Thilo Herrmannsdorfer, Swiss Re: A new environment of opportunities and risks in digital ecosystems

Interview by Amalia Rouchota

Covid-19 caused, among other things, the acceleration of developments that had already begun in the global insurance market, mainly in the field of Digitalization. It is now obvious that the key to survival and success lies in insurer’s capability to respond to a new generation of risks and also to the evolution of traditional risks in both Life and Health and Non Life insurance. Swiss Re is already able to provide the appropriate solutions to its customers, as Thilo Herrmannsdorfer Market head Greece, Cyprus, Malta and Turkey explains. Digital ecosystems, which are already a trend in different markets, can help businesses reduce costs, thus freeing up capital, but at the same time they can also generate new risks. Swiss Re provides reinsurance cover as the backbone of its support for its client, while on the same time is able to contribute substantially to prevention, which is a dominant issue today, and guide its customers in the new environment of digital ecosystems.

Based on your experience as the market head of the region which includes Greece, Cyprus, Malta and Turkey, what are the most important trends that you would say will shape insurance market’s reality in the short-term future?

Τh.Η.: As we are all still dealing with the effects of the Covid-19 pandemic, I think it’s useful to look at our own change of behaviour as a guidance. We have adapted rapidly to a new way of interacting with each other, using technology that was implemented in many places at massively increased speed. With this, also the way we interact with our clients has fundamentally changed. Applying an integrated, digitized business model is not any more an option for the long term, but rather a pre-requisite in the short term.

Next to that, I would name an increased sense of risk awareness. With Covid-19, a seemingly remote scenario has de facto realised and reminded all of us that even more extreme tail events can happen any time. With this comes an increased focus on risk mitigation, risk selection and underwriting performance in an environment where investment results may become more volatile.
On a more global scale, Swiss Re Institute has recently issued an Economic Insights Publication, addressing likely accelerated paradigm shifts in the industry: a larger role of governments, accelerated digital transformation, de-risking of global supply chains and higher inflation risk coupled with financial repression present both challenges but also massive opportunities to re/insurers. What is important to mention: Swiss Re’s own business remains resilient in the current environment }and is needed now more than ever.

How would you describe Swiss Re’s core priorities in the region you supervise and in the Greek market especially?

Τh.Η.: First and foremost, we will continue to fulfil our core mission as a reinsurer: applying fresh perspectives, knowledge and capital to anticipate and manage risk -something that we have done for almost 160 years already, across the globe and with more than 15.000 employees.
Client centricity, agility, team spirit, passion to perform, and integrity. These values are at the core of our organisation. Our clear ambition is to translate these for the region into tangible innovations. We want to remain at the forefront in introducing new solutions to the market, such as cyber, digital placements of risks, data analytics and others, that help our clients grow their business and be successful in achieving their strategic objectives.

Current reality and challenges, due to restrictions connected to the pandemic, seem to push us even more towards digital ecosystems of services and vendors who make customer experience holistic, simpler and easier. How does this change the business – consumer relationship and which is the position insurance services can assume in these ecosystems?

Τh.Η.: As discussed also in Swiss Re Institute’s publication “Digital ecosystems: extending the boundaries of value creation in insurance”, ecosystems are the new markets. They combine a variety of services and vendors on one platform to offer a holistic experience to the user. With consumers having the power of choice in the palm of their hands, the typical business to consumer relationship has been transformed. Online retail vendors are able to offer highly competitive prices due to low overheads, and the collection of huge volumes of consumer data that has enabled targeted advertising and sales in a way that was not possible prior to digitisation of the marketplace. This data is helping companies shift from simple digital marketplaces to more complex ecosystems that cross sector boundaries. Access to new sources of data is central to the success of ecosystems. The maturity of upcoming network structures, customer willingness to switch and the openness of the regulatory framework are also important factors to be considered, especially by companies looking to join an ecosystem or establish one of their own. Access to the data and insights being generated by digital ecosystems will be the key to success for insurers.

How do reinsurers adjust their services to these ecosystems and what are the possible areas in which they can offer advice and solutions?

Τh.Η.: Swiss Re has developed a whole set of solutions across all lines of business that support profitable growth at several places along the value chain and in relation to various ecosystems. Automotive & Mobility, Cyber & Digital, P&C Analytics -making use of modern data science techniques to generate insights for portfolio steering and strategic growth-, parametric products, various digital tools for automatic placement of risks in Life and Non-Life are just some examples. All of them are backed up by reinsurance cover as the backbone of our support -not only do we believe in the innovations we help developing, we also have skin in the game through sharing the risk.

Could you give us an example on how you helped existing clients cope with recent challenges related to the pandemic?

Τh.Η.: In a response to the uncertainties Covid-19 has brought to the world, Swiss Re opened access to its proprietary Life Guide underwriting manual to all life and health insurers for 90 days (from 27 April to 31 July 2020). The offer was designed to help life and health insurers navigate today’s crisis, better understand the risks they underwrite and give them confidence in offering coverage at a time when more people are thinking about life insurance and re-evaluating their financial situations.

The concept and the challenges of a connected home is one of the most expanding trends in the Greek society. It is even more relevant in a time where many people had to work from home. How do you see insurance industry’s proposals adjust to the new reality?

Τh.Η.: In connected home products, the insurance industry is seen as an ally who helps to prevent the losses from happening rather than picking up the damage costs after it happened. This is a new ecosystem where the insured sees the added value of our industry, the knowledge and innovation. Connected homes definitely are an example of an environment where innovative solutions are in demand. The growth is driven by an emotional factor, the desire to feel safe in our homes.
Next to that, an obvious area where insureds have a developing need for more comprehensive protection is the field of Cyber security. A home-office environment may be more vulnerable to attacks from malicious sources compared to an established office infrastructure. But also the evolving relationship between employers and employees in a setting of physical distance may create opportunities for the insurance industry in the search for products adapted to a different working environment going forward.

Health insurance and specifically a more personalized health ecosystem is also among the topics being largely discussed lately. It seems like the pandemic has brought to the surface the demand for a new approach on data exchange and interconnection. How can the insurance industry contribute in a more concrete and adequate approach to this challenge?

Τh.Η.: In health, where the challenge is to find new models that are more sustainable than the current one, much more focused on the effective and efficient use of technology and data to identify early signals of diseases, allowing data exchange and data processing among different parties involved. To this end, public authorities, health service providers, technology companies and insurance companies will all have a key role to play.

One of the topics you are addressing in the market, is the topic of driving digital ecosystems / solutions. What is your main target and who are the people that you wish to address with this initiative?

Τh.Η.: Digital ecosystems offer opportunities to insurers across the board, both with companies (B2B) and consumers (B2C), for different markets and lines of business. At the same time, new types of risks arise as the complexity of the ecosystem increases, and we are faced with new vulnerabilities, for example, those related to the Internet of Things (IoT), cyber security, business disruption or system crashes. A permanent transformation that requires an agile response with value proposals that provide a good customer experience.

Insurance must combine the search for new partners and suppliers with information to create its own digital ecosystem, acting as a conductor in each of them, to ensure that they do not fall victim to disruption. We already have cases of integration of financial and insurance services in this type of ecosystem such as those that have created home delivery services, market places, transport and health.