Insurance Industry Trends
24. 02. 2023
Reading time: 10 minutes
What makes sense to digitise in the insurance industry? "I think practically everything where you don't necessarily need human contact. We're here to help people in trouble, which is usually an insurance claim of some kind. Here, I would like the client to always have the opportunity to talk to a live person who can reassure them, direct them, help them, in addition to the digital form," says Michal Řezníček, CEO of Direct pojišťovna, in the Adastra podcast.
Ivana Karhanová: Thinking less and less like an insurance company, even though they are an insurance company. How is the view of an insurance company that runs the business through costs different from an insurance company that goes at it through client experience? How do you drive innovation? Where do you get ideas? I'll be talking about this with Michal Řezníček, CEO of Direct pojišťovna. Hello.
Michal Řezníček: Hello, thank you for the invitation.
Ivana Karhanová: So, how does the insurance company manage costs?
Michal Řezníček: The insurance company manages costs with an emphasis on costs and especially on cost efficiency so that everything is aimed at being cost-effective and making as much money as possible in the end.
Ivana Karhanová: But what does that mean for clients and then for innovation in the insurance market?
Michal Řezníček: I think that in such a case the client may come across some unpleasant surprises here and there, such as some limit, some hidden hook in the insurance conditions. For example, long, unreadable insurance conditions that the client usually reads only when something happens.
And there he is often warned that exactly on page 6, paragraph 5, it is written that this is not applicable. There are, of course, requirements for innovation that the insurance company be cost-effective - in terms of operational efficiency, so that there are fewer people, for example, and so on.
Ivana Karhanová: But isn't innovation sometimes about just getting stuck, that your ROI doesn't work out and from time to time you just throw a project out the window.
Michal Řezníček: That can happen too, of course. But the question is, why are you doing all this and why does this company exist as such, what is your mission? I think it affects both innovation and ultimately the client.
Ivana Karhanová: At Direct, you say that the client experience comes first. Still, isn't that a bit of a buzzword?
Michal Řezníček: It can be a buzzword if you don't have clear evidence that you're doing it differently or that you're any different than the rest of the people who also say they're doing it for the client. I think there are a lot of client firms and client-oriented firms today that are trying to do that.
We're trying to make sure that we're in things that are important to us and that are aligned with our mission so that we're clearly readable and we have clear evidence that we're doing it differently.
Ivana Karhanová: And what is it specifically?
Michal Řezníček: We focus a lot on keeping things simple. People don't want to deal with insurance. That means we want them to have it solved at the snap of a finger at Direct, to make it simple, intuitive.
Ivana Karhanová: Yeah, that's your new campaign.
Michal Řezníček: Today, coincidentally, it's starting up, so it's contagious. We want people to experience it for real and to have everything at the snap of their fingers in Direct. We want to be able to give people a chance to experience Direct, both from the point of view of arranging insurance and from the point of view of handling claims and all things related to insurance.
Ivana Karhanová: If we look at the insurance market or the insurance companies' market, many of them are like a carbon copy. They have the same processes, very similar policy conditions, similar limits, similar ways of dealing with the client, how the client can deal and communicate with them. How are you different?
Michal Řezníček: When we founded Direct back in 2015, we said we were building an insurance company where we wanted it to treat the client like its own mother - for those of us who have a good relationship with our mothers.
And it does help a lot to some extent and it defines the processes and the client-facing communication in general that we have. So we don't have, for example, only a call center, but the client reaches out directly to a live person. We don't want him to spend his time having to figure out and push one, two, three and screw his request and think about what he wants.
Ivana Karhanová: And write down on a piece of paper the options you have to press.
Michal Řezníček: So it would be a quick combination of nine, star or whatever it is, just to call the operator straight away. And at the same time, if we reject a claim today, which is always unpleasant, because we are a transparent and friendly insurance company, but that does not mean that we can pay everything, we would go bankrupt.
We try to make it clear what the client has insured and what he should expect to be paid, and conversely what is not insured and what is therefore in exclusions. So when we reject something, today, for example, our adjuster calls the client directly to explain why we reject those things.
This means that we do not hide behind a letter signed by someone you will never get hold of, but there is a clear contact to the adjuster who actively calls the client and tells them the reasons why we will not pay the claim, so that the client understands. Because either way it's annoying for the client if they expect to get paid for something and they don't.
