Hello everyone, hope you’re all well, and welcome to today’s ICMF Webinar: episode six in our The Digital Mutual webinar series. Today, we feature the case study of HUK-COBURG from Germany, and they will share their digital strategy and journey in terms of digital transformation. I’m pleased to introduce today’s speaker, Detlef Frank, who is a board member of HUK24. HUK24 is the online-only subsidiary of HUK-COBURG and to explain more and share his case study from Germany, I’m pleased that Detlef can join us today.
Thank you very much Ben for the kind and direction. Let me first, in those times, address some words about digitalization in general. Today, we all are faced with the omnipresent COVID-19 virus, and I think it’s a really great advantage of our form of making business that customers are seen as equal partners in a fair play. And that brings to us a lot of trust of clients and we have to reinforce that trust by the means of digitalization. I mean the higher the degree of digitalization we have, the lower the burden for the customers, and this is not meant only for sales, distribution, marketing, but also for services, customer relationships and extremes happening. The topics that I will strive today, mostly out of the range of P&C or non-life in general because of the HUK24 is an insurance company that is not, has not an offer in life insurance as a risk carrier.
I will come to that point later. I think the customers in those times in that, and now times really learn to appreciate the digital of multitudes and I’m convinced that this will last even after the actual crisis. Let’s go first to the next slide, please. Let’s first go to some remarks about HUK-COBURG because most of you are outside Germany, I think, and HUK-COBURG is relevant only and active only in Germany. I cannot cover all topics of digital transformation, of course and I will show you, I hope I will be able to show you how the group is, wants to use the digital only player HUK24 at the forefront of its development in digitization to strive the concept of the data-driven insurance group. When HUK-COBURG gets off from the mother company is, comes from civil servants and, already in the 50s, 60s and 70s, some daughter companies were founded, covering lifestyle, P&C insurance for among public services for everybody.
And so today we have around 12 million customers that come nearly exclusively from private households. That, around a fourth of the private households in Germany, have a contract with HUK-COBURG group in total. HUK24 is one of the companies, it belongs 200% to HUK-COBURG was founded in 2000. Today we have nearly 20 years of experience and we are active purely online, so it’s a clear difference between the business case of HUK-COBURG as a group, then the other companies and HUK24, the contract is done, as a direct insurer but not via telephone, fax and other direct means only email and the website is our meet.
To give you some hint about the channels of distribution, we have around 15% of the policies, a few dollar policies in motor, P&C and the partial liability that are assigned to directly and directly means not only online, but telephone as well. If you restrict the view to motor insurance, you can say that around one third of the German market is really done online or direct with a clear tendency towards online. From the beginning from 2000, and even since 2010, it’s a constant growth of that channel. The next please, concerning our portfolio, of course, motor is dominant. That’s a little bit clear with HUK-COBURG we have around in a group level around 50, more than 50% of the premiums that cover or that come out of motor and on a company level HUK24 has around 90% of the premium russell with premium that comes from motor. Besides that we have P&C product lines, legal expenses, and we are an in group intermedia, intermedia for life and health products within the group.
The principle is to be as small and efficient as possible. That means where all functions already existed in the beginning or even nowadays already exist. We try to use synergies in within the group. That means that we have an expert team that is where my colleague and me are responsible directly that comprises only 14 employees and then additional online support department that comprises around 140, 150 employees. All other functions are done by HUK-COBURG employees doing that besides though their other duties for HUK24. What do they do those expert team and their online support where the expert team of course is responsible for marketing and sales, online marketing and sales, of course for HUK24 for products, for self services, for processes and automation, for controlling and development and the support functions comprise emails and those processes that are not ultimately not yet automatically implemented fully, automatically implemented.
Just to give you an idea about the differences between certain functions, certain direct insurance ways to do, of course we have service insurers, like HUK-COBURG which is on the left side of the three data columns. Then we have here on the example of customers direct that’s direct player that uses telephone, support quite intensively. They have restricted to life insurance and P&C and HUK24, which is a little bit similar about the x that is marked. That means that we deny any telephones support. That means that our employees in the services’ department can’t telephone, and we are pleased that customers give us their telephone number, but it is not a regular meeting. That means customers cannot telephone with us in terms of contract and of new business, of course, in terms of claims, they have where we are convinced that in immediate support is necessary to be successful.
