Digital Reboot

Allianz Seeks Insurance for the Internet Age

Looking for Viola. Source: DPA
Looking for Viola.
  • Why it matters

    Why it matters

    Allianz Germany has been reliant on a large network of branches and representatives to sell its insurance products. But as more and more customers go online, it is having to adapt its business model and is losing ground to other firms in the meantime.

  • Facts

    Facts

    • Allianz Germany is spending €80 million on digitalizing its insurance business.
    • The company plans to offer all of its insurance products online.
    • Currently only 15 percent of Germans buy car insurance online.
  • Audio

    Audio

  • Pdf

For Allianz, customers like Viola are the future of the insurance industry.

The 30-year-old medical student from Munich is currently preparing for her state exams. When the future physician was looking for household insurance coverage she did an Internet search and signed a contract online. But if she wants to file a claim, Viola would like to talk to a representative on the phone about it. “That is practical and convenient,” she said.

That’s at least how the medical student describes it in a video that Allianz is using to advertise its new specially designed products for Internet-savvy customers. Because Markus Riess, the 48-year-old chief executive of Allianz Germany, has recognized that the firm needs to develop more attractive offers for Viola’s generation. That is why, after four years at the helm of Allianz’s German division, he wants – and must – speed up the digitalization of sales and claims settlement.

Michael Diekmann, chief executive of global parent company Allianz, expects the digital revolution to permanently change the insurance business.

It is not the only work in progress that Mr. Diekmann will pass on to his successor Oliver Bäte next May. There is unrest with the in-house fund manager Pimco in the United States. There are problems with the U.S. specialist insurer Fireman’s Fund. And the company has had to contend with low interest rates battering its capital investments and the resulting deep-reaching changes for its life insurance business.

Last year, sales for the 124-year-old company, which has almost 150,000 employees, rose by more than 4 percent to almost €111 billion or $139 billion. Operating income climbed almost 8 percent to €10.1 billion. Allianz managed €1.8 trillion. Analysts still recommend purchasing the stock – even despite the recent turbulence with the U.S. fund manager Pimco, which Allianz bought 15 years ago for $3.3 billion.

014 Allianz

William “Bill” Gross, who co-founded Pimco in California in 1971 and was its chief investment officer, terrorized employees with his autocratic leadership style. But Mr. Gross, known for his unique flair for fixed securities, recently started working for competitor Janus Capital. His departure from Pimco is said by company sources to have pre-empted his forced removal.

Mr. Gross seems to have lost his touch. His flagship, Pimco Total Return Fund, which he had built up to be the world’s largest investment fund, has lost more than $60 billion since the spring of 2013. The boom in stocks last year also passed Mr. Gross by.

The personnel issue is not unproblematic for the parent company in Munich. The departure of the well-known fund manager will draw money toward his new employer. In all, Pimco currently manages almost $2 trillion. Many analysts are calculating outflows of $200 billion to $600 billion in the near future.

Many experts believe that the biggest threat to traditional insurers over the long term will come from clever startups, companies in other industries or Google.

On a sunny September morning, Allianz Germany boss Mr. Riess climbed up onto a small stage in the foyer of the company headquarters in Munich. A few hundred employees gathered in front of the stage which was lit by spotlights, as music sounded across the room. Videos were being played on a screen, showing beaming young people, including the medical student Viola.

It was the day when Allianz officially marked its foray into the digital age, and it was meant to be a major watershed. In the future, the company will offer all Allianz products online for private customers, enabling them to subscribe to specific policies.

The switch started with car insurance. Soon other products will follow, starting with life insurance. The program is costing Allianz a total of €80 million.

The company had to react quickly to the digital revolution because more and more customers want to take care of their insurance needs online. Experts praised Allianz’s online push. “The portal is well-done, clear, and simple to use,” said Henrik Naujoks, a partner at Bain & Company in Munich.

But behind the scenes, the digitalization is a formidable challenge. A former Allianz manager said there were substantial problems with the internal IT system. The technology was partly too old, and digital sales were difficult to “implement on a system-level,” the former manager said.

“The entire culture of innovation must change, and for an old tanker like Allianz that takes a long time.”

former Allianz manager

Mr. Riess also knew of the difficulties. He did some things, and promised to make further investments. But the problems with the digitalization lie deeper. No insurer in Germany has a larger network of representatives than Allianz, with its 13,000 agents and 8,500 branches. More and more of the agents are worried about how they can be used in the future, and they fear for their commissions and for their jobs.

Klaus M. operates a small agency in western Munich. A blue Allianz sign hangs on the door: “Customer adviser needed.” He said the trend toward digitalization wouldn’t stop. “But with more complex products such as life insurance, customers will still want personal advice,” said the agent hopefully, as he printed out an invoice.

In fact, only 15 percent of clients in Germany complete their car insurance online without the assistance of a representative. Mr. Riess thinks it is a rate that will hardly rise in the coming years. Experts like the Bain consultant Mr. Naujoks disagree and predict rates of up to 45 percent by 2020. They say the trend in Germany is unstoppable.

It is therefore no wonder that representatives in the past torpedoed so many online initiatives. At their insistence, Allianz had to redefine its online brand Allianz24, with which it appeared in comparison sites, as Allsecur. They feared that customers would switch over to its cheaper in-house digital competitor.

Pressure is also coming from outside the industry. Many experts believe that the biggest threat to traditional insurers over the long term will come from clever startups, companies in other industries or the U.S. Internet giant Google. In the United States, two former Google managers are offering agricultural insurance allowing a farmer to insure a single cornfield against damages from bad weather. Sales and claims reports are made over an app. The two entrepreneurs get the necessary national weather data from a publicly accessible meteorological station.

In order to be a leader in such developments, insurance companies no longer need just old-school salespeople, but rather creative freaks. “The entire culture of innovation must change,” said the former Allianz manager. “And for an old tanker like Allianz that takes a long time.”

This story first appeared in WirtschaftsWoche. To contact the author: Mathias.Kamp@wiwo.de

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