How does an organisation like Allianz - one of the world's largest insurance companies - stay ahead when it comes to innovation?
Matthew talks to Michele Williams, Head of Allianz Global Corporate & Specialty's central innovation unit XSE, to find out what the group is doing, and the areas of analytics and data they are interested in. Michele explains Allianz's strategy for producing new ideas - which are focussed around their clients' needs - and how they work with start-ups, scale-ups and technology providers.
Michele explains how Allianz's Trend Compass tool has become a central focus for looking at which directions the insurance market might head in. This tool is available for anyone on the Allianz website - https://tci.agcs.allianz.com/
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Transcript for this podcast
00:00 Michele: They present us with the problems, their business problems, our client business problems, and we work with them to find a technology solution to solve those. So, any project that we work on has that end value because it always comes from a business problem.
00:20 Matthew: Hello, this is Matthew Grant, partner at Instech London. Allianz is one of the world's largest insurance companies and Allianz Global Corporate & Specialty, or AGCS, focuses on providing insurance to companies of all sizes around the world from over 200 offices. So, it's really interesting to have a chance to talk to Michele Williams who heads up the recently formed Allianz XSE or Cross-Functional Smart Evolution. This is their central innovation unit at Allianz AGCS. Michele is based out of Munich and has a degree in engineering, but also brings to her role experience in risk assessment and underwriting with Allianz. In our discussion, she provides some very helpful insights into Allianz's strategy for why, how, and where it looks for new ideas.
01:14 Matthew: And it's also worth noting that most of the work they do, or probably all of the work they do, begins with the customer and with a customer problem. Sounds obvious, but it’s something that can often be forgotten about when it comes to the complicated world of commercial and specialty insurance. Michele also talks about the Allianz Trend Compass. Worth taking a look at that. It's a tool they use which is available to anyone, and there is a link in the episode notes to where you can find it on the web. Once again, we are delighted to be supported by Insurance Insider for these podcasts. They are one of the best sources of information on the global wholesale specialty and reinsurance market. Personally, I've been reading their daily bulletins for over 10 years. And a quick search just now on Allianz brought out 15 articles from the last month alone. As a listener of our podcast, Insider is giving you subscription for three months. So, do try that, the link is in the episode notes.
02:11 Matthew: Michele, delighted to welcome you to London. It's a brief trip over here, I think, from your normal location in Munich. Perhaps if you could just describe your role today, and what you're doing at Allianz AGCS?
02:31 Michele: So at AGCS, I am head of a team of very skilled people within a department called XSE. So XSE stands for the Cross-Functional Smart Evolution and it's all about digital transformation and innovation within the company.
02:44 Matthew: And what took you from engineering into your current role?
02:47 Michele: When I left university, I went to a company to design fire suppression systems, fire protection systems, and then I was offered an opportunity within the insurance industry to work as a risk consultant. And I did that role for a number of years and was then offered an opportunity to move into underwriting. And, in doing so, moved to Munich. And while I was there, our board member who has a huge vision around innovation and transformation started a project on what the underwriter of the future looks like. I got involved with this project and that developed very, very quickly into something far bigger than underwriting. So, what does the insurance company of the future look like with regard to claims, underwriting, market management, back office functions. And from that, we developed the team, the XSE team, and I was given a great opportunity to lead it.
03:36 Matthew: What defines what you're doing and what success is in terms of the outcome from XSE?
03:43 Michele: So we want to take insurance from the very traditional industry it is today. And through challenging the business models, through using data differently, through bringing technology, really start to do something different for our clients.
04:00 Matthew: So Michele, when people look at Allianz, they probably see you as one large organization, but in reality you're broken down into some different components. Can you just talk a little bit about what Allianz Global Corporate & Specialty does relative to the rest of the group company?
04:16 Michele: Allianz SE is the group company. And within Allianz SE, there are many, many operating entities, of which AGCS is one. From the UK perspective, Allianz UK is another one, and we have a lot of local entities within different parts of the world. AGCS, Allianz Global Corporate & Specialty is the global corporate insurance carrier for the Allianz solutions.
04:40 Matthew: So you're looking after the big, large, complicated risks that...
04:45 Michele: Exactly.
04:45 Matthew: Tend to be almost entirely commercial and the personal Allianz is a totally separate side of the business?
04:49 Michele: Yes, yes.
04:50 Matthew: When we spoke before, there were four, maybe even five areas that you're working on that quite simply is a helpful way of categorizing how anybody in innovation, in an insurance company, should be thinking.
05:04 Michele: So, we have four key areas. We have what we call the innovation area. So, the focus of our innovation team is strategic. It's around looking at what are the future trends, how will they impact insurance, and how will they impact our customers. So, to get the solutions, we talk a lot to clients, we talk to the senior members of the organization to really understand where they see our organization being in the next years.
