Insurer's Plan

Ergo Sums Up New Strategy

Markus Riess the new ceo of ergo Thomas Einberger for HB1
Mr. Riess pieces together how Ergo will look in the future.
  • Why it matters

    Why it matters

    Markus Riess, the new chief executive of insurer Ergo has developed a new strategy to expand abroad and digitize the business.

  • Facts

    Facts

    • Mr. Riess was in contention for the top job at rival Allianz last year, but after losing out in the competition, the ambitious executive quickly moved to Ergo, which is a subsidiary of Munich Re.
    • A document released to Ergo’s 43,000 employees details a wide range of changes the new CEO plans, but he is not expected to announce them publicly until spring.
    • His report cites five areas ranging from increased marketing efforts to prospecting for new business in foreign markets, especially China and India.
  • Audio

    Audio

  • Pdf

 

After less than three months in his new job as chief executive officer of the Düsseldorf-based insurance company Ergo, Markus Riess has announced internally how he plans to whip the firm into shape.

It’s no easy task. Over the last quarter, the subsidiary of reinsurance giant Munich Re announced a decline in operating results, largely because of problems with its life insurance segment. Meanwhile, the company created by the merger of several individual insurance firms is still struggling with differences in its entrepreneurial culture.

But Mr. Riess, 49, is an ambitious mover and shaker and will pursue his goals at a brisk pace.

“Where we have lost market shares in past years, we want to gain them back.”

Markus Riess,, Ergo CEO

It was only logical for Mr. Riess to move to Ergo after losing out last year in the competition for the top job at Allianz, Europe’s largest insurer. Five years earlier, Mr. Rieß had managed the German subsidiary of Allianz and taken tough but successful measures there. Indeed, within the group of companies Allianz Germany is considered exemplary in many areas, leading many observers to think Mr. Riess had a strong chance of rising to the top of the insurer. But Oliver Bäte was named the new chief executive of Allianz and Mr. Riess drew the obvious conclusion and jumped to the competition.

On his first day of work in mid-September, he announced that he intended to turn Ergo into an “internationally active, leading company in the insurance industry.” He also “difficult decisions” would also have to be made. Now his plan is taking on concrete form.

On Friday, Mr. Riess told employees the current state of his thinking. He will publicly present his strategy this spring, but in his internal statement, he named five issues that will serve as the “cornerstones for future considerations.”

First, the marketing division is slated for a thorough examination. “Our agents continue to be at the center of our market presence,” Mr. Riess said in a document Handelsblatt obtained. “We will give them added support in this role and will actively integrate proposals for improvement.” A task force named “Easy” is designed to shed light on sales processes and suggest ways they can be improved.

Second, contact with customers will be enhanced with new means of communication including video chats, websites and smartphone apps.

Third, the range of offerings will be extended. More products will be aimed at retirement provisions and there will be more focus on financial products. In the area of damages and accidents, a modular product concept is envisioned. “We want to convince our customers and our sales partners with comprehensive, attractive and modern offerings,” Mr. Riess told 43,000 Ergo employees.

Foreign operations comprise the fourth area of emphasis. Efforts to grow business overseas, especially in India and China, may include acquisitions in those countries. And Mr. Riess said entries into new markets are conceivable.

Finally, with his enthusiasm for technology, of course, he is betting on digitization. As many individual operations as possible would be carried out automatically in the insurance company of the future. “The digital revolution will have a great impact on us and the overall market,” said Mr. Riess, who has a doctorate in economics. “We intend to make use of the ensuing opportunities more rapidly and effectively than others do.” There is no talk of dismissals in his statement, but “cost analyses and structural examinations” will certainly “give rise to measures.”

In areas where Ergo already is strong, such as in health insurance in Germany, the company intends to defend its position. “Where we have lost market shares in past years, we want to gain them back,” Mr. Riess said, which is seen as a challenge to Allianz, where the new chief executive likewise issued marching orders for the next few years.

 

Allianz Ergo Is Shrinking-01

 

And with good reason. The industry must rethink things, say insurance experts such as Michael Klüttgens of the consulting firm Towers Watson. Technological possibilities, start-ups with clever new business ideas and the changing behavior of customers are forcing insurers to continuously question every element in the value-creation chain, Mr. Klüttgens said.

German media noted that Mr. Riess will have to win his employees over to his new strategy though the staff is weary after numerous efforts to reform the company and the revelation of scandals in 2011. While efforts to reform Ergo’s IT systems and structure, there is uncertainty about whether the announcements mean job cuts too.

Whatever is ahead, change is likely and while industry observers felt Ergo addressed its problems too slowly in the past, Mr. Rieß seems determined to do things differently in the future.

 

055 ergo WTB 2014 resume

 

Kerstin Leitel covers the banks and insurance companies for Handelsblatt. To contact the author: leitel@handelsblatt.com

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!