Rahim Rahemtulla: Hello and welcome to Silicon Valley Innovation Center. My name is Rahim Rahemtulla. I’m SVIC’s Brand Ambassador. My guest today is Dr. Robin Kiera, founder of Digitalscouting.de and a leading thinker on Fintech and insurtech. Robin, welcome.
Dr. Robin Kiera: Thank you very much for the invitation. I really appreciate it.
Rahim Rahemtulla: Great to have you with us. And, Robin, you’re going to be giving a webinar for SVIC on October 11 on how to digitize a traditional insurance business. And so, tell us first, where is the insurance industry today on going digital-first?
Dr. Robin Kiera: Well, I fear I need to disappoint a few people because I fear that we don’t see it too much. I only know rare examples where we have digital-first or, actually, digital-only. Well, you’ve got insurtech companies, a lot of them go digital-first. You have tech companies that are digital only in a lot of cases and that provide products and services for the insurance industry. I see aggregators – especially in Europe, I know in the US they are coming right now – that means that you go to a website and you can compare different insurance products, which is not a real comparison but actually it’s a platform where you bid for the ranking in a sort of way. They are some sort of digital-first, but I’ve not seen a truly digital-only or digital-first product. And maybe also in the banking industry you have some direct banks where you don’t have branches anymore, but you just have that account. But to be honest, this is just digitalizing processes that have been around for hundreds of years. My big question, what I’m more asking for, what I’m expecting is something truly new, something that relieves me of my pain as a customer, may it be in the banking space or may it be in the insurance space. And I’ve not seen that. And the contract managers that we’ve seen, again, these guys at the phone of this company, big respect, kudos to them that they really did it in the first wave of insurtech, but it in the end it’s like inventing a dentist app. I’ve friends that are dentists, nice guys, but I’m not looking forward to the appointment at the dentist, especially if I have pain. So dentist apps probably won’t work, like insurance apps don’t work, but why not a health app? Health apps are going like crazy in the app stores or websites and services. Why can’t we invent something like that for finance and insurance?
Rahim Rahemtulla: And so, how far do you think we are from seeing that? Do you think insurance companies are seeing that maybe just digitizing processes which have been going on for a long time rather than really turning things around and presenting it in a very different package? Are they beginning to understand that?
Dr. Robin Kiera: Well, it’s a radically different approach. So the old ways of selling insurance – at least in the market where I have some insights and I’ve worked, actually, in the sale of insurance myself so I really sat on the couches of the people and participated in this madness of traditional insurance – it’s like you go there, sell them insurance and you hope you’ll never hear from the customer again.
Similar to banks, by the way, who actually almost never call their customer, even though there might be some occasion to do that, large income situations or something like that. But the new way is to think every day about, How could I provide the customer as many services, as much convenience as possible? How can I become the daily companion of the customers? How can I actually conquer the home screen of the cellphone? Or soon, how I can conquer the voice-driven or voice command device? How can I conquer the algorithm of the person and become partner of the customer in everyday life? It’s a totally different thinking of, “I’m selling an insurance, I hope I never hear of this person again.” Totally different. Radically different.
And I’ve seen only very, very few, smaller insurers actually slowly going into that direction to provide digital products and services the customer actually desires. But it’s very early. Very early. In insurtech, of course there are some interesting products and [0:06:22?] sales processes, but I’ve not seen an offer that really helps the customer. I’ve seen one thing that’s being developed in the Middle and Near East right now. That’s promising, but it’s not really released, I cannot tell about it, but I think that could be something for the future. Because you guys sitting in Silicon Valley and most successful companies of the last 20 years have solved problems and delivered value to the customer, I think we need to really do that.
But why am I so passionate about it? Actually, insurance is not a topic that’s famous that’s there’s so many passionate fans of it. I’m so passionate because I think the potential is gigantic if insurers and banks would really share their knowledge, what they have about risk, about financial planning, retirement. Let’s talk about a life event like the birth of a child. Insurers know a lot about that. Insurers are actually baby experts. They have accident insurance, know what not to do with a baby. They have health insurance records to give tips on how to increase the health of a child. There are a million things that they could provide to customers. They don’t. And my question is that we actually need to go there to provide this to the customers, but it’s a radically different approach.
And other industries do it already, in other industries it works. Google, for example, provides lots of services for free, Google Maps and Android and whatever, and I just give away my data and my privacy, but I get a lot of stuff for this. So I never get lost any more – as long as I have coverage – and this mental thinking needs to be part of insurance and the bank industry, in my opinion.
Rahim Rahemtulla: And what I understand, what I’ve been reading about insurance and making this move into being something a little bit different, a different partner, perhaps, in our lives is that insurance could actually be more in the prevention business.
Dr. Robin Kiera: Yeah.