05:27 Michele: And then, we work with our clients. We work with our senior members to try and find the solutions. To find their solutions, we employ Lean Startup methods design thinking to really get from day one a solution that will be valuable for our clients moving forward. Then we have a second area we call the capabilities area. This has a slightly different focus. Its focus is a little bit more internal, and this team works directly with our client-facing functions. So, underwriting, market management, claims. The idea is they present us with the problems, their business problems, our client business problems, and we work with them to find a technology solution to solve those. So, any project that we work on has that end value because it always comes from a business problem.
06:15 Michele: We have a data science team. They work very closely with our innovation teams and with our capabilities team. But this is all about enhancing the internal capabilities and use of data, democratizing the data for our people to use differently, to use better, to gain better insights. But it's also about training and up-skilling and really teaching people that data isn't scary. It can be used and it can deliver results that enable us to make much better decisions to sort our clients.
06:44 Matthew: So customers are clearly at the heart of what you're doing. It's only my experience and I think it's changing but I think there's still some challenges in working with the risk managers who are generally employed to buy insurance and get them to think differently and actually consider other ways of protecting a risk. How do you find that when you're going to talk to your customers? Who are your main points of contact there? And how are things changing with the sort of willingness to take on some different ways to do risk management at your clients'?
07:15 Michele: Risk managers are still very, very important to us, and they have huge insights into the company and into what the company needs. For us, it's about more than talking to the risk managers. When you're talking about innovation and the services we as insurers can offer moving forward, we need to also talk to other areas of the business where we can have an impact. So it's good to talk to supply chain managers, finance people, where some of the solutions can make a difference but also where there is a budget to pay for some of these solutions. Because ultimately, while we're looking to innovate and transform and make a difference, we need to be doing it in the sense that people are willing to pay for these solutions. And if we want that to happen, we need to be talking to people who have the budgets, who have the problems that we need to solve.
08:01 Matthew: And so when you talk about paying for those solutions, are you building a separate consulting business alongside the insurance business, or is that bundled into the way you negotiate the premiums?
08:13 Michele: Some of the services would be part of the bundled premiums. But what we're trying to do is really understand what the needs are, what the pains are, what the problems are beyond the risk transfer. I think we all see that from a risk transfer perspective, our clients are moving forward very, very fast. They're embracing technology, they're embracing innovation. They understand their risks much better than they did just a few years ago. And in understanding their risks better, they're willing to retain a lot more of this risk. What they need from us is to fill those gaps that they can't do themselves.
08:46 Matthew: So they are willing to retain more risk, but clearly as an insurance company you want to continue to grow your premiums. So it sounds like the balance is they retain more risks because they can manage those better, and maybe they understand them better, but you're helping them by tackling some of the problems that previously they just wouldn't have had the ability to understand or quantify. And therefore you're kind of maybe changing the landscape of risk into areas that people before would have potentially would have suffered large losses 'cause they just didn't understand how to manage the risk.
09:18 Michele: Yeah. This is the idea.
09:21 Matthew: Good. So just talking a little bit about who you're working with now, I think you prefer not to work with start-ups or you find you're more successful when you're working with companies that are actually have got some traction than the scale-ups. Could you just talk a little bit why that is.
09:37 Michele: We always start our process with a business problem. We don't think about the technology. We really try to identify what is the problem we're trying to solve. When we have identified this, we then look out to the market to say, "What is the technology and what is the sort of company that can help us do that?" This could be a start-up, this could be a larger company. And really at this very early stage, we want the best company to deliver the solution to us. I think where we face more challenges is when we're looking to scale because many of the start-ups that we come across can deliver a fantastic solution at a small scale. But when we're looking to increase this to scale globally, the capabilities are not there.
10:18 Matthew: So, you're not saying no to start up, but they either need to be in a very niche area where they've got a specific skillset that they can fit in on it straight away to supporting a client or they need to be able to scale very quickly with you because you don't really have the luxury of educating them on what insurance is and incubating them when you've got some fairly pressing demands to address your clients' needs.
10:40 Michele: Yes.
10:40 Matthew: If you look at the organizations you work with, what was it betting on all your clients but the companies that are helping you support your clients, what was this balance? And is this is trend changing between organizations that are already working in insurance and helping other insurance companies versus people you come across that haven't yet done anything meaningful within insurance.
11:01 Michele: I think it's about 50-50. Many of the problems that we have, that we're trying to solve, are directly focused on insurance. And for that it's better to work with companies that have a knowledge in the area that speeds things up. They can bring knowledge from working with different companies and really come up with a tangible solution that fits the insurance industry. But also some of the challenges we have need a slightly different mindset. So we're very open to working with companies that don't necessarily have an insurance background but have a very good solid background and technical capability in the problem we're trying to solve. And sometimes for us bringing in that knowledge from outside the insurance industry challenges us to think differently and comes up with a better solution.
