“zeb.digital pulse check” study: Digital transformation status of the German insurance sector made transparent German insurance sector invests in digitalization, but so far hardly any innovative business approaches have been developed

The German insurance industry has realized the strategic importance of digitalization for its own business models and is largely investing in digitalization initiatives. On the one hand, 83% of the German insurers participating in the study indicated that they released budgets for digitalization investments at least on a selective basis. On the other hand, only 8% of insurers were able to establish a functioning innovation process which included developing innovative business approaches at high speed and transferring them into the overall company. In contrast to common perception, the digitalization of the German insurance industry is not at risk of faltering due to a lack of willingness to invest, but rather due to its internal processes.

This is a key result of our latest digital.pulse check study on the status of digitalization in the German insurance sector. More than 50 decision makers from German insurance companies participated in the study, representing approximately 60% of the German insurance market in terms of gross premiums.

Overall in its self-assessment, the sector documents that the majority of insurers in Germany have initiated digitalization initiatives. However, most of the participants see themselves in the “lower medium range” with regard to their digital maturity and, with initial implementation projects, they are still at the beginning of digital transformation. “Digital leaders” covering all facets of a digital business and operating model have not emerged at all.

Figure 1: Overview of the DPI (digital performance indicator) of the German insurance industry

There is a great degree of attention paid for digitally disruptive business models within the sector. Accordingly, a high level of readiness to invest and cooperate as well as a distinct willingness to digitalize can be perceived among insurance companies. This perceived willingness, however, is only very hesitantly transferred into practice. Although most of the respondents have a digital agenda representing the total of various individual initiatives, only 50% of insurers have consolidated this to a road map with a strategically defined project portfolio. On top of that, only one in four companies demand responsibility for digital transformation and define it by means of digital KPIs.

Processes, data, and IT systems of German insurers are also not yet geared towards digital business models and thus restrict the speed of transformation. Mostly, the companies are still trying to create the basic conditions required for digital transformation, namely the harmonization of their data formats and the flexibilization of their IT architecture. Any real-time consolidation of data remains a future prospect. The majority does not currently use artificial intelligence, but is examining the opportunities of this technology.

Furthermore, the principle of thinking from the customers’ perspective is not yet integrated in insurance practice. While most of the participating insurers claim to know the needs of customers, less than half of them involve their own customers in their product development. The product portfolio is digitalized in an evolutionary process. More complex digital offers – such as use-based insurance products or preventive insurance services – are mostly still in development, and disruptive approaches are almost non-existent in the product portfolio.

Figure 2: Digital products and services offered

Ultimately, a major aspect for the success of digitalization initiatives involves the embedding of the required innovative strength within management as well as the organization. The study shows that here, too, there is room for improvement. For instance, at almost 80% of participating companies, executives did not, or at least did not consistently, act as “digital leaders” or role models to drive digital transformation. Likewise, traditional organizational structures with a clear separation between IT and business still prevail against agile alternatives. This said, most of the companies surveyed have identified this problem. 60% said they were working on overcoming cultural resistance. In this context the middle management, especially, regards the corporate culture in many German insurance companies as an obstacle to innovation and criticizes the low level of risk appetite and error tolerance.

On the whole, German insurers have fundamentally understood the strategic importance of digitalization and have introduced numerous initiatives across all digitalization dimensions. However, there is a lack of systematic implementation of key success factors, ranging from data, processes, and IT systems as basic prerequisites, right through to the consolidation of a consistent road map including definitions and measurements of success. If insurers are serious about packing more digital punch, they will have to systematically integrate digital transformation into corporate management and utilize executive capacities in a targeted manner. Especially when considering globally operating internet companies which are becoming ever more interested in the insurance business, incumbents need to pick up speed. Now is the time to develop the organizational ability and the appropriate “toolkit” to design new approaches at higher speed and bring them to market.

Stefan Geipel

Partner Office Münster

Philip Franck

Senior Manager Office Frankfurt

Milena Rottensteiner

Senior Consultant Office Frankfurt

Kilian Gundlach

Consultant Office Frankfurt

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