#digitalization #insurtech #insurance #op-ed

Effects of Covid-19 in the DACH region

Even before the Corona crisis, the insurance industry in the DACH region was faced with a number of challenges, which have been further intensified by the current situation. The dependence on local call centres and inflexible administrative systems, but also the need for brokers as the main sales channel, became more apparent than ever before. The digitalization of the industry is progressing only slowly, with many insurers hesitating due to uncertainties and economic turbulence. They shy away from the risk, but are forced to make a choice: invest in digitization immediately or be knocked out by the fierce competition from InsurTechs and other competitors with digital know-how.

The indecisiveness of insurers

Even if insurers are digital latecomers, the problem is not so much a lack of investment in their own digital resources, but rather that they are not up to date. According to the GDV (German Insurance Association), IT expenditure in the German insurance industry will amount to an additional five billion euros by the end of 2020. This shows that insurers are not fundamentally averse to technology.

But why is the industry still hesitating? On the one hand, the integration of new, unknown technologies and the necessary partnership with InsurTechs is leading to uncertainty; on the other hand, there is fear of costly and disruptive mega-projects and concerns about data control and security. This is where experienced partners are needed to take these concerns away, because they know the difficulties and have already mastered them themselves. That creates trust.

The need for digitalization

Since many experts assume that the pandemic will lead to a second wave of infection, short-term digitisation is of particular importance. This is also confirmed by a recent KPMG analysis, which shows that the establishment of digital business processes and sales channels has accelerated for insurers in the context of increasing risk of infection and home offices. In addition, by automating key processes, European insurers have been able to reduce the number of fraud cases by 18%. This was based on AI systems that sift through large amounts of data to identify fraud risks. AI and machine learning can also be used to achieve more accurate and reliable results in underwriting, actual risk assessment and customer service. IoT sensors also trigger a warning for insured goods in order to counter high claims costs.
In the long term, this leads to higher cost efficiency and greater stability.

The modernisation of core systems, away from old systems without open interfaces, is crucial. It also requires effective digital distribution channels and digital product development. In partnership with industry leaders, these measures can be collaboratively developed and successfully implemented.

Building workable solutions

With Sapiens core systems designed for large portfolios and sum.cumo's first-class digital front-end solutions, insurers in the DACH region are well equipped for the market transformation already underway. Decades of experience, the mix of products, digital offerings and core insurance systems create the opportunity for smooth customer service, efficient business processes and the introduction of innovative ideas.

Covid-19 has shown that companies depend on new collaboration models and tools. In order to keep their employees flexible, insurers need digital solutions in the form of first-class user services combined with state-of-the-art technologies.
The industry should not be discouraged by digital change, despite its rather conservative, reluctant attitude, because innovation lives on the latest technology.

You can find the guest article at vwheute here.

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Ingolf Putzbach
#management Ingolf has been one of the two CEOs of sum.cumo since July 2016. His job is to keep developing the company as an attractive employer of digital virtuosos while also advancing its position as a digital trailblazer for insurance companies and lotteries. Prior to sum.cumo, Ingolf was a founder and partner at Arkwright Consulting and the Germany CEO of Halogen AG. Ingolf cherishes the great enterprising spirit here and says “that every minute at sum.cumo is a pleasure for him.” Innovation, sustainability and individual freedom are important to Ingolf both at work and at home, shaping his actions in every way. Ingolf’s words have appeared in many media outlets, including [Versicherungsjournal](https://www.versicherungsjournal.de/vertrieb-und-marketing/wie-kann-man-als-makler-heute-digital-verkaufen-135254.php), [Intelligent Insurer](https://www.intelligentinsurer.com/contributed-article/purely-digital-insurers-and-their-service-providers-increase-the-attractiveness-of-germany-s-insurance-market) and [Finanzportal Joonko](https://www.sumcumo.com/ist-das-neue-vergleichsportal-joonko-check24jaeger-oder-maklerschreck) and [Zeitschrift für Versicherungswesen](https://www.sumcumo.com/unternehmen/interview-zeitschrift-fuer-versicherungswesen). Furthermore, Ingolf’s commentary on “Guidewire mania” appeared in the magazine [Versicherungswesen 22 (2018)](https://www.sumcumo.com/blog/content/de/zfv-putzbach-guidewire-mania.pdf). All articles by Ingolf