We don't rely on him or her reading all the policy terms and conditions, even though we try to make them terribly simple in Czech, in human terms. If we don't want to pay the claim or can't pay the claim because of some exclusion, we proactively call that client ahead of time and explain it to them.
Ivana Karhanová: Do you have any feedback when a client gets a call directly from a liquidator? Are those clients a little less disappointed then?
Michal Řezníček: This is a very fresh thing, we've been doing it for the last week, so I don't have any feedback on it yet. But I think it will be a good feedback because at least we are trying to explain and tell the client what the reasons are, rather than having him find it somewhere in the insurance conditions. But I don't have the feedback yet.
Ivana Karhanová: If we look at Direct in terms of business and numbers, is there anything that makes you significantly different from the larger insurance companies that have been around longer and so on?
Michal Řezníček: Yes.
Ivana Karhanová: Do you differ in terms of structure, revenues, costs? Because logically your model of operation is slightly different.
Michal Řezníček: I think that what we differ most in is our inner workings. The revenue and cost structure is quite similar because we operate in the same market, in the same market, at some price level to be competitive. We work normally with third parties where again you have some market standard, like commission, so there is not a difference there at all.
What I see the biggest difference is our internal functioning, which is totally different. For example, we don't have KPIs and we have an inverted pyramid so we don't have managers but we have supporters and we try to create a safe environment for people to pick things up and not be afraid to pick things up and come up with an idea or not be afraid to tell us that something is wrong and we could change it.
So the biggest difference is the mission, why the company exists, the culture that we have, and the values that we live by.
Ivana Karhanová: Don't you have a KPI? How do you know if you are doing it right?
Michal Řezníček: It doesn't mean that we have nothing. We have reports and of course we try to look at how our number of clients is growing, how our profitability is developing. We look at those things, but the fundamental difference is that that's not why we live, we really live for that client and we try to put them first and think about what new service, what new product we're going to develop for them.
And we look at the numbers as a rear view mirror to see if it's working, if it's important. Of course, we are not a charity, we are a normal economic company and we need to do it profitably to be here and operate in the long term. But the primary thing is really the client and what we bring to them. And that's where I see the biggest difference.
Ivana Karhanová: Where do you get ideas on how to do things better?
Michal Řezníček: There are several sources. When I mentioned a safe environment, for me it is the basis for the ideas to work at all. Because if you don't have a safe environment in the company, people are afraid to raise something, to say that it's going to be a problem, that they're going to look for someone to blame. I dare say we don't have that, it's normally human to make mistakes.
It's only by making mistakes that one learns and moves on somehow. So we try to tell people that a lot. We tell them when they come in that we're not a perfect company, so if they come across something that they don't like that should be changed, to pick it up, go to their supporter and try to change it in some way. I would say that's the very basis of where the ideas come from.
And then, of course, we meet with key people three times a year in a workshop. Every time we have a business day where we do business stuff, and the next day we have a cultural day where we talk about culture, about values, about how we want to operate. A lot of ideas come from both days, and then we just try to prioritize them properly and say what we're going to implement and what we're not going to implement.
Ivana Karhanová: So basically ideas on where to take Direct's business. That means that if I have insurance, I can now, for example, have my tires changed through my insurance provider? Did that option come up in your workshops as well?
Michal Řezníček: Now I don't know exactly where the pit stop originated - a quick tyre change. I think this was the idea of Pavel Řehák (chairman of the board of Direct pojišťovna company), which is another source of our ideas. I really don't know now exactly where what originated, but it's just, firstly, workshops and normal operations, and secondly, something coming from Pavel or from us.
Ivana Karhanová: Since the whole basis is focused on innovation and digitalization, what do you think makes sense to digitize in the insurance industry?
Michal Řezníček: I think it makes sense to digitize almost everything where you don't expect or need human contact, which is not everything. I'll give you an example: we're here to help people in trouble. That trouble with the insurance company is usually some kind of claim, a loss. When you have a claim, it's always unpleasant on the psyche, especially if it's the first time.
It also depends on how serious the damage is, what the situation is. But there's always some level of stress. And that's a situation where I would want there to always be human contact, I would always want the person to be able to talk to a live person who can calm them down, direct them, help them, tell them what to do. It's just different than talking to a robot, a why bot, a chatbot, or ordering an assistant through an app.
