Industry Technosavvy the November 2018 issue

Incubating Insurance

Q&A with Jean Vernor, Head of Incubator, New Strategic Markets, Munich Reinsurance America
By Michael Fitzpatrick Posted on October 31, 2018
Tell us about the Munich Re incubator and the Innovation Lab.
The incubator is a regional innovation unit, and we focus on accelerating growth in new areas of risk where we don’t currently operate. We focus on longer-range innovations, three to five or more years out that expand new capabilities or address new customer needs, breakthrough innovations or looking at new technologies that are entering the insurance or reinsurance space.

The incubator has several components. There’s a lab team that runs pilots and an underwriting unit. There are two strategic domains. One domain is focused on mobility, and the other is insurance on demand. These are two big themes within the space. Mobility is about getting people and goods from place to place. Insurance on demand is focused on how data, digitization, technology and consumer preferences are disrupting insurance as we know it—although we don’t see this as disruption but, rather, as an opportunity for our industry to evolve.

The underwriting unit is taking on what we’re calling frontier risks, like autonomous vehicles, car sharing and ride sharing, and we provide insurance coverage for companies that are operating in those areas. This is really exciting, learning how to underwrite these risks when there still is very little, if any, historical data to refer to for insights.

The team of specialists in the lab take on very early-stage ideas that have been through a vetting process to help us determine if we want to pilot them. The lab operates with a mix of lean startup tools as well as agile and design thinking. These help us shape minimally viable pilots to test them in the market before scaling. If a pilot is successful, we take some time in progressing it toward scale. And if the opportunity is very far removed from our existing business model, we might consider creating an entirely new business unit or spin the company out.

Outside of the incubator, across Munich Re’s North American operations, each of the company’s U.S. businesses has a group dedicated to innovation. These business units are working on innovations that align with their core business.

Can you give an example of an innovative idea?
One of the projects launched out of the incubator is Smart Mobility. Smart Mobility is the simple solution to the complex issues surrounding auto risks. We use a patent-pending data analytics tool called LossDetect, which is an online, automated text-analysis tool that examines claim descriptions for commercial fleets to recommend potential solutions. It also identifies the potential for quantifiable savings. Based on this analysis, we outline the technology solutions to address a client’s causes of loss. These solutions include collision avoidance, telematics, driver coaching, and advanced fleet monitoring. Our partnerships with leading-edge companies in these areas provide us with an easy and efficient way to offer the technology to our clients. At the same time, we’re gathering loss data that can prove the benefits of new technology.
Why is it important for a global company like Munich Re to work with startups?
The insurtech space exploded over the past few years, and certainly Munich Re was on the forefront of that. We started by sending several colleagues to Silicon Valley. They moved there and began to interact with the startup community. It’s important for big incumbent companies to have their ear to the ground and see where advancements in technology are taking place. We’re members of several accelerators. We were the founding partner for Plug and Play in their insurtech accelerator. That has fueled a lot of insight, whether it’s for the incubator or different innovation practices within our corporate innovation ecosystem. We don’t have to build everything ourselves—and that’s the answer to the question of why insurtech is important. We don’t have to be the experts in certain technology advancements. We can offer startups capacity, stability and, importantly, expertise in the insurance and reinsurance markets. Sometimes startups don’t have any of those things.

At a very high level, our role as a company is to continue to focus on our need to help protect people, our clients and businesses from the unknown. There’s a lot of change going on. It’s amazing to see what has happened in the last three to four years and to see whether the technology that you are investing in today will stand the test of time. Some may see this as disruption, but we see it as an opportunity.

What trends are you seeing in insurtech?
We’re seeing things shift now. A few years ago, startups were focused on certain parts of the front end of the ecosystem and making it easier and simpler to purchase insurance products. Now, we’re seeing a growing interest in commercial products and an emerging trend within risk avoidance. It’s not just about the insurance product and covering new and emerging risks but also using data and technology to avoid or prevent risk.

We’re thinking more about how, as a reinsurer, we can add value to our clients by leveraging the data and insights that we see across all these areas of risk, as well as providing solutions and services beyond traditional reinsurance.

How do you recognize the good ideas?
Recognizing a good idea takes a disciplined approach—it’s essential to initially frame up the problem succinctly. You need to obsess about the problem and not the solution. Then it’s time to rank ideas and decide which ones to invest in for further exploration. That’s the approach we’re taking in the incubator. We need to be disciplined in learning about what the customer and the market is telling us about the idea. That’s hard, but it’s really important not to fall in love with an idea, because you can make costly investment mistakes and build something nobody wants to buy. Finding that out as early as possible in the innovation stage is an important way to avoid unnecessary costs.
How does Munich Re work with brokers on innovation?
Brokers are another important part of our ecosystem. Some of the products that we have launched, or are in the process of launching, are a direct result of listening to brokers and what they say are gaps in the market. They are an important part of what I was just discussing—listening to your customer and listening to your market and understanding what it is that they need and then putting that idea into a process that allows for you to shape it well and then pilot it.
How did you get into insurtech?
For the last 15 or so years, I’ve been leading business units of large corporations and leveraging innovation, product development and technology to fuel business transformation and growth. Running the incubator is a great opportunity to focus 100% on innovation and leverage all the interesting innovation in insurtech. I love that because there is so much change going on in the industry. This is a great place to make an impact.

Doing this well can help fuel transformation and growth for us, for our clients and for the industry. That’s what I think is so exciting. It’s a really fascinating time to be in the industry. If we do this well, it’s going to change the way we handle risk in the future. It’s a really cool place to be.

Michael Fitzpatrick Technology Editor Read More

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