We have service numbers that are similar to that of HUK-COBURG. All claims are treated similarly and all service channels are comparable between HUK-COBURG, the service insurance company and HUK24. The next please. To give you some idea about the satisfaction the customer have with that purely online business model shows you the, that’s on the study as it’s done in quite new in 2020 that shows that HUK-COBURG and HUK24 do not differ a lot in terms of customer satisfaction of the between the top 25 insurance companies. And you see that we are, even if we are not a service insurance company, like for example, the DEVK or Allianz we are quite, we are ranked quite comfortable and that customers really estimate that go-to the service.
To give you some figure about the direct market in Germany, you see the gross rate and premiums in life and besides life and health in the German market, you see we have in 2018 around 860 million gross with the premium in 2019, we have more than 900 million. And what is….One of the reasons of course, the brand trust, because HUK-COBURG is quite known in Germany and well, to be fair we have to add of course, even in Germany, we have moused and you Insurtechs that have not yet the relevance you see quite on the right side, the next level, that is from the Ergo group and Insurtech and we have others, like FRIDAY, GetSafe and Coya but these do not play a big role yet in Germany, but of course we see quite precisely in that niche and we see of course how they watch what they do and what they do differently from us.
Yes some hinder bound the market share of HUK-COBURG and HUK24. You see a market share of more than 15% of HUK-COBURG that comprises all P&C or motor covering risks covers besides HUK24 in the group. And we have separately from the market share of 3.5% of the insurance policies in motor. We are part of the top 10 motor insurance companies in Germany, although we are playing only in a niche, so to say, because we offer only our products online. What are the reasons for this, the next slide, please. One of the reasons is, of course, the price leadership, and to offer attractive prices is always a matter of actuarial expertize. I’m an actuary myself so I know what this means. And of course we are in addition, we have a quite homogeneous portfolio.
We want to be able to ensure 90, 95%, online of the private household, the HUK-COBURG group perhaps can assure 98% of the needs of private households. So we differ not a lot between the risk areas within the group, but we differ a lot between other carriers that have a special business and that leads to a not more heterogeneous portfolio in their books. And additionally, we have a scalable process and this allows us to in HUK24 to play at a cost ratio of about 6% in motor and the market value lies more than 20%. You see that is frightened an interesting point that allows us to be a price-leader in motor, but not restricted to that.
And this has given us an annual growth in policies of around 7.5% a year that is quite solid. And in addition, we have seen that after some years, of course, where we have to fulfill, we had to finance the costs of the growth that starting from 2017, we really were quite profitable and the forecast of 2019 has become truth as I can say, nowadays, we allow around €60 million of profit after tax in that year and the last year. The group actually is quite content was our results, and we seem to have to be on a good line for the moment. The next slide, please. Nevertheless, that success story has its challenges, and we are quite aware that in that X, Y diagram where the market share on the due to the growth is seen that the established direct insurers and the traditional insurance completed by new players that come along really try to be successful as well.
And we see of course that customer behaviour might change over the time. To begin with the established our players I think they’ve done their own SWOT analysis and they have found good ways to grow themselves and to copy, or even reinvent themselves to get well, a higher market share on that slide. Others, like the new attackers or new players you see their price comparison functions like Joonko that have had to be began last year or other risk areas like Lemonade and FRIDAY. And in addition Allianz star, right, that has begun in 2019, the motor business in Germany that consisted before by Aktuar and that’s trying now to scale on a Pan-European vision where Italy, Spain, Austria, and the Netherlands and other countries will help to, well to lift them in probably a separate league of players that cover from all over Europe, you’ll see that. And to complete that view, the traditional players understood because we all see that the web is the marketing attempts are open for everybody.
You see how it is comparable to, the TV space that is available in the renewal season, for example, similarly, you see it with all those marketing, it means that are done by every players before the year, the renewal season that’s in Germany before Christmas. And of course, a lot of companies and a lot of industries try to get their share hold on that. And to be honest, they are not only HUK24 successful of course, the comparison platform CHECK24 is quite successful as well. But I come to that point, perhaps a little bit later when I explain why we are not listed in with CHECK24 and with a comparison platform sites in general.