11:40 Matthew: And just 'cause this is a theme that people love to come back to, how many of the companies you work with turn out and are trying to disrupt the industry and challenge you by telling you that you're moving far too slowly and you don't get it versus those that are maybe a little more established, have got data clients outside the industry, and a little more mature?
12:00 Michele: I think in our space, it's much more about the established ones. We don't get many start-ups telling us that we need to be more disruptive. If you look at other areas of the business, more retail area of the business, there's a lot more startups in that space really trying to disrupt that space. There's not so much expertise in the larger corporate space. So the people that we work with generally aren't about disrupting.
12:22 Matthew: Presumably, there are areas that cross over between retail that you can see coming into the commercial specialty area. Things such as sort of fractional on-demand insurance that started off in cars and property and renters. Are you seeing things like that that you can learn from what's happening outside of your normal area in start-ups to sort of bring those into commercial space?
12:44 Michele: Absolutely, pay as you go, pay as you fly, pay as you drive. Definitely there is potential. Why do we have to have an annual insurance policy which is very traditional? Why do we have to insure everything? Can we insure specific parts of the equipment? So there are many, many ways that we can disrupt the industry and there are many lessons that we can learn from this more retail type business where they've really challenged and disrupted and really changed the customer journey. And that's what we need to take and understand and re-use rather than build it from scratch.
13:20 Matthew: And talking about sort of pay as you go, maybe moving away from the old annual contract, one of the areas that is getting a lot of attention is the use of IoT tapping into data from sensors, from buildings, machinery. Where are you on that? Is there anything specific you can talk about in real life applications that you've managed to find working with your clients?
13:44 Michele: IoT is an interesting topic for us and it's something that we're currently investigating with quite a high level of detail. I think there are a number of challenges. Those challenges from our perspective are what is the real value that we add from the insurance perspective, why would a customer give us data? Because it has to be more about premium reduction. If you're working in the corporate space, premium reduction isn't really so much of an option because of everything you have to take into account. So if you look in the retail space, if you look at motor, if you look at health, there are direct applications where if somebody is healthy, they get premium reduction. If somebody drives better, they have a benefit to their own premium. It's not so straightforward in the corporate space. So there has to be more. There has to be a value add. There has to be something from our knowledge and experience that we can bring to our clients through IoT which adds a value. And this is the intangible piece that I think we're all searching for at the moment. There's not an obvious answer, but I think it's very important for us to investigate this fully because there is a lot of potential.
14:47 Matthew: Part of that is that the willingness to share data and the risk of sharing data is it exposes more risk rather than less risk. So it's a challenge that together with your clients you're still trying to work out where the best mutual advantage is, or is there still some lack of trust in terms of actually the sharing of the data?
15:07 Michele: There is still a lack of trust. There is still a fear that if our customers share data with us, we will use that and it will impact them negatively. It's still very much very cyclical in the sense that they don't want to share data because we can't prove the value, but we can't prove the value until we have the data. This is what we're trying to tackle at the moment, is finding those one or two companies willing to work with us to really try and investigate how we can do that. And we've actually come across a couple of companies who we are talking to at the moment where we have the potential to do this moving forward.
15:43 Matthew: So just moving on a little bit to how you sort of map out the landscape, you have a at Trend Compass at Allianz that you use to identify what things you ought to be working on now versus other areas out there in the future. Can you just talk a little bit about what that is and how that's used and is that available to other people to look at?
16:03 Michele: So our Trend Compass was developed in response to the need to identify areas to focus on. There's a lot of different types of technology out there, and you talk to people, there's a lot of problems, but we really wanted to be able to focus. So we worked with a third party and we worked with a number of our customers to say, "What really are the trends that impact you now? What do you think is going to impact you in a few years? And what do we just need to think about, it's not going to really touch us in the next few years, but it's something we need to keep on our radar for the future?" And we split those up into three areas. The Act area where this impacts us now, it impacts our clients now, we really need to act and look at these technologies because they will make a difference. There's the Watch, so in three to five years we believe that these trends are the ones which will be driving the future changes. And then Think, which is a little bit longer term so five to seven years where the technology is there, people are talking about it, but there's no real tangible impact on it at the moment.
