My previous blogpost introduced 10 insurtech trends for 2017. I received a lot requests to share more with regards to the last trend mentioned: Symbiotic relationships with insurtechs.
Banks and insurers are looking for ways to learn much more from the fintechs and insurtechs they’re investing in and partnering with. This is indeed a critical issue to accelerate innovation in banking and insurance. In the new book, Reinventing Customer Engagement – the next level of digital transformation for banks and insurers, we actually included seven ‘best practices’.
Virtually every bank and insurer is organising competitions and hackathons, or supports one or more accelerator programmes. Some have started their own corporate venture arm. Obviously corporate venturing shouldn’t be the main way for financial institutions to reinvent themselves. It is a means, but not an end in itself. The challenge of the digital transformation is essentially a cultural one that involves the whole company, not just the technology. Working with fintechs and insurtechs offers the opportunity to rethink and accelerate innovation. Innovation isn’t about asking customers in focus groups what they want. It’s about understanding new technologies and how they will interact with consumer behaviour, and that’s one of the things fintechs and insurtechs are much better at than incumbents. Therefore, financial institutions need to really immerse themselves in the fintech community to keep pace, or perhaps stay a step ahead, in a rapidly changing technology environment, or better still to shake up the status quo and accelerate change in the stagnant financial industry. That’s basically why we created DIA.
Banks and insurers are looking for ways to learn much more from the fintechs and insurtechs they’re investing in and partnering with. Whether it’s about specific capabilities or concrete instruments they can use in the incumbent organisation, or whether it’s about the culture and the way of working. At last year’s edition of DIA, Minh Q Tran, general partner at AXA Strategic Partners, and Moshe Tamir, global head of digital transformation at Generali, shared their views.
For our latest book, we have come across quite a few different models in which relationships between financial institutions and fintechs/insurtechs seem to flourish. In this post, we included seven examples. This isn’t meant to be exhaustive. New kinds of symbiotic relationships evolve every day, and of course they can be combined.
DBS Bank: fintech injections
Neal Cross, chief innovation officer at DBS Bank, involves fintechs in its own distinctive way: “I don’t do innovation, I do sales. I sell programs that solve business problems inside the bank. We always start with their problems, around business model innovation or around KPIs. The startup community plays a key role in our programs. I often tell our business units, Give us 20 of your staff, we will split them into teams and pair them with startups. By embedding our staff in this agile, lean, mean way of working, everyone benefits. We make sure our teams work within structured processes that include research, experimentation and prototyping, followed by implementation. Everything we do is focused and we get senior sponsorship before embarking on a project, so we don’t have problems with innovations that end up not being implemented.”
This is the best practice that we included in our previous post. Andrew Brem, chief digital officer at Aviva: “In our view, ‘icons’ are needed to spearhead the digital transformation process. Our Digital Garages in London and Singapore are such icons. They are a very concrete and visual manifestation of our digital journey, for everyone across Aviva. The Garages are not just idea labs to house ‘skunk works’ teams – they are real places, where we make and break things. We run digital businesses from the Garages, and we design and build our digital ecosystems such as MyAviva. Anyone from Aviva is welcome to come and hold workshops and meetings there, to see and feel our digital capabilities first-hand. The Garages also help us engage with insurtechs, and inject their culture into our organisation by launching startups ourselves, and by partnering, mentoring and investing. Aviva Ventures, with a fund of £100m, is also housed in the Garage, as are some of the startups they invest in, such as the IoT home security startup Cocoon.”
Deutsche Bank: Digital Factory
In the summer of 2016, Deutsche Bank started its Digital Factory. More than 400 IT specialists and banking experts from the Private, Wealth & Commercial Clients division are working on a specific site in Frankfurt to develop new digital products and services for the bank’s customers. In addition, there are 50 places for external partners from the fintech community. The Digital Factory is obviously also connected with Deutsche Bank’s Innovation Labs in Berlin, London and Palo Alto.
Munich Re: interfaces
Andrew Rear, CEO Munich Re Digital Partners: “To avoid a culture clash, we have set up a separate Digital Partners unit in 2016. To make the interface between the two worlds work, two things are vital. The first is speed. Startups move fast and don’t accept the limitations of a corporate diary: “time is money” is literally true for them. We therefore need to move with the same sense of pace. The second is decision-making. Startups make decisions, they don’t arrange committees. Therefore, we don’t do that either. All the key decisions from Munich Re’s side are in our hands. In our model, we do the things startups don’t need to control, to make their proposition live. That can include policy administration, compliance, reporting and product pricing; the “boring insurance” stuff.
“We have stakes in our startup partners, but we don’t interfere in the way they engage their customers. The positive effects on our ‘regular’ organisation are noticeable. For example, people in compliance and risk management were not used to these new speeds, but are already adapting and finding new ways to fulfil their responsibilities in a way that’s manageable for the startup.”