From that point of view we see you have to roll up our vision. Our vision is really to be in within the group consequently way to strive a consequently way, to become an insurance machine that generates the highest number of online only insurance policies in the German market, and probably remarked that we are not only arguing as a risk area, but also in comparison to well, online brokers like Trek 24 and others as well. So, there are three comprising factors that I highly agree automization, a very attractive offer concerning price and costs. And of course here, again, our mutuals approach, because that is in for my convention a very necessity risk to think about the next slide please.
What are the guidelines to implement the solution? You see seven characteristics beginning from simple direct, no commission fees, and all of those, is seen as necessary to get to that goal, to that vision of the direct machines that’s means we want to reach that vision via an e-commerce like, and you see on the right side, the actual screen of the HUK24 website where we really wanted to see how to make it in an analogous way, like e-commerce offers really our presence today. To go in the depth concerning the characteristics of the principals, one is of course, simplicity, that means that if a customer searches the data and the personalization that welcomes him on the website leads to simplify the customer journey that means we have to see why he comes, by what means he comes, that means what devices he has used, with what intention probably, comes to our risks, website and, probably what will he do? Everything depends on the data that we have that we know when the customer comes to us and is therefore quite, important how we welcome him.
And the first site that he sees on our website is really quite a personalized that you see from that slide with the six ways how to welcome him when it comes to our site, it’s possible that he searches, for example, for the telematics offer, then he is presented a telematics offer, if he comes during the renewal time where we have a black weekend or black week, then we have another, welcome screen. We have one hero position all we can use several of positions with actions with different topics to play similarly.
And this means, of course, that the user experience is quite important because as we have only this channel, this online channel, it is not possible to indicate other channels, for example, a telephone number or the address or telephone number of an agent where he can get additional information. Everything is done in the online channel and we have to use the and it’s our way to do it, to give the customer, the user, a hand to get his quote without any additional counselling and to give to get all the information he needs while at the online process. It is necessary to be very clear, very transparent. And what you see here are screenshots from mobile first developed user-experience customer journey that is done quite a few months ago. And which we have launched some months before the renewal season in the end of last year.
What does it mean? It means, and this is again, perhaps in a point of a kind of mutual thinking. We want to be fair. We want to be as transparent as possible in order to give him some choices and to give him some differences, about the cover means, and to use it really via all your devices. Wwe do not find any screenshots from a desktop here that, of course this works well with desktops to, but we are convinced that more and more mobile devices will be our way or the way of the customer to use the internet and to get his quotes, to get his needs fulfilled. It should be easy and as experienced elsewhere in e-commerce, location, and we want to offer our products very fair and transparent.
The next thing is direct. And that means that we do not cooperate with comparison platforms. I want to skip all that story that we had. We had our own platform comparison platform Transpower, which was ended in 2014. And since 2016, we are not listed anymore in any comparison site, because we are convinced that direct means, really direct. And each intermediary between the customer and us is, does not fulfil that direct concept. In addition, of course, a direct and an intermediary cannot convince customers about the mutual thinking, how the special characteristics that we have compared to others. We do not pay any commissions. And all of you who work together with inter medias know that, online business is not for free anymore. And this is true, not only since yesterday, but also already quite a long time.
The next question is, of course, everything we are do is data-driven is KPI based. That means we look very precisely, the website portal, when you look at traffic, we look how many see the product science that we offers, we see how many it really use the calculator, get a quote, and of course do the close to contract at last. Every KPI is like a click to lead click to all the view to lead or whatever you want is really necessary. And not only on the top view, but even on the very detailed level. AB tests, multivariate tests that really have to quite necessary to optimize the customer journey in terms of the customer, not so much in terms of our feeling good on the, our well the taste that we probably have everybody.
Another thing is the scalability. We have here an example of household insurance, we have really more than doubled the number of new contracts within a period of four years. This is quite a standard thing on the other side, if you concentrate and focus on certain things you can reach more. On the other side I want to be honest we have other products that we do not offer anymore. For example, we have, as in, not as our own product, but for our life insurance company, as an intermediary, where we offered to death benefit insurance, we have started, we have to stop this because it, of course we did some business but it was not in number of the digits it’s not even that tight that we have here, for example, with household insurance or car insurance. We have dropped it and I think that’s something you have to in mind, you have to have in mind to concentrate on the things that you do and you do a good and you’re doing normally better if you concentrate at least something beside.
