Focus on specialty, claims and technology will support German growth: Berger

AGCS is back on the front foot in Germany and sees good growth prospects in its core market, despite continued ferocious competition. The ability to offer the full range of specialty products and services to companies of all shapes and sizes will help maintain growth. A big and continued investment in the latest technology to improve the way the insurer works with brokers and customers, notably in the key area of claims, will also help, as Andreas Berger, AGCS board member responsible for Germany and central and eastern Europe, Mediterranean and Africa, and head of broker channel distribution for Allianz Group, told Adrian Ladbury. Adrian Ladbury [AL]: How have recent renewals been for AGCS in Germany – harder, softer or the same? Andreas Berger [AB]: There’s no doubt that the market environment remains highly competitive. The combination of ongoing overcapacity in the market and high level of competition results in muted rate increases. Hyper-competition has become the new normal in corporate insurance but, irrespective of that, when we consider large corporate risks, a case-by-case approach is always right. Currently in Germany, we do see selective premium increases for loss-affected accounts, but we have also seen a significant volume of new business for AGCS, primarily in property and liability. [AL]: How has your German business performed in the last year and how do you intend to deliver more profit in the coming year? [AB]: Last year was a tough year globally, but AGCS in Germany maintained a strong position despite these challenges. Our underwriting, exposure management and portfolio diversification again proved their value and robustness within our central and eastern Europe (CEE) region – the greatest part of which is Germany – generating about 20% of last year’s global premiums for AGCS. One particular advantage of our multiline global model is that this diversification by product and geography acts as a shock absorber, and last year we were able to offset the claims burden through very good performance of individual business lines – especially engineering and liability. In 2017, we focused on profitability before premium growth. This year, the signs are pointing to stronger growth again. There is a lot of movement in the market, which gives us opportunities and shows how growth is also possible in mature, highly competitive markets such as Germany. [AL]: What is the outlook for the commercial and corporate insurance market in coming renewals? Will the market finally harden? Is there a big difference between middle market and large corporate business? In which lines can German risk managers expect tougher negotiations in the coming months? [AB]: Competition for business is fierce in the German market, just like it is currently in most insurance markets worldwide. However, we are now in a situation where we are growing profitably and gaining market share. I wouldn’t say there are particularly hot discussions across specific lines, but instead we have to look at each major client holistically and on a case-by-case basis. This is where longer-term relationships can allow you to look beyond the surface and understand a client’s bigger picture. The effects of our new ‘Vertrieb2020’ (Sales 2020) initiative are already evident. We see this with a very high retention rate of about 90% in our CEE business. But beyond our longstanding customers, there are numerous companies within the AGCS segment that we can still win over. These include, for example, large family businesses or international medium-sized companies. For these companies, our services in the area of liability, product recall or cyber are of great interest. For example, we know of more than 80 customers with a strong fit to what we can offer and with significant growth potential for AGCS in at least one line of business. We are also making progress among companies with smaller sales volumes. New product approaches, such as Allianz Reputation Protect, are meeting with great interest from customers. New business areas such as entertainment and the expansion of our marine cargo team in southern Germany provide further growth impetus. [AL]: Is there still plenty of capacity for risk managers in Germany or are you seeing withdrawals in some lines? Will recent M&A activity, and potentially more in future, plus significant strategic changes at leading insurers, cause a tightening of capacity during the next 12 months? [AB]: With the AXA/XL merger, market consolidation continued and I expect that we’ll keep seeing other transactions. Market concentration is increasing as a result but so far limited impact is visible in market terms. We don’t expect any problems in Germany for clients to access the required capacity, at least in the foreseeable future. Such acquisitions can offer us opportunities, both in terms of talent and new business. [AL]: Claims are a big focus for risk managers currently. What is AGCS doing in this area to deliver more contract coverage certainty? [AB]: We offer new claims services through new technologies, allowing for quicker, simpler and more convenient collaboration and settlement. Examples include loss adjusting apps, providing client-specific real-time information through our online platform myAGCS.com, or loss-scenario workshops. I think it’s fair to say that AGCS is already well regarded as a claims lead, especially for large complex risks. This is because AGCS in Germany generally draws on its own legal expertise in the event of a claim, and because of our global reach. This is an important point that is appreciated by our customers. Our True Customer Centricity programme also highlights the strength of claims in practice. What we see here is that when clients have experienced a claim and have worked with our claims experts, their loyalty increases as measured by their willingness to recommend us to their colleagues. So ‘the proof of the pudding is in the eating’. Claims is truly a differentiator in practice. In terms of contract certainty, one important focus area is ensuring a strong relationship between client, broker and our claims experts. At AGCS, our claims functions are involved in the sales cycle and ensure clarity in