook…)?
It’s not a matter of opposing them, rather, learning from them. The solution is to invest in our great assets. First of all, insurers have to go from push to pull by really putting the customer at the center of the company. Customers have taken the power and we have to accept that. We need to improve the data, the customer journeys, the product ranges, the services, and the prevention solutions to deliver a delightful multi-channel customer experience. If insurance companies do that, they will increase client loyalty and make it much more difficult for insurtechs. On the innovation side, we need curiosity, courage and investment. In this new digital and innovative world, the winner takes it all.