An example of an interface between Munich Re and startups at regional level is Mundi Lab, which is an accelerator partnership between Munich Re Iberia & Latin America and Alma Mundi Ventures. Augusto Diaz-Leante, senior vice president of Munich Re Life, Spain, Portugal and Latin America, explains how the cross-fertilisation with startups works: “We select startups from all over the world, such as RiskApp from Italy and Netbee from Brasil. 20 Munich Re executives mentor these startups one-on-one. The best performing companies with the highest potential to disrupt the insurance industry have the opportunity to work on a pilot programme in one of the Munich Re Iberia or Latin America markets. In this way, the sharing of knowledge, experience and expertise is made very concrete.”
Zurich: open innovation
Zurich created a platform to bring together the innovation initiatives and projects in the group. Xavier Tuduri, CEO of ServiZurich Technology Delivery Center: “In the Zurich Innovation Lab, we generate disruptive ideas and strategic R&D projects for the global Zurich group. We believe in open innovation – a collaborative model that means combining the internal knowledge, for example regarding markets, with external talent and disruptive technologies. In this way, we are always at the forefront of the latest disruptive fintech and insurtech developments, while being able to quickly develop tangible prototypes that fit and inspire our businesses. These are prototypes without risky high investments, for example regarding using drones for risk assessment. Each prototype project is led by an employee of ServiZurich, who works together in a team with several startups, universities and institutions. In this way, our people and organisation is injected with new ways of working and thinking.”
If a financial institution wants to behave like a fintech, it needs to open up, think of what the ecosystem could look like, be at the forefront to see what’s happening, and partner with fintechs to accelerate innovation; to learn, or to advance, the sector as a whole. Roberto Ferrari (CheBanca!) is a protagonist of this mindset: “We believe in a ‘co-opetition’ model. There will be things in which we will be competing with fintechs and other banks, and things that we will be cooperating with the same parties. Therefore, we try to make the Italian fintech community grow.
“‘Building a larger cake’ will be for the good of the whole financial ecosystem, innovation is key and startups will always be the lifeblood of any sector. We among others launched the Italian fintech awards and the Smartmoney blog, which is now the most important vertical innovation in banking blog in Italy. We now have a very strong presence in the Italian fintech community and we’re close to all developments and connections. I and other C-level executives at our bank speak to at least five to six fintechs each week, and we have already launched two new services: award-winning Mobile Wallet and Robo Adviser, thanks to our partnership with some specialised Italian fintech startups. We help them by partnering, but we also want to help them to go abroad, because scale is the key to succeed.”
MetLife: capability building
Lee Ng, vice president and COO of LumenLab, MetLife’s innovation centre in Singapore: “LumenLab and our new businesses are distinct from MetLife’s core business. Our mission is to create a growth engine that launches disruptive, new revenue-generating businesses for MetLife, targeting the needs of Asian consumers across health, ageing and wealth. But we do work with in-country experts to develop plans for testing the new business ideas and assess market potential. In our first year, we launched BerryQ, a quiz app that rewards users for their health knowledge; Rememory Stories, a platform to capture intergenerational stories; and developed CONVRSE, virtual reality experiences around service and sales for financial services.
“We notice a real mindset shift within MetLife because of this cooperation. The people we work with develop skills about new ways of testing new ideas, new toolkits and new ways of thinking. Our core insurance business thus improves its performance through adopting new behaviours such as curiosity, velocity, experimentalism and bravery. In others words, we are lighting a path for innovation at MetLife.”
Move the chair
We believe that it will be increasingly important to adopt a culture of constant innovation, to stay in sync with all that’s going on out there. Rather than trying to change their DNA, which is quite impossible, banks and insurers should think that constant innovation is the only way to adapt the DNA to the change that’s taking place. You can for example buy great algorithms, but if you’re not able to transform your culture, the implementation of these algorithms will fail. A banker shared with us: “I see working with fintechs like vaccinations in biology: these injections in our cytoplasm help us prepare ourselves for new attacks and adapt to changing environments. If you acquire new fintech companies, you could destroy them if you don’t adapt to them as an organisation. You have to adapt the mindset of your own people. It’s like playing a piano. Some people sit down on their piano chair and move their chair to the piano. Other people don’t want to change their position and try to pull the piano to their chair. We should therefore teach people to move their chair after sitting down. How to move the chair will depend on the situation, but should always deliver value to our customers.”
Maximising the results from working with insurtechs is an essential subject on the digital insurance agenda. See you at DIA 2017 Amsterdam for more insight into this subject.
READ NEXT: The future of insurance is insurtech
– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Main photo: Gumpanat, Shutterstock.com