Rahim Rahemtulla: And as we are going to have things like Internet of Things, which is going to have a lot more sensors in our homes, in our cities, in our cars and elsewhere that we’ve all this data coming out which insurance companies could use to offer us a service perhaps a bit like what we called “predictive maintenance”.
Dr. Robin Kiera: Yeah.
Rahim Rahemtulla: Where they can tell us before something goes wrong that something is going to be wrong, maybe be a partner in solving that problem before it turns into an insurance claim. Do you think that that direction, moving towards prevention, is that something which insurance companies should be looking at?
Dr. Robin Kiera: I think it’s tremendous. Why? Out of two reasons. First of all, it takes into account the idea of “We deliver value to the customer.” Wouldn’t it be nice, as a private person or as company, there’s an insurance that has 40 big machines insured and there are 80 in the world and they have seen already certain damages at certain parts after just certain hours of usage, 40,000 hours of usage and we know this part is going to break, why not inform the CEO or the CTO of that other company that has 39,000 hours running the machines, that maybe you look at this before the thing blows up? I know this in very niche products, in the marine area, for example, that there are these approaches already now, also have for 10, 15 years. But it’s not an approach that is in center of the attention of people in that scale approach. The Internet of Things. There are studies that say in 2035 we will have over 1,000 connected devices.
And even if it takes until 2040, it’s gigantic. Why is it gigantic to the insurance industry? If an insurance risk carrier is able to calculate risk better than somebody else, he can give the product away cheaper and make the same money. Right now, all insurers are using almost the same methods. It’s a 100-year-old life insurance, it’s like the mortality tables, they are calculating with claims statistics, they are calculating, but it’s not a qualitative difference. You know somebody is better, somebody is worse but in the end it’s almost the same.
But what happens, actually, if there is some AI-driven insurtech company that’s able to calculate risk and predict that better? That would have a tremendous effect. Why? Because most insurers are happy when they have a combined ratio of 98%, 95% So if you get $100, you spend $95 and you’re happy because you have made $5, you’re the hero of the day. And there’s some, actually, who get $100 and pay $105. That’s a good concept. But what if you are an insurance offering an insurance product and you’re getting $100 and it costs you just $20? You can lower the price to $40, make still more profit than the rest and take the whole market. And, to be honest, this is something so risky and so dramatic, that I, as a CEO of an insurance company, that would be my main focus: to find out that even maybe I become the company that lowers the combined ratio like that. That’s a little bit insurance nerdy now, this is the insurance nerd party, but this could be an Uber moment for the insurance industry if one insurer manages to do that.
Yeah, and on the other hand, predictive analysis and predictive maintenance, it can be in all parts of life and it is like you need to provide the customer with digital products and services that help them, and this is a big potential for the insurance industry. And the insurance industry should ask themselves, do they want to become – you have the insurer here, the customer here – do they want to become the endpoint of the customer or do they want to give Siemens and other tech companies that are building the refrigerators and the heaters and the ovens, would they become the person between customer and the rest of the value chain? And I have a feeling, if I look at Google and Amazon, especially, for example Amazon, where they’re pushing between customer and the rest of the value chain, I’m not sure if there are too many happy people right now at the rest of the value chain, especially in the publishing industry.
Rahim Rahemtulla: And actually, speaking of Amazon, I did want to ask you about that. I know there are predictions – and I’ve heard them, read them, you may have mentioned this yourself at some point in the past – that Amazon, Google, they are looking at the insurance industry and they obviously both have a very good record when it comes to disrupting markets. So do you think, is that going to happen? And is the question not should traditional insurers be worried but how worried should they be?
Dr. Robin Kiera: Well, I’ve been for years advocating or at least a little bit predicting – even though I’m not in the prediction business – but I’ve thought about that quite a good bit, that Amazon was going to enter the insurance market. And I had, actually, C-suites of insurers laugh at me. They’d say, “They are a retail company. They are e-commerce. They don’t understand the business” and all those typical arguments they had, and now they’re there.
With Google, it’s a little bit different, the official position. I just talked to someone here in Europe also dealing with insurance industry and the official position is that they are the enabler, that they make lots of money selling ads to the insurance industry and they are thinking about actually working on – that’s also official – providing a data infrastructure to insurers, so being the enabler, the people that the insurers get all their data into the Google magic machine and then they can do very interesting things. I’m not sure if the insurance industry will accept this offer because, I mean, if you give away over your customers, it’s really easy then to switch them and to just take them over, so I’m not sure if the insurance industry is already desperate like that.