Perhaps here’s some slide about the automation and the fully automated processes. We have other levels of benchmarks that within the group, you see here, a period of eight quarters from the beginning of 2018 to the end of 2019 eight quarters, and you see that the green benchmark of a HUK-COBURG is around 60% and they strive to get it. With HUK24, we really started from the very beginning of that, we said, well, we need at least 80% of fully automatic loop process household applications. And we just reached that, and this is standard for all products for all relevant applications that are present on our side. Yes, this means, of course the next slide, please, not only the processes that, are active, but even that the try to assist our customers by digital means, for example, a frequently asked questions and that can be used without can be answered without any human resources, the interview, or the introduction of a checkbox that via texts not yet via speech really supports customers and want to help them.
We have done a really, really good experience with that. We offer some areas of very transparent support for the customers, of course, we are not ready that’s work that is not yet finished, but we really try to give the best support that can be compared with a call agent, for example, or a physical person that is in the bureau of the customer together. Of course, these are old means that can be ameliorated by natural speech, by voice, and we work on that, but first of all, it must be realized, it must be put into reality concerning the content. The next please. As I mentioned before, we receive calls that customers are busy under way in a lot of industries that they use their mobile phone for everything today. We always look and strive. How other companies like big players we see here, Amazon and eBay and Google, perhaps that what they do and how they do it.
And we want to be not so much different from them. Our benchmarks on lots of other insurance companies, other risk areas, but more the, e-commerce offers that are present today. The next slide, please. And now to go to the last minutes, I want to talk about how we realize that and how we are still active to reach that digital transformation. From the very beginning, I told you we have of course we have tried to use the fact that we have an online orange only insurance company within the group, and to develop a digital transformation via that company, you can perhaps imagine that with 2.4 million customers nowadays with HUK24, it is sometimes in the operation, at the open heart that nevertheless, and this is totally different from other Greenfield players, like FRIDAY and Nexible motor over, if you have no customers, you can try and use MVPs all of those things very, very clearly. With us, it’s always a little bit harder to get things done and to put with the example of trying to fold the digital transformation forward.
What we have down so far, we rolled with HUK24 and additional surrounding digital 2.0. Then of course, we tried to build not only our website, a little bit more modern and much more transparent, but really to build, to use, to build a motor that leads to the second image from the left. We build in new model within that car. And now we are just on the way to, with the experience that we made and the that we have made to use that for the digitalization of the process. The motor is copied and adapted to the needs of the HUK-COBURG group. At least we want at last we want to be the head and gear head the two groups of two brands comparable.
We want, therefore the decision was to focus on the first line on the HUK24 business model, and to develop those innovations there and to test it, of course, on the open heart, as I mentioned, and to implement it. And we always had the second principle of course, to develop it once, and use it several or multiple times in the group. And that means of course, that we have all those or learn that we have different business cases, business models within the group we have HUK-COBURG running Multi-channel insurance company. And besides that HUK24 is an online only. The online channel, the online section of that customer journey is the same and should be principally the same.
What does this mean? This means, in terms of, the five aspects we use, of course in all cases data. It does not matter if you have one line only, or if you’re a multi-channel business model, data is worthwhile to use, because then you’re relevant. You can use the data to give relevant content to the customer and to convince him, even if you have an agent system data is worthwhile they’re dealing with it, of course, tools. We use Web-Tools for personalized contact, because we are convinced even in the group, if a customer calls us and wants to have some counsel, then it is necessary to be as personalized as possible towards the customer in that call situation, of course, in an online situation, this is possible, even easier. The IT architecture and the processes have been modernized.
Most of that motor that is symbolized on the left done via processes and via technology. And of course we have known and have learned how to collaborate in a natural way with cross-functional teams and using scrum. Which is quite interesting nowadays, because now we have decided really, we have done that in quite big project and now we think about how to install it, to make it permanently that’s HR process. We just are underway to build up a department for development for digital services within the group. And this is back again, like at the very beginning of HUK24, we try to create synergies within the group wherever possible. And this, again, not only hope trying to, for us digital services there ar other subsidiaries as well, but of course use those future services.
