Facing Digitalization in the Insurance Industry

(a) Situation faced: Given their long-established tradition and resounding success, digitalization brings unprecedented changes for insurance companies. Driven by the disruptive developments observed in comparable industries, DEVK, the company investigated in this case, realized their business model is at stake in the digital age. Due to a lack of experience with establishing and managing digital business models and an IT infrastructure and processes focusing primarily on stability and reliability instead of fostering innovation and creativity, the company faced a plethora of challenges. (b) Action taken: Responding to these challenges, DEVK made “making use of digitalization” one field of action in its new business strategy. One initiative within this field was the founding of “Freeyou”, a company-owned start-up. The name reflects the start-up’s vision, which is to make insurance as easy as possible for the customers, to free them from tedious paperwork and to give them time for other things they would rather do. Since its foundation in 2017, the InsurTech has launched two products which are equipped with digital features and that can be purchased entirely via digital channels. (c) Results achieved: Launching the products took Freeyou 4 and 8 months, respectively—an implementation period that would so far not have been feasible within the parent company. While the first product, a bike insurance, still had pilot character, Freeyou was able to achieve significant sales success with the second product, a car insurance. To implement the new business model, Freeyou has built up an organization which, unlike the parent company, is primarily focused on innovation and speed, allowing the group to quickly test new products and forms of customer interaction. (d) Lessons learned: Even though the initiative is still at an early stage and requires continuous development, the case investigated gives valuable insights for incumbent companies looking for ways to benefit from digital technologies quickly. The case has shown that for this, the underlying organizational model is at least as important as the changes required on the business model side. In order to build both on a “greenfield site,” it was “mission critical” to reduce the dependencies to the rest of the group to a minimum.