Steffen Krotsch, head of innovation at Allianz Worldwide Partners, outlines how the insurance and assistance provider is applying Internet of Things technologies to dramatically enhance how it engages with customers.
Like many other industries, the insurance sector is facing the challenge of digital disruption. But according to Steffen Krotsch, head of innovation at Allianz Worldwide Partners, in many ways insurance companies should see digitalization and hyperconnectivity as another evolution in their tech-driven business models.
“Insurance was a very early adopter of digital technologies and has always been a very data-driven business,” says Krotsch. “Dating back to the 1950s, we have really only had virtual products that exist solely in our systems.”
But for the customer assistance and insurance unit of German financial services group Allianz, there is a new dimension to IT that extends digital innovation to the assets it insures and delivers services around — from cars and homes to devices that monitor health.
That development has prompted numerous initiatives within Allianz Worldwide Partners as the company has explored how digitalization and the Internet of Things (IoT) will change its business models and the way it engages and delivers services to its customers: car manufacturers, banks, public institutions and other large organizations which bundle a mix of insurance and services with their offerings.
IoT will deepen and broaden engagement with the consumers of those services, says Krotsch. “When you need insurance it is typically when something bad has happened — you’ve had an accident, a burglary or a water leak has damaged your home. The Internet of Things gives us the chance to transform our services, to be there for our customers on a more continuous basis. In effect, to be a ‘guardian angel’ for our customers, not just to assist them but to take preventative measures too.”
That might mean warning people when a sensor picks up that a pipe has started leaking at their home before it does serious damage or a heart monitor alters medical teams when a heart problem is detected.
“We not only help you financially to pay for the damage but we help you physically by detecting a problem and sending someone to fix it,” he says.
How digitalization enriches the customer experience
As well as enhancing customer experience, the constant flow of data from digitalized objects also helps Allianz extend customer engagement beyond the traditional ‘end-points’ of insurance — policy signing and claims, says Krotsch. “It provides us with more frequency interaction points before, during and after something happens.”
From a business management viewpoint, knowing in real-time when an event has occurred is also valuable. When a storm is creating damage to buildings in a particular area the insurance company can know about it at that exact moment, as well as learn details of the level of damages rather than when it receives a batch of claims several weeks later.
“Digital technology gives us the chance to build customer experiences that are much richer, more frequent and pleasant,” says Krotsch.
The new world of digital ecosystems
Such reshaping of business models will have a fundamental impact on the shape of the insurance market. Companies are increasingly cooperating in ecosystems built around newly digitalized assets, says Krotsch. Allianz Worldwide Partners is already looking at creating ecosystems around smart homes, connected cars, healthcare monitoring, travel and mobility.
Those ecosystems extend from device and networking companies that provide sensing and connectivity technologies through to service deliver agents such as plumbers, engineers and medical staff. The Allianz team has already built a set of open API that enables those partners to participate in its ecosystem, while also tying in customers such as connected car manufacturers.
“We want to be the owner of some of these ecosystems, because the owner in the end controls the customer interface and drives the ecosystem. But we also want to participate in others,” says Krotsch.
A concrete example of such an ecosystem is the company’s first offering in this area, Smart Home + Allianz Assist, an integrated monitoring, assistance and insurance product launched in Germany in November 2015. The IoT service monitors customers’ homes 24/7, automatically sending alarms to Allianz service centers when smoke, water and unauthorized entries are detected, with help dispatched immediately and an insurance claim initiated.
Allianz Worldwide Partners has also been showcasing the end-to-end integration of such services with Fujitsu’s RunMyProcess business. RunMyProcess has built a digital process layer that connects all processes and partners across the ecosystem. So a customer on holiday is contacted immediately when a water leak is detected in their IoT-enabled home, with a plumber dispatched, the damage assessed, a claim opened and the bill paid by Allianz.
IoT customer data: Why a value exchange is key
This new landscape is not without its challenges. The proliferation of connected devices also poses new risks, says Krotsch, with the danger of devices being hacked and the potential for breaches in customer data privacy.
“In insurance we’ve always used statistics about the likes of car accidents, natural catastrophes or burglary as the basis for our products and to calculate the risk price,” he points out. “Data has always been a factor; there is now just much more of it and it is now just more instantly available.”
“We take very special care about the protection of our customers’ data, ensuring we explain how it is used and the value that represents for the customer,” says Krotsch. “So there always has to be a value exchange with the customer.”