As Allianz forges deals, data displaces old commercial metrics

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Raymond Au, Balaji P., Allianz
  • Allianz’s new data-science capabilities in Asia are helping transform the insurer into a digital organization capable of winning consumers currently underserved by financial institutions
  • Allianz is pursuing a raft of partnerships in which customer data is valued over traditional commercial metrics for a project, which in turn is impacting product design

Partnerships are at the center of Allianz’s new growth strategy in Asia Pacific, with data as the benchmark by which these are deemed successful, according to executives at its Singapore regional headquarters.

Traditional metrics such as return on investment (RoI) and revenue remain, particularly with orthodox partnerships such as bancassurance deals such as a new distribution agreement with Standard Chartered Bank.

But increasingly these are being set aside so long as the firm believes it is able to improve its understanding of customer behavior, particularly regarding another 14 digital-focused partnerships with non-financial players such as Indonesia ride-share company Go-Jek, says Raymond Au, Allianz’s head of data science, Asia Pacific.

“It’s an investment mindset,” Au said. “Twenty years ago, no one knew the RoI of email. But you gotta do it” if the insurer is to win the lion’s share of new customers in Asia: millennials and middle-class consumers outside of traditional financial infrastructure.

Data v. RoI
Digital partnerships or internal projects coming out of the firm’s new digital lab are measured by calculating their expected value in ideal conditions; and then an actual value is revealed once a project is executed.

In other words, Allianz is applying the discipline of accounting after the fact, rather than basing partnerships or deals on what the numbers suggest first.

“Even if the RoI turns out to be zero, we have learned something” about customer preferences, Au said, noting the German firm has spent €700 million to €800 million on digitalization per annum starting in 2015. (Allianz announced Asia region revenues grew 40% in the first half of 2017 to €2.9 billion.)

“Even if the RoI turns out to be zero, we have learned something”

Balaji Prabhakaran, lead for digital multi-access in Asia, says the idea behind the firm’s drive for partnerships is to move from product-pushing to sales within the context of a customer’s more fundamental desires, such as a pressing health issue.

This is partly because, like many consumer banks, Allianz realizes digital technology makes it easier to sell the right product at the right time, and in the right context. “Think of Netflix,” says Prabhakaran, who goes by Balaji P, referring to that company’s provision of content-on-demand.

Changing price points
But is buying insurance like downloading a film?

In the case of Go-Jek, Allianz is targeting the drivers. It sells health cover through the Go-Jek app that drivers use. It’s not about banner ads, but a push to convince drivers to allocate a small portion of what they collect off each ride to a healthcare policy.

This necessitates working in sums that traditional insurance business would never touch – which is another reason why conventional revenue figures are hard to generate.

“We are changing our products to meet affordable price points,” Balaji P. says. “The premium cost to a Go-Jek driver is now as low as 17 cents U.S. And we’ve switched from requiring a monthly premium to collecting a premium on any given day the driver works. This is totally different for us.”

This kind of business requires the insurer to overhaul its internal systems architecture, which was designed over decades to process monolithic standards for price quotes. To that end, the firm is moving to a systems architecture built around APIs, application programming interfaces, that lets is design business models around third parties’ software.

Although there are still uses for traditional I.T., such as with the StanChart deal, in which the bank will sell Allianz policies in five Asian markets by the end of the year, working with non-financial partners requires a faster approach.

Back to data
This returns to what Allianz values in these relationships: data, not traditional commercial terms. The traditional approach works with banks because banks have built their own systems dedicated to distribution. That’s what they do: sell financial products. But a Go-Jek’s system was built to give its customers a good ride.

Allianz hired Au in 2016 from advertizing agency Publicis to head up a new data-science role in Singapore, because it needed a way to combine its proprietary information with those of its various distribution partners. “Our partners give us access to customers; they’re good at distribution,” Au said. “We’re good at risk.” By combining the two sets of data, Allianz hopes to design more compelling products.

The challenges Au and his team face involve the complexities of regulation across Asia. Treatment of data and sharing information varies, meaning in some places Allianz is freer to use individual-specific information than others.

Au would not comment on which regulators offer the easiest environment to use specific data. So far, since Allianz set up a digital lab in 2016, it has initiated a number of products addressing issues from claims fraud to better means of upselling customers. Cyber-security has also been important, including using image and voice recognition, along with geospatial identification, to calculate risk on a product offer.

“This is the time for data science to take root across markets,” Au said. The lab is not just there to give data scientists a desk and a set of projects, but to help them promote their approach to business throughout the organization.

Data science goes mainstream
At some point, ‘data science’ will disappear, says Au. It will just be how insurers insure. The specific skills may remain within the team, which involves marrying coding skills with statistical analysis. But the firm developed the lab in part to instill the thought process throughout the organization.

“CEOs may not know how the algorithm works, but they are now starting conversations about the usefulness of data,” Au said. Insurance companies, he adds, need to reorganize their entire business, not just put a digital layer on top of an existing setup. “We’re moving toward building an organization around digital business models, not supporting old-world processes,” Au added.

This shift may be viewed internally as progressive, but it also has to happen simply because if Allianz doesn’t by itself, competitors will force its hand.

“The selling process to millennials and the emerging middle classes has to be more transparent,” Balaji P. said. That’s going to be true even for life insurance products, which in the Asian industry are typically bloated with unnecessary riders, opaque and expensive.

Online comparison sites are already making clear which products are uncompetitive. So if insurers don’t change, their offering will become a commodity. Therefore Allianz wants to use data to personalize products, even in life insurance, and rely on that customization through technology rather than opacity and customer ignorance to grow its revenues.