That's not to say that there isn't a group of clients who are completely at ease and even in that situation, they order those things through the app, and they should be able to. That said, this too should be digitized, but the human contact in some situations is irreplaceable for me and I will want us to keep it especially at breaking points.
Ivana Karhanová: Does that mean that you have double trials next to each other then? One digital and one face to face, your support and client, which are able to run in parallel.
Michal Řezníček: Yes, that's right. It's nice to have a lot of processes digitized for our people because they also work with some systems and need some support. And of course, the better system support they have, the better they can work with the client.
I think it goes hand in hand, and I think we want to digitize it to the point where it makes sense for the client, and where it makes sense economically. But at the same time, we're going to want to maintain the human touch so that a person can call a live person who just normally wants to help them in their time of need.
Ivana Karhanová: If the client doesn't want it, can he communicate with you exclusively online, that is, from the arrangement to the eventual settlement of the claim, so that you really don't have to see him physically?
Michal Řezníček: We don't have to physically see him. Today you can arrange a contract completely online, the contract is created by payment and comes electronically in emails, including the green card. This means that the client doesn't need any paper documents that we would have to physically hand over.
This is one of the reasons why they don't need to see us. If he doesn't want to, he can change everything in the client area himself, any changes to the contract he can do electronically. He can also report a claim and the money will come to him virtually as well. So if he doesn't want to, he doesn't have to see us.
Ivana Karhanová: At one time, the insurance market discussed applications, to what extent an insurance company needs its own application, because the client comes into contact with the insurance company once a year, usually when paying premiums. And on the other hand, you also mentioned the word client experience. How do you create some level of engagement with the insurance company's clients?
Michal Řezníček: That's a good question. It's a good question. First of all, there is a payment once a year, as you mentioned, but people travel, so they take out travel insurance once or twice a year, plus maybe they deal with an insurance claim, but it's still not enough, there are not that many interactions within a year.
Now, I'm not going to be totally specific and I don't want to give away what we're going to do there, but it's going to go very much in the direction of that mobility and cars and our other arm that we have within the group, which is Direct Auto.
That basically allows us to interconnect that app where it makes sense, so that the client lives with us more, they use that app for more things and they want to use it multiple times throughout the year because obviously once a year is not enough. They would forget they had an app and basically not use it.
Ivana Karhanová: Does that mean, for example, changing the tyres?
Michal Řezníček: For example, changing tyres, ordering services and other things related to mobility as such, so they can be done in the app in the future.
Ivana Karhanová: To what extent are you able to solve frauds using various machine learning tools, artificial intelligence, and to what extent is the human factor still important?
Michal Řezníček: Today it is still a combination. Software is evolving very fast and I think it's important to follow and use the ones that already bring some value, and now not just cost value, but we just want to do it right.
So software that can tell how badly damaged a car is or how much damage there is, whether that part is going to need to be replaced or whether it's going to need to be replaced or whether there's still some way to fix it. So these are things that we're gradually testing and we're watching them a lot and we want to use them when they make sense.
Alongside that, in parallel, there is still a standard team of detectives who investigate insurance fraud. So we're still in a hybrid version there, where the tools are evolving over time. And alongside that, we have that standard fraud team.
Ivana Karhanová: Do you think that you will be able to replace those detectives one day with a technological process?
Michal Řezníček: Who knows. It depends on how the software will evolve, how reliable it will be, how it will allow us to detect the frauds, how fast it will go forward. It's exactly the same as with the various whys bots that are supposed to replace call centres.
Personally, I think that's a long way off, it's just like saying that there will be no more brick and mortar branches and everything will be done online. Still an awful lot of people want human contact and want to deal with these things directly. I think it's very similar with this, but we don't want to underestimate it. It's moving forward quickly, so we want to use both options.
Ivana Karhanová: When you became CEO of Direct, you said somewhere that you wanted to have all your data in one place. How did this strategy come about and why do you need the data in one place?
Michal Řezníček: Data today enables so many things, it's such a data age. So the more we know about the client, the better we can make the client experience, we can personalize it better, because people have different needs. And the more we know about that client's behavior, the better we're going to be able to adapt to that client. That's one of the reasons.
The other reason is that we, when we bought Triglav in 2014 and started to build Direct gradually in 2015, we bought it still with the old system that didn't allow a lot of things. So we decided that we would build our own system so that at the same time we could adjust the processes to the way we simply needed to.