And I’m not sure if that’s actually the endplay of Google. Yes, you make a lot of money with the current industry, but they’ve also shown in other examples that they’re doing some more radical things. selling the product. And I have to be honest, when Google would decide, actually, to offer also insurance products and to calculate risk and really use their Big Data approach to do that, I think they have the potential to be the player that it doesn’t have the 98% combined ration where they get $100, then make only $2; I think Google has the potential of getting $100 on the insurance customer and only spending $10, $15, $20 and making a lot of money there.
Amazon, again, we have the example of Berkshire Hathaway, JPMorgan and Amazon founding health insurance in the US – which I think is not the easiest market for insurance, especially in the healthcare sector – and they’re opening, just bought, I think, an Indian insurtech for quite some money and it’s like a half-open secret that they opened an office in London, are hiring like crazy insurance professionals. And to combine insurance professionals with tech talent and an experience like Amazon is gigantic. I think they will slowly try our having insurances, so that your checkout process has then, you can buy something. These are baby steps I think they could take on large parts of the insurance market because people are convenient. I get in the news, my insurance premium goes up, I’m on my couch, I want to go on Amazon and I want to get a liability insurance there. I want to get a car insurance there. I want to get everything there because I have made already – I don’t even want to know how many products I’ve bought there, so maybe I’m not the best customer of Amazon but pretty close probably – so I’ve made so many good experiences. In contrast, by the way, to insurers, who have – a study just came out here in Europe – insurance is one the least respected industries and least respect jobs and least trusted industries. That’s a gigantic danger. If you’ve got tech companies everybody loves, or a lot of people love and trust – Amazon more than Google – and you’ve got an industry with the lowest image possible, then that’s very dangerous. Then people are more eager to switch to the other partner if they already trust them with everything else.
Rahim Rahemtulla: That sounds like it’s sort of poised. The situation is well-poised there. Amazon and Google already have potentially a lot of advantages and it sounds like it’s a matter of time before they decide to take advantage, to switch those on and maybe go into insurance. But I wanted to double-back slightly on ourselves, if I could. I just wanted to ask about the impact of these emerging technologies. I feel like we were saying that, with IoT and so on, this could be a great thing for insurers if they take advantage of it, but another piece of analysis which is out there, which says it’s pushing them towards maybe looking into being in this prevention role.
Dr. Robin Kiera: Yes.
Rahim Rahemtulla: Is that emerging technologies are actually going to produce a situation where we have less risk in our lives? Autonomous vehicles are going to be safer, we’re going to live longer and better and healthier lives because of improvements in healthcare. Similarly, smart cities, our homes, with the IoT it’s going to be safer and there’s going to be less things to insure. What are your views on that? Is there something that insurance companies do need to be aware of?
Dr. Robin Kiera: Well, I love the idea that we are going to live longer. And I have actually only one big desire in my life. This is that I want to see my favorite soccer team win one more time the German National Championship, which is quite hard because they’re really bad, so I need to become 150 to see that, I think. So I’m really looking forward to that.
Yeah, I’m not sure. On the one hand, I have the impression that we totally overestimate not the impact on life but the reduction of risk. And another side, I think we totally underestimate what is going to happen in 5 or 10 years. I think we would look in 5 or 10 years at this conversation and say, “Oh, man, these guys didn’t have a clue that the light at the end of the tunnel was not the end but actually a freight train coming.” And I think they will be smiling probably about this conversation. So I’m torn when it comes to that. I think we will see in certain areas a lot of prediction and the reduction of risk also combined, like the reduction of claims we will see. I really hope this, by the way, because the worst-case scenario actually for an individual, so I’m so hopeful that we will see this. But on the other hand systems will become more complex and I think a lot of new risk is coming. So what is going to happen is somebody hacks my thousand sensors? And I think there will be new risks coming, so we need old risks and risks that are going down, but you will also have risks that are a new and that also need to be dealt with. If the sum is in the end positive or negative, I don’t know. I just know it’s very exciting. And, again, I need to reach 150.
Rahim Rahemtulla: Well, maybe it will happen. What you say about new risks, actually, that’s quite an interesting area, I think. How prepared do you see the insurance industry at the moment for all this new data which is just going to be coming out of all our smart machines that’s going to have to be protected. Security threats could be there. On social media these days, brands are very exposed.
Dr. Robin Kiera: Yeah.
Rahim Rahemtulla: There’s lots of risks out there, it’s very hard to control the message once it gets out onto social media. How do you feel that the insurance industry is coping with these new threats and risks which are emerging, really?
Dr. Robin Kiera: Nobody talking about controlling them. I think, personally, it’s dead. I think it’s gone. It’s like a ship that has long sailed. It’s like halfway to you , guys. It’s gone, it’s gone, it will never come back, you will never be able to – only with severe, very severe efforts – suppress something. And why should you do it? I mean, do we really expect nowadays that a company is perfect? It’s made out of humans, we make mistakes. I make mistakes all day. Ask my wife, she’ll have probably a long list of it. And companies will do it too. I know I also do in my job. So it’s totally unusual.