the coverage concepts during the joint contract drafting, so that there will be no surprises later on. This allows early dialogue on claims response in advance of a claim. We often support this with our clients through agreed claims protocols or claims-scenario testing, so all parties are as familiar as possible with the agreed approach. [AL]: How are you investing in new technologies to deliver improved service and products for customers? [AB]: This is at the core of where we’re investing, and we’re investing heavily. This year, AGCS globally will spend more than €100m on external investment in technology and improving systems and processes, and we will continue this level of investment. It’s essential to invest because of the speed of change, not just in our industry but across society and business at large, driven by new technologies and changing customer demands. Insurers have to modernise or even transform their operations and service offerings to meet rising customer and broker expectations. They increasingly expect digital capabilities from us, based on their experiences in their professional and personal lives. Products will look fundamentally different in future. There will be more focus on cross-LoB solutions, partnerships, insurance-as-a-service, pay-as-you-go, bundled insurance and services – including from third parties. We are focusing our investment into two main areas. First, to continue to provide the best possible core functionality for our clients and for our business – so this is in our core underwriting systems, for claims and for running and managing our core offerings and products. Second, we are exploring many strategic options in a more experimental mode. For example, the use of blockchain to service captive programmes, how we can use satellite imagery to facilitate claims in nat cat scenarios, or how we can harness the wealth of data that we have to improve risk insight and services. One of the many examples here is exploring how we can analyse high volumes of property risk data to identify links and interdependencies in supply chain risk that clients might not be aware of. Technology and data are key in this more exploratory area. In the future, competitive advantage will rely on embracing insights provided by data and technology and transforming them into products and services ahead of competition. This is why AGCS has introduced XSE, which stands for Cross-Functional Smart Evolution. This a collaborative new cross-business function that links underwriting, claims and market management. The team will have a strong focus on innovation, data, technology and partnerships, and is driving forward many of our more transformative concepts. This team has three main focus areas: innovation: To explore new business models and the use of technology and data capability build: To use data and technology to strengthen our capabilities in underwriting, sales and claims data science: To develop a centre of expertise that helps all teams at AGCS to harness internal and external data to improve our risk insight and customer services. [AL]: Are German businesses ready for GDPR, in your experience, and what demand is there for cyber insurance? How are you reacting to this demand? [AB]: The GDPR has attracted a lot of attention in Germany and our experience is that there is a high level of corporate awareness. Naturally, it’s the largest companies that tend to be best prepared when it comes to cyber risk, and we see less cyber-readiness in smaller companies – but it’s hard to generalise. Cyber risk is truly dynamic – it is constantly changing – and milestone legislation such as the GDPR has done much to reinforce awareness of risks associated with data and the digitalisation of business. What we see is increasing interest in cyber insurance, combined with improved preventative risk management as a ‘belt and braces’ approach to the problem. We will see a lot more companies interested in obtaining risk-transfer options through cyber insurance. But in practice, the decision-making process in companies for new insurance products is complex. In the case of cyber insurance, it involves many functions beyond risk management, such as IT security and often even the c-suite, which might not previously been deeply engaged in the insurance process. [AL]: Do your customers have control of their supply chain risks? Are they interested in cover for this important area and what kind of coverage is available? Is it adequate and how could it be improved? [AB]: The Allianz Risk Barometer found that business interruption (BI) was the number one concern of risk experts globally, closely followed by cyber. The number of events that cause BI are increasing and have broadened beyond physical loss at a company’s own premises. BI is becoming one of the principle risks for digital companies dependent on networks of suppliers, business partners and customers. Supply chain failure, fire, terrorism, product recall and cyberattacks can all interrupt a business. Just a decade ago, the vertical supply chain consisted of three or four links. Today, products often pass through ten stations on their way from the factory to the end consumer, and that’s not counting the original input suppliers. The more complex the supply chain, the harder it is to manage. This is even more so as digitalisation grows. New relationships in the digital world create new liability exposures, often unexpectedly, and it requires an open dialogue to map them and respond appropriately. Understanding the complex supply chain relationships is key to providing adequate insurance cover to corporate clients. There is great interest from clients here, not just in providing the right solutions, but also in understanding the underlying risks. That is why AGCS is developing various tools based on big data that allow us to map and visualise the complex location networks, as well as supplier relationships up to the fourth tier. These tools will enable us to identify exposures and accumulation issues, and help us understand contingent business interruption risks better. To view our GVNW conference newspaper please click here.

Focus on specialty, claims and technology will support German growth: Berger

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