Ivana Karhanová: But you still have the old system.
Michal Řezníček: We still have it, we still have two running in parallel, we are gradually migrating these things. This year, we are nearing the end when we will have completely retail insurance in the new system and gradually we will move on to corporate insurance, that means fleets and SMEs.
Ivana Karhanová: When I talk to different clients like this, they usually mention something like a data strategy as a key element for them to be able to put everything in one place. Do you go through something like that at Direct as well when you're trying to figure out what individual departments need and what they might not want to put out of their hands sometimes as well?
Michal Řezníček: We have a fairly strong reciprocity, so we don't have any departments that don't want to give something away. That's the different style of operation that I described. It's more about thinking about which data to use to improve the client experience and why.
And at the same time, that thinking is expanding tremendously now, across the Direct Family group and across those other companies, because when we talked about, for example, linking the service or tire change and the insurance company, we obviously don't want our client to come into that service center and not know who they are and figure it out in a new additional system, and again, they have to say things that we may have already figured out from the insurance company or know from the contract.
We don't want the client to have to tell us those things twice again, but we want to have that data in one place. We want to be able to see the entire client history so that we can live with that client and be able to surprise them in a positive way. So it's nice to greet them by name, know that they're booked in at 9:05 and someone will be there waiting to greet them.
He or she will know what they want rather than the client having to explain it again because both of those firms are Direct and as a client I would expect that firm to know about me.
Ivana Karhanová: What is holding you back at the moment? What about innovation or technological development?
Michal Řezníček: We have a lot of ideas, and maybe the biggest obstacle for us is deciding which are the right ones, or what is the right combination, where to go now.
Ivana Karhanová: That's why you're probably the first one who didn't say there's a shortage of people.
Michal Řezníček: People are not the biggest problem that I would say in the first place. Right now, we have an excellent experience that for the new roles that we are filling in new projects, we have managed to fill three key positions with absolutely skilled people, and we really had a lot to choose from. So I was very positively surprised.
There are smart people in the market and it's just that some of them may be looking, or more likely are looking for the right option for themselves in terms of where they want to go in life and what they want to do next. And I am glad that maybe we have become the right choice and the right alternative for them.
Ivana Karhanová: So, are you currently held back by the prioritization of your own ideas?
Michal Řezníček: We have to decide what we are going to do and what we are not going to do.
Ivana Karhanová: Where do you see more room for innovation in the insurance market in general?
Michal Řezníček: I think a lot of it is about digitalisation. It's also a bit of a buzzword, everybody wants to go digital, but nobody knows what it is in our case. I see digitalization as simplifying processes so that they work, whether it's completely no touch, so to speak, or low touch, and we've enabled people to engage with clients from a soft skills perspective and where human contact cannot be replaced.
But what can be done systemically, let's do systemically. There will be lower error rates and processes will run more online, they will be faster. And that's what I think the times today demand, that people expect things to take not a month or a fortnight, but that we're going to count a lot of processes in hours, some maybe in minutes.
Ivana Karhanová: So if I were to sum it up, it's speeding up, some automation, and yet still human contact at critical moments.
Michal Řezníček: Exactly. And I would also say accessibility, whether in the app or in the client area, not only for clients but also for our business partners. The market there is also evolving a lot and they expect us to expose a lot of things out of the system openly so that they can connect through the API and they don't have to call us or they don't have to email us for requests, but they can find them in their systems. So I think it's about the overall digitization and onlining of the whole environment.
Ivana Karhanová: Is there anything that you see as a game changer in the insurance industry right now?
Michal Řezníček: I think that the game changer will be how the digitalization will work out. We're all trying to do that and I always say, let's make innovations that make sense and that really bring something to the client and they will use them. I sometimes feel like it's a bit of a sprint - let's all digitise because we should and because everyone is doing it.
But we're trying to test very hard whether or not it's going to add value for clients and if it's really something that they're passionate about and something that they want to maybe address digitally. So I think that's one thing.
And the biggest game changer for me is still going to be a total focus on the client so that we actually really want to help them in a situation where they need it because then that's the moment that they'll remember. If you help him well, he'll remember that and I think that's the biggest value today.
Ivana Karhanová: Michal Řezníček, CEO of Direct pojišt'ovna, says about the future of the insurance industry. Thanks for coming to the studio, and see you next time.
Michal Řezníček: Thank you very much.