Interviewer notes:

I had the honor of meeting Dietmar Kottmann a couple of years ago at the
InsurTech Connect (ITC) conference in Las Vegas. We connected again at the
InsurTech Symposium in Cologne, where Dietmar gave an excellent keynote
address about the new age of insurance.

After the InsurTech Symposium, we met and discussed the dawning new age of
insurance in more detail. The conversation with Dietmar was inspiring and is the
basis for this interview.

A Quote from Dietmar:

“The platform economy accelerates the speed and dynamics of the business
model — requiring insurers to adapt. Carriers must speed up their reaction to the
constantly changing competitive environment — underwriting, pricing etc.; and
the capability to release new products and prices much quicker.”

David Schapiro (DS): Could you please tell us about yourself and how
you found your way into insurance?

Dietmar Kottmann (DK):
I am a computer scientist by training. After my PhD, I went into strategy
consulting with a focus on bridging business and IT strategy with strategic IT and
digital work. As insurance is an information business, it was natural that I started
to work for insurance companies on IT/digital themes. I was pleasantly surprised
what a complex and exciting world opened up for me — much, much more than
what I expected given the sometimes “boring” reputation of the industry. So, I
got hooked and pivoted more and more from IT/digital into core insurance
business strategy.

DS: Based on your extensive experience in the industry, how would you
define the future of insurance?

DK: Insurance is entering a new age — the age of the “platform economy.”
Platforms are technology-based business models renting their customer access
to other players. In insurance, “customers” can be end-customers, such as
individuals, corporations, or distribution partners. Hence, the platform term in
insurance also includes also independent (non-tied) agents/brokers connected in
some way to insurance carriers — for example, via an agent management
system (AMS) or other system/platform/connection. Platforms might be part of an
ecosystem, which is a system of players forming a network around a customer
value proposition for their mutual benefit.

Some examples of platforms include:

• Comparison sites for consumers or brokers

• Trading sites for used cars

• Corporate platforms providing access to employee benefits for their
  employees

• AMS systems for independent agents or brokers

DS: What would be some of the non-insurance platforms that we are
familiar with?

DK: I think the most famous example is Amazon, which has evolved from being a
retailer to becoming a platform. Over 60% of the gross merchandise value (i.e.,
value of the products sold) on Amazon today is on the Amazon Marketplace,
where the seller is not Amazon. So, Amazon is today is no longer a retailer, but a
platform.

Many other e-commerce businesses are building up platform business models —
an example is Zalando (a publicly-traded German online retailer of shoes,
fashion, and beauty active across Europe), which during COVID allowed local
fashion retailers to stay in business when their shops were closed during the
lockdowns. They could sell their inventory on the Zalando site without setting up
an online shop and attracting customers.
In travel distribution, the platform business is the norm today, with online travel
agencies (OTAs) such as Booking.com or TripAdvisor rarely taking inventory risk.
You can clearly see the impact of platforms as business models in travel where
inventory risk, such as tour operators, has declined dramatically.

DS: How do you see the platform economy evolving over the next few
years in insurance?

DK: I believe that a broad range of platforms will gain more relevance in
insurance, including the following:

• Price comparison websites or digital insurance wallets, which allow
  consumers to manage their portfolio of insurance contracts, have already
  become relevant in many markets.

• Brokers are migrating away from insurer portals and toward using tools such
  as Acturis in the UK or Bolttech in Asia to access various insurers. And this is
  not only true for “simple” products, such as motor insurance. Even for very
  complex corporate business, platforms such as the London Market’s Placing
  Platform Limited (PPL) platform or Verisk’s Whitespace have gained
  relevance.

• Then there are corporate platforms which provide corporations with the
  means to manage their employee benefits — independent of the carrier
  providing the benefits.

• And finally, B2B2C platforms, which provide digital solutions to embed
  insurance into products or customer journeys of their partners — and then
  look for carriers to cover the risk.
  We predict that that intermediated (non-tied) insurance distribution will largely
  be platform-based by 2030, for short-term insurance, for example, products with
  renewals.

DS: What is required by insurance companies not to be left behind?

DK: Platform participation by insurers require specific capabilities — and the
time to start building these capabilities is now, including:

1. Digital foundations - establish foundations for platform connectivity - product,
   IT, operations, sales, such as:

   • STP capabilities

   • Platform APIs

   • Digital products

   • B2B platform key accounts

2. Agile capabilities - ability to position propositions in a dynamic competitive
   environment, including the immediate reaction to competitor moves with a
   short time to market, such as:

   • Dynamic pricing

   • Agile proposition deployment

   • Management of positioning versus competitors

   • Decoupling from release cycles

3. Trading and yield management - capability to benefit from a highly
   dynamichighly-dynamic competitive environment, such as:

   • Street pricing

   • Trading function

   • Yield management

   • (Intra-)day analytics

DS: What challenges will insurers face to achieve the platform economy
benefits, and how do you see this from a global perspective?

DK: The platform economy accelerates the speed and dynamics of the business
model — requiring insurers to adapt. Carriers must speed up their reaction to the
constantly changing competitive environment — underwriting, pricing etc.; and
the capability to release new products and prices much quicker.
The degree varies across geographies and countries — UK, EU – DACH, France,
Spain, Central and Eastern Europe, U.S., Asia. Different regulation formats imply
variations in the platform economy — for example, the U.S. has different
regulations in each state and the need to get approval for products and pricing
will be less impacted compared to some other markets.

DS: Are there any final thoughts you would like to share?

DK: Short-term insurance products, such as P&C insurance, will compete more
and more on speed in a world which is much more influenced by platforms.

If you take a year to launch a new product as a punch against the move of a
competitor — they will have already moved before you launch, and your punch
will only hit air. This requires different operating models compared to long-term
insurance such as life insurance — which will be a challenge for markets with
composite business models such as Germany or Italy. Insurers who do not
manage to play on eye level with line specialists will lose competitiveness. And
finally, we might also see a further migration of value from carrying risk to
distributors, especially those running platform business models themselves.

Dietmar Kottmann Bio

Dr.-Ing. Dietmar Kottmann is a Partner of Oliver Wyman, a global strategic
consulting firm. Based in Munich, Dietmar is a member of the Insurance and
Digital practices. Dietmar has more than 25 years of management and strategic
consulting experience. During this time, he has led numerous projects on
strategy, IT, operations, organizational effectiveness, and digital. In EMEA, he
leads Insurance in DACH and is internationally working on digital insurance topics
with a focus on Europe, Middle East, and Asia-Pacific, having worked for local
players in more than 20 countries.

He is also a venture advisor of Viewpoint Ventures, a US-based venture capital
firm, with investments in insurtech, fintech and other related sectors.

Dietmar is an innovator in digital insurance themes, recognized by leading
market participants and the media as the go-to-person on insurtech and
innovation in the insurance industry, and he is a regular speaker and author of
Oliver Wyman research and articles. He has led various digital projects in
multiple industries and a multitude of strategic projects in insurance covering
distribution, LOB and specialty strategies (e.g., cyber, renewables),
manufacturing, claims, and operations.