17:00 Michele: So having split this out into the three areas: The Watch, Act, Think, we then use that to train our people. So we have a lot of seminars, webinars to help people understand what that actually means and how that... What implications that has for them. And we also look at them and then we deep dive. So internet of things is one that we've just talked about. This is something that was identified in the Watch area. So our team is now doing a deep dive into the Internet of Things, what that means for us, what that means for our customers. Another area which is in the Watch is platforms? What does that actually mean? 'Cause you say platforms, it could mean absolutely anything. And what does... What can we bring to the table from an innovation perspective? So there's somebody else in the team who's doing a deep dive in this particular space. Our Trend Compass is split into two areas. There's the internal compass which is really about what is the insurance impact of trends, and then there's the external, the client compass, which is what is really impacting our clients at the moment. Now things are slightly different, but that's okay because there are overlaps, and it is these overlaps that we want to focus on. The Trend Compass is available to anybody who wants look at it. You just need to go to the Allianz website and type in Trend Compass.
18:13 Matthew: Great.
18:13 Michele: And you can look in more detail.
18:15 Matthew: We'll put link for that in the episode notes. So Michele one of the problems many insurance companies have is allowing people in the organization to have time and motivating them to bring new ideas into the business. How do you solve that for your underwriters and your analysts and other people across the organization to help them find some ways to carve out some of their time from their day job to bring you ideas, and also actually the other way when you've got the ideas? How do you get their attention to actually get those into practice?
18:45 Michele: Motivating our underwriters and our claims handlers is not the problem. They are motivated, they have ideas, they really want to make this happen. Allowing them time to do it is more difficult because there is a very strong focus on the moment... At the moment on the day-to-day business and profitability as there should be. As we said earlier, every problem comes from the business. So every problem has a product owner, the business owner who is really motivated to solve that. This person takes responsibility and we ask their managers to give them a certain amount of time to focus on delivering this solution. And in doing so we get the motivation, we get the hands-on experience of what needs to be delivered because the person who has the problem is working with us side by side, and we get a faster solution because people have dedicated time to deliver it.
19:32 Matthew: So finally, when you look out there, what are the really hard problems that you haven't yet solved? Where are the opportunities for people looking at how they can help you or others in this industry?
19:44 Michele: There are a lot of problems, and I don't think we should underestimate what a challenge we actually have at the moment. But if I was to narrow it down, I would say there's three. First is data. Everybody says that data is the new gold, but data in itself isn't helpful. Data that is of good quality, that is pulled together in the right way to generate the insights has a huge amount of value. But historically, we don't necessarily have data in the format that enables us to generate these insights, so we'd have to do a lot of work to bring an external data, combine it with our internal data, to generate the insights which add the value. Culture, from an insurance perspective, insurance is a very old industry, it's a very traditional industry. We have to change the culture, we have to start making people challenge what they do and accept that things are going to change. And to do that, what we need to do is develop the solutions and show them they get a benefit from it, but it takes time. So culture is a big one for us.
20:44 Michele: And the third one is value. We have to deliver value. Change for the sake of change isn't change. Change that adds value make people's lives better, solves their problems, that is great. But we have to really focus on what is the value we're trying to deliver, and that takes time. And it takes a certain skill set to really deep dive and say, "This is what I want to solve." It's not a generic problem any more. It's this piece which has the most value that we need to focus on.
21:13 Matthew: Good. And I assume being a German company when you talk about, you need to define value delivery, there is some very clear metrics that are expected to demonstrate that you actually have done that, as opposed to just sort of talking about it.
21:27 Michele: Yes. So our key areas are growth, profitability, and productivity. And I think that's probably the same for anybody who's listening. My team doesn't focus on process improvements. There is... This is very, very important to the organization because improving processes is fundamental to the way you move forward, but our focus is on delivering solutions which deliver profitable growth to the organization. Whether that is through a product or a service, but ultimately, we have to deliver a value to the organization and to our clients.
22:04 Matthew: Good. And there's a number of companies you're working with and case studies out there which we don't have time to go into now. But people could find those if they...
22:12 Michele: Yes.
22:12 Matthew: Get on to...
22:12 Michele: Yeah, if they go onto the website, there's information there.
22:14 Matthew: Fantastic. Alright, so finally if anybody out there has got an idea they want to bring to you at AGCS, what's the best way to contact either you or your team?
22:27 Michele: I would say, if I could ask you to put my details on your website, please, I'd welcome anybody who wants to contact me by phone, by email, by any other messaging way, and we'll be happy to respond and talk to you. We're always looking for new problems, new solutions to solve.
22:43 Matthew: Good. Let's get together in a few months and see what you heard and what you've learnt in the interviewing period. Michele, it's been great. You're heading back to Munich today. I guess it's almost Oktoberfest time is now, too?
22:55 Michele: Yeah, it's coming, starting this weekend.
22:57 Matthew: So do you take a tent there and go and wave your beer stein around and join in the singing?
23:03 Michele: I couldn't possibly comment.
23:04 Matthew: Michele, thank you.
23:07 Matthew: Thank you.
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