But right now, we live in a time of transition. Back in the day, companies needed to be perfect, at least in their image, and in the future it will be totally normal because it’s a no-brainer, humans make mistakes. But right now we’re in a transition phase. We still have the expectations that they should be still perfect but we’re not, so that’s the situation with the problem. But I think the Internet killed this idea of control. Yes, I think we also need to be very careful when we see and read something and not just believe it, but I think we’ve done it before the Internet too.
And you asked if the insurers are ready. I always compare the insurance industry with a sport. What is your favorite sport?
Rahim Rahemtulla: Maybe football. Tennis, perhaps.
Dr. Robin Kiera: Football? Okay, let’s say football. So in football – as I understand it a little bit, at least – American football. Is it American or soccer football?
Rahim Rahemtulla: Well, soccer, I’d say.
Dr. Robin Kiera: Oh, really? Which nation? Which team
Rahim Rahemtulla: Well, I mean, I support Arsenal in the Premier League.
Dr. Robin Kiera: Great, Premier League, great. I think insurance industries are like the Premier League. Why? Because you have the big teams that will always be on top, then you have the positive surprises like a few years ago when, I think, Stoke City won the title. You’re like, “Oh, what are they doing?” and you see that they have a perfect coach, they have a hungry team, they have hungry players, they have a good staff, they have whatever – it’s like a magic picture I’m hoping for my team, by the way, that it happens the next year at some point. So that’s that. You have these positive surprises also in the insurance industry. Small players, I know like at least three, four, five in this region that are doing a very good job, that are not outgoing yet but they’re doing actually a good job and we will hear of them, I’m pretty sure. I think there are a few players that are doing a good job the. But you also have the better surprises, the four giants that are going to fall as you also had in other countries’ soccer leagues. The company’s going broke, the club’s going broke that did not do their job. And this is capitalism, baby. So it will be like that. Yeah. So I think the industry is not seen as totally unprepared by that. Parts will make it, parts will not make it.
If I go to an insurer and I need to have a lot of behind-the-scenes talks and I go into their canteen at lunchtime and I have the impression that I’m at a retirement home and people are only talking about their free time and all of that and I see them making fun about their own company, I’m like, “Oh, this is critical And then you look at the data and the projects and then you’re not surprised anymore. And those will have difficult times, I think.
Rahim Rahemtulla: Well, Robin, it sounds like there’s a lot of room for improvement and a lot of big changes which could be on the horizon. We could probably go on, but we’ll probably have to wrap up now, I’m afraid, we’re almost out of time. So just as a final thought there. If I had to put you on the spot, what is the one thing, given all we’ve said and all that could change and is changing, what is the one thing today that a traditional insurer could do to prevent themselves from being disrupted?
Dr. Robin Kiera: Fall in love with your customer and not with your product. Not with your company, not with the structures – fall in love with the customer. Do everything for him or her. That’s the main thing that you need to do. That’s the meta-level. And all the lower level, everything follows them. Only because you have structures and they have always been around, it’s no reason, it’s no arguments why they should be there. And if you don’t become a tech company yourself and become a customer-oriented company like them, I think winter is coming for you.
Rahim Rahemtulla: Thank you, Robin. That’s a hopeful message but also a slightly pessimistic one too if you’re an insurer, but I think plenty of opportunities as well there behind the scenes.
Dr. Robin Kiera: I mean, one more thing I ought to say. So this is the negative view, but if you do your homework, we’re not talking about 1%, 2% profit a year. We’re talking about 20%, 30% 35%. So the opportunities, if you do your job, especially when you’re a small insurer, a smaller carrier, you can conquer the world nowadays with the technology. It’s not like you need billions for that; you can do it with less budget, you can beat them when you’re better. And this is a big, big opportunity for you guys out there. So that’s the positive thought. Sorry.
Rahim Rahemtulla: Well, that’s good. We always like to end on a positive note.
Dr. Robin Kiera: Yeah.
Rahim Rahemtulla: So Robin, thank you very much for joining us.
Dr. Robin Kiera: Thank you.
Rahim Rahemtulla: And to our viewers, thank you for tuning in. Remember, Robin is going to be back with us here at SVIC on October 11. He’s going to be giving us a webinar at 9 am PDT on October 11, so do mark that in your calendar. We’ll be able to go into more detail then about how to digitize a traditional insurance business. You’ll see a link to register or that webinar appearing on your screen now in the chatbox. And so that’s where we’ll wrap up today. So from me, from my guest today, Dr. Robin Kiera, thank you for watching us today and we’ll see you again next time. Bye bye.
Dr. Robin Kiera: Bye.