And therefore we try to create those and to build those digital services in a central place within the group. But this has to be according to the needs of the business. And of course there, it is quite relevant, how this function health, how this works together with the non-HR parts of the group. Next slide, please. What does this mean then? Of course I’ve done a very, very simple screen this and the next one, some compared screenshots concerning TPL for house and land owners, and you see nearly the next slide, please, as well. You see that similarly it’s the same, the first one was for HUK24, the second one for HUK-COBURG it is the same way to offer your valor colors where perhaps other buttons and perhaps other facilities, but the structure the way to give information and support to the customer is quite the same.
The principal, I think, is quite clear that we try to give customers a fair and transparent way, and the information and that it’s not a matter of the channel of that you might take after that customer journey. Of course, within HUK24 we are eager to come to a close after that screenshots that you’ve seen in HUK-COBURG we’ll see, of course others, other means like telephone numbers and as well to get some additional counseling. The next slide, please. And this will be one of the last two for you, five takeaways for the road. The first is I think, again, in those times with the Corona crisis, I think every concept that has a focused to online and direct is in favor because the customers will learn in those times in those days that it is possible to be quite underway, quite convenient.
Of course, if you have a risk carrier, like HUK24, that is committed to an online only way, then it is even easier, to be transparent. I can tell you if we had, in that time, some pressures concerning the authorities, therefore, where you have to go to get to new business. If you have to buy, if you want to buy a new car, want to drive it, the office is now in Germany you have problems to give their services because the services are not digital, not yet, and not fully digital. Of course this has consequences for us as well. But nevertheless, the decline that we have in what we see in the online only model in Germany when within the group and who trying to for is far less than the one that we see in traditional ways and this supports that online only, and direct only is always an advantage, even for those who offer more than the way that channel alone.
The next one is simplicity first. I think customers from their behavior see and are used to it, they see, they do not understand why we are so complicated. Why are our products also complicated? And therefore, it is our needs of course we have to differentiate different risks and as an actuary, I know quite well, but not every customer not every risk is the same, but nevertheless, we have to make things as simple as possible for the customer to get to an end of the problem. It is not so much a question as the third, the third topic is a third takeaway. It’s not so much a question of the taste and beauty of a website, but it should be data-driven database, all the efforts to optimize, to personalize the customer journey best in real time and best of the best set up to be successful.
The fourth takeaway is of course, customers do not come to us because they like us so much. I think they have their needs, they are looking for products and they have and their behavior changes steadily. It is always necessary to keep and to develop that digital thinking. And this should be consistent during the whole funnel that we cover, and I think even for my lab position, we are quite good, quite good together with those departments that develop products and are very, have a higher knowledge about products and about coverages over things. But nevertheless, you have to always to have in mind that the customer has to understand and to appreciate what you really have for him and what perhaps are the advantages that you have compared with other competitors.
And the last thing, perhaps if you have in your group, or if you have other means to acquire a digital speedboat, it’s always a good situation to test it. It is not so easy to test 2.4 million customers. I can tell you, but nevertheless, it is easier not to transform a whole company because you have a lot of resistance and a lot of discussions within the group. It’s always better to test it, besides that. These were the five takeaways that I had for you at the end of the presentation.
I thank you for your attention of course, I’m quite interested to try to answer some questions that might have been raised during the presentation. Thank you.
Thank you very much Detlef. I think those five takeaways summarize a very comprehensive presentation and case study that you’ve you provided on HUK24, strategy learnings, and also the influence that it’s having in terms of group digitalization for HUK-COBURG. We do have a number of questions in, and we probably have about five minutes to answer them.
The first question for you Detlef is comes in and it says, “Was there a conscious decision to create a subsidiary company and a new brand for HUK-COBURG and through HUK24, rather than just for HUK-COBURG just policies online?”
