WirtschaftsWoche Exclusive

Insuring their Survival

robin von hein simplesurance
Founder and CEO of Simplesurance Robin von Hein, is taking up the opportunities of digitalizaiton.
  • Why it matters

    Why it matters

    Insurance is undergoing a major overhaul. Two executives argue it will be cooperation rather than rivalry between traditional and startup insurers that will keep the industry afloat.

  • Facts

    Facts

    • Robin von Hein founded the upstart insurtech startup Simplesurance in 2012 and now has more than 120 employees in 30 countries.
    • Thomas Blunck has been a board member of Munich Re, the world’s largest reinsurer, since 2005.
    • Simplesurance uses traditional insurance companies such as Munich Re subsidiary Ergo or Allianz to underwrite policies and products it sells online.
  • Audio

    Audio

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They do have one common interest – kite surfing – and both in South Africa no less. But when it comes to their day jobs as insurance salesmen, Thomas Blunck and Robin von Hein seem to come from opposite ends of the spectrum.

Mr. Blunck is a 55-year-old executive who works for a long-established global industry player, while Mr. von Hein is the 33-year-old head of a tech company that’s just four years old.

Mr. Blunck sits on the board of Munich Re, the world’s largest reinsurer, which in 2015 booked gross premiums of €50 billion ($56 billion). He’s in charge of financial risks and investments. Before joining the Munich-based reinsurer in 2005, he worked with the Munich-based global consulting firm Roland Berger.

Mr. von Hein is the founder of the Berlin-based e-commerce provider Simplesurance, which operates in Germany under the trading name Schutzklick. Originally from the federal state of Hesse, he’s been singularly committed to the insurance industry. After studying the insurance business at university, he trained as an insurance broker before founding Simplesurance in 2012.

The company’s big idea has been to develop software that enables customers to buy a product online alongside corresponding insurance. For instance, they can buy anti-theft protection with a bicycle purchase or damage insurance for a mobile phone or a washing machine.

Now employing more than 120 employees in 30 countries, Simplesurance uses insurance companies such as Munich Re subsidiary Ergo or R + V Insurance to underwrite policies.

It’s an entirely different business model from Munich Re’s. And yet, pull back the veil and these two men may not be quite as different as they seem at first glance.

“We are not a garage band, nor could we or should we aim to be one. A global group is, by comparison, a large orchestra where little is improvised and everything is about high standards.”

Thomas Blunck, Board member, Munich Re

Mr. Blunck might work for an established player, but he’s known for his work to foster a culture of innovation at the reinsurance firm. And it is precisely through co-operation between young tech startups and traditional insurance businesses that both men see growth opportunities for the industry rather than threats.

“That is why we are active in Silicon Valley, London and Tel Aviv,” Mr. Blunck said in an interview with WirtschaftsWoche, a sister publication of Handelsblatt. “We are expanding our business model in those places and supporting startups, for example, in the fields of product development or risk management.”

That kind of investment couldn’t come a moment too soon. Mr. von Hein, who was interviewed together with Mr. Blunck, said he believes the insurance industry is in for a period of massive change over the next 10 years – an overhaul that will make the changes gone through in recent years seem like small potatoes.

 

bluck picture alliance
Helping startups in product development and risk management: Munich Re’s Mr. Blunck. Source: Picture alliance

 

And while insurance startups known as “insurtechs” may be leading that change, Mr. von Hein knows they can’t do it alone.

“Every day as a startup we discover countless new opportunities created by digitization, but at the moment we along with other insurtechs lack the expertise to underwrite risk ourselves,” Mr. von Hein said.

But Mr. von Hein also believes that being a startup has many advantages. That’s why the cooperation can work – only startups like his can drive the change that larger established players need.

“We are free to fully concentrate on own business and don’t need to worry about market fluctuations or regulations that DAX-listed businesses need to comply with,” he said. “That gives us the freedom to try things more easily and much faster than bigger companies.”

“Every day as a startup we discover countless new opportunities created by digitization, but at the moment we along with other insurtechs lack the expertise to underwrite risk ourselves.”

Robin von Hein, Founder, Simplesurance

Mr. von Hein also believes that a young and relatively small start-up company with good access to venture capital is better placed to try out and experiment with new ideas.

“The other big advantage is the quality of the team,” he said. ” We want to cultivate a more creative and courageous workforce than the staff of a company the size of Munich Re. We have 130 rock stars from 30 countries working for us.”

Mr. Blunck does not disagree with his industry colleague’s assessment. “We are not a garage band, nor could we or should we aim to be one,” countered. “A global group is, by comparison, a large orchestra where little is improvised and everything is about high standards.”

In other words, a startup can afford to risks – risks that might bring the whole company to collapse – that an established company like Munich Re simply can’t afford.

“Particularly when it comes to areas such as risk management we have to remain highly disciplined whereas start-ups are all about innovation and radical business ideas, and that diversity is good for our industry,” Mr. Blunck said.

That doesn’t mean a large company can’t adapt. Mr. Blunck is optimistic that even Munich Re can foster innovation. He hopes that a newly-created innovation center within the company that is completely detached from the day-to-day business cycle will be able to react more dynamically to new ideas and stimulate new thinking.

Although Munich Re’s innovation center is rumored to have been given a generous budget, Mr. Blunck is tight-lipped about the precise amount.

And while larger companies may need to become more nimble, startups by contrast often lack the business experience needed to survive for the long haul.

The fact that new startups need the expertise of the old established players is something that Mr. von Hein acknowledges. It’s the reason why a collaboration between Simplesurance and Munich-based insurance giant Allianz, announced in June, makes business sense.

The deal, which saw Allianz make a sizeable investment in Simplesurance, will see Allianz insurance products sold over Simplesurance’s online platform. But Mr. von Hein is confident that Simplesurance will not lose its independence as a result of the injection of Allianz cash.

“Compared with us, Allianz enjoys greater trust from customers and Allianz also has underwriting expertise that we lack,” Mr. von Hein readily admitted. “To expand abroad, we need to have a local partner in each country. Allianz is a global insurance company, which helps us a good deal.”

Mr. von Hein also pointed to another advantage of insurtech companies collaborating with established insurance firms. By selling the insurance products of established companies over new digital platforms, rather than creating their own products, fintech companies avoid having to jump through the regulatory hurdles that come with setting up your own insurance business.

Still, many of these insurtechs do have larger ambitions down the line. Mr. von Hein himself has previously predicted that insurers like Allianz will cease to exist within 30 years because of changing sales and marketing structures. Compared with the old behemoths, he said, the digital startups enjoy much cheaper distribution costs. This could help insurtechs attract new business in areas such as private property insurance.

Mr. von Hein brushes off criticisms that companies such as Simplesurance are little more than software developers.

“We are a bit more than that,” he said, “We use data to create insurance policies and, using a cost-neutral fully digital platform, manage the entire claims settlement process. As we obtain more and more data, we are able to improve our data analysis when it comes to risk selection.”

Mr. Blunck also admits that insurtechs are playing a much greater role than some in the old insurance business might care to acknowledge. Traditional insurance may not die as Mr. von Hein predicts, but he says the very nature of how these established companies operate is definitely changing.

That means he does have one prediction: As insurance is increasingly sold online alongside other products, it may well be that in 10 years’ time “purely analogue insurers” will have gone out of business.

 

The interview first appeared in WirtschaftsWoche, a sister publication of Handelsblatt. To contact the author: Matthias.kamp@wiwo.de

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