Yeah, it’s a good question. Well, as I mentioned, HUK24 was really founded in 2000, and if you remember that times, it was just the end of the dot-com bubble. It wasn’t really clear that we might be successful with that way of offering insurance coverage via that online only channel. What we were organized as a profit center in order if it had not worked, one could have closed it, and again, this would have, perhaps some defect, but it would have worked otherwise good, quite good. The second reason was we had to differentiate as I mentioned before, HUK-COBURG and the mother company and all the other companies they do not have that normal distribution system, that means we have no fees for the sales persons that are running, but only for the conclusion of new contract and therefore the customers really I would say around 50 to 60% of normal HUK-COBURG customers see, or saw HUK-COBURG as a direct insurer, which means that if they have any complaints or any questions, any support they contact the company itself and not via the agent.
And therefore it’s, from the very beginning, it was clear that we make an online only way. And it with HUK24 and we have a separate and not redundant business case besides HUK-COBURG. And I think it’s most quite successful as well. On the other side, of course, if somewhere would be within the group that would think about well to reorganize that online business, then we would have some conflicts concerning two different brands that our personalities, and as I mentioned at the beginning with the market shares that HUK-COBURG and HUK24 have nowadays we will feel quite comfortable with a situation. Actually I do not see anybody in the group that really say, would think about that. Like other German players, like for example Gothaer, others perhaps did. I do not know it precisely, but I cannot, I only have my view from it from outside.
Thank you Detlef. Another question here. It asks about the distribution model of HUK-COBURG and it seemed you use tied agents, and then the question is, “How do you maintain the same level of personalized service they want online interactions that customers would expect through agents or channels via HUK-COBURG?”
That’s really a challenge because if you go outside the online channel, then it’s necessary, as I mentioned to be present with all the data you have, and I mean, this vice-versa. If you have any data coming out of the contact of a personal contact via tied agent or whatever the call agent, for example, then it must be present, then it must be usable for the online journey as well when the customer comes in. We adjust on the way I have to say, because we’ve tried to realize that to put into reality that online principal buyer HUK24 and they just now on the way to transform it, as I’m mentioned with the motor build a picture that I had before to HUK-COBURG and this is of course, a complexity that we have to face now, in order to be present with all those data we have, and we get from the customers.
We have two more questions. I think we’ll have time for, both about the marketing of HUK24. The first one, just as you emphasize in your marketing, that you are not on any comparison websites.
Well, the thing is we were, we had our own comparison site transfer, as I mentioned until 2014. And what we realized at that time was that we were too late. CHECK24 and at that time, some other comparison sites really had to had realized that it is not to be successful, it’s not sufficient to offer those insurance capabilities, but to be present with all needs customers are looking for and want to compare. And as an insurance company, we did it together with two other insurance companies, we saw that this is not, that we could not follow that way because, to offer some energy carriers or some mobile device carriers that was on our way. It wasn’t, it was not lasting.
And at that time, we really thought quite heavily how to act further. And what we realized is first, what is this not very, that is quite expensive to present on a comparison side, because the spillover effect in Germany at least is not so high. That you have to pay nearly for every client, for every new business that you get from that comparison site. The next thing is, that comparison site in Germany, at least mostly actors, online brokers, and this, always carries the conflict. As I mentioned before, to act as a direct player, we used to have direct contact to the customer and to make business via an online broker that is always in the field of the customer himself is not so easy. It’s more complicated and all our systems are not done for that.
We really thought about that and we were present in another comparison site, Verivox that until the end of 2015, but then really we decided we’d go out of it and we keep away. And the same is true for HUK-COBURG, whereas the group there are other risks carriers because HUK-COBURG has made a similar experience. And of course the meaning of the weight of that form of distribution for HUK-COBURG is, as they have other channels far less than it might be for other direct risk covers in Germany. That was the reason.
Finally, there’s just one final question, about your marketing campaigns and marketing strategy, and it asks whether you sort of market yourself as having mutual values in your marketing campaigns or whether it’s more of about the service and the being a price leader?
I think it is quite difficult, at least in Germany to act very, very prominent with that new tool approach it is better to convince via the way how you treat customers. We do not see in the markets, other players that are present with mutuality in marketing campaigns so much and, but we see of course that they treat customers differently from other forms of insurance companies. We are not a shareholder value-oriented. We are committed to the welfare of our client even if its only our mother company that tradition and that way of treating customers similar to all of us. We want to convince via our approach and via our way to contact and to service customers and not so much in pure marketing campaigns.
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