A bigger piece of that pie, please

ERGO Direkt case

In the German insurance market, there is little, if any, room for new entrants. The reason is simple: the pie has already been sliced. Where many traditional insurance companies have seen this lack of new competition as a good excuse to stick to business as usual, Nuremberg-based ERGO Direkt sees it as an opportunity to dramatically change the way people handle their insurances. Combining traditional tied agents with state-of-the-art online competences, it now aims not only to attract more customers, but to wake up an entire industry in deep sleep.

Manuel Nothelfer
EVP of Sales at ERGO Direkt

When Manuel isn’t digging deep into the most exciting technology news, he likes to listen to hip hop. And not any kind of hip hop. As a true German, Manuel’s heart belongs to rhymes in his mother tongue – and he attempts never to miss a concert.

A go-slow industry

If you’re one of Germany’s insurance veterans, you know what to do. You sell insurances, yes, and you sell them either through tied agents, third-party channels or a direct business. Until quite recently, this seemed to be the only way to stay on top in Germany’s huge insurance market. But then ERGO Direkt, owned by one of the country’s biggest insurance groups, decided it was time for the industry to stop trudging behind its customers.

“The industry is still in its baby shoes in regard to getting digital and getting online. If there are strong relationships between customers and tied agents, there are of course a lot of direct interactions between them, but the fact is that customers are moving more and more into online”, says Manuel Nothelfer, EVP of Sales at ERGO Direkt. “Today, customers see their tied agent, or they receive a call, or they go online and buy something. Perhaps they send an e-mail to their insurance provider, calls are made and then the customers buy, renew or adjust their insurance contract”. But, he adds, most insurance companies have not fully utilised all the different ways in which they could interact with their customers. What Manuel and his colleagues at ERGO Direkt are working towards is to make one holistic customer journey out of all of these different contact points.

When Manuel, whose professional background is in consulting and as a digital entrepreneur, came aboard ERGO Direkt in February 2016, he was surprised to see that seemingly no other company had been thinking the way he had: to combine the strengths of a traditional insurer with the most fresh and innovative online strategy.

“In order to inform themselves about various topics and to gain insights about what is going on in the market, people will go more and more online and receive more and more information. So to combine this, the existence of both an offline and an online part is really the key thing”, he says. “We have an exceptional team for mail and telephone here, and now we’re adding more and more special expertise in the online segment”.

People at their hands

ERGO Direkt emerged from a rather unusual project, and little did people know back then how much value its odd history would later offer. It all began when Germany’s mail-order retailer giant Quelle found out that it could use its extensive customer base to start selling insurances. And so, people were hired, customers were called, insurances were sold. Soon, the business thrived. When it later was divested, the business became what is today known as ERGO Direkt. And this, which may sound like a fun, but rather irrelevant background story, has proven to be one of ERGO Direkt’s keys to success.

Because of its origin, ERGO Direkt today has what most other insurers lack. It combines massive customer records, a historic competence in direct channels and data collection. Pair that with a small size and fresh-minded employees and you get history, agility and a horde of innovative ideas – all in the same place. “Compared to all other players in the market, ERGO Group has an extraordinary advantage by having a direct insurance player – one of the best in the market – in its portfolio as well as one of the best primary insurance companies”, says Manuel. “At least in Germany, there is no other player who has these different competences within one group and within one company”.

ERGO Direkt’s owner, the ERGO Group, is one of Europe’s largest insurance company groups, with between 30,000 and 40,000 employees and some 10 million customers, and it is part of the global reinsurance market leader MunichRe. The much smaller ERGO Direkt has, as the name implies, historically been its owners’ direct centre, meaning it would base most of its revenue on direct contact with customers through mails, calls and online advertisements. Today, ERGO Direkt is present in Austria and Germany, and said to be Germany’s most popular direct insurer.

Shifting time

When digital native Manuel entered ERGO Direkt’s corner office in Nuremberg, he had his plans all laid out. His main goal was to gather all the contact points that the company used to sell its insurances into one coherent journey. In an instant, he began pulling strings. “You might have your first contact point just reading a newspaper about ERGO. Then you see a display ad and click on that; then you might go to a tied agent and after that, you buy an ERGO product online. All of these different points have a value as part of the customer journey”, he says. “What we now want to change is to give every contact point a certain value based on the effect they had on the buy in the end”.

According to Manuel, ERGO Direkt’s focus is now rather on selling and retention and being in charge of sales and marketing than on after-sales processes. This way, the company will be able to adjust more efficiently to its customers’ needs. One of Manuel’s plans is to utilise its collected data in an even smarter and better way. “Based on customers’ current situation, if they for example had a child recently, we make an offer based on what we assume they might be interested in. The next thing is based on predictability: the more data we get, the better we understand and predict customers. Knowing that people who do this or that and have that kind of history will be or might be interested in certain products really drives new customer acquisition. We drive the penetration within the customer base based on the optimised kind of interaction”.

ERGO Direkt wants to offer more and more thought-through digital offerings, allowing its customers to communicate with their tied agents in an online portal or through other digital channels. The end goal is to make people feel they are treated in a coherent, relevant and comfortable way, Manuel says.

Even the fast are slow sometimes

Seemingly little has been standing in the way for ERGO Direkt’s digital transformation. However, Manuel explains, old habits and practices have slowed certain processes down more than he would have preferred.

“Obviously, some existing structures are not appropriate to something you would start tomorrow or yesterday or just off scratch right now”, he says. “We have to make sure that we adapt what we already have in terms of technology with what we want to build in the future. That takes time. Actually more time than expected. That’s a learning for us”. To cope with this, Manuel and the rest of the ERGO Direkt team have aimed to adapt what the company already has in terms of technology with what they want to build in the future.

In addition, Manuel adds, creating an insurance product is a lot more complicated than creating general digital products like the ones he worked with earlier. Not only are there a lot of regulations that have to be followed for every move you make as an insurer, but the company’s stakeholders also have widespread opinions on how to digitise and optimise selling.

“Obviously, the tied agent is still at the centre for us, as he or she brings most of the value to the customers. However, we still have to make sure that all of the parts surrounding the agent have the chance to optimise the overall potential”, Manuel says. “Beyond that, I think it’s all about execution: having the right talents on board, doing the right things at the right time. So this is what has to be done – besides the millions of products we still have – to make sure that we prioritise everything in the right way and in the right order”.

Invincible future

Manuel says that the ERGO Direkt team still has a lot of work to do, but that the company is already on its way to becoming the most innovative player in the German insurance industry. ERGO Direkt’s ability to combine the old with the new will be the clue in years ahead, he says. And although peers may follow ERGO Direkt’s lead, Manuel believes the company’s unusual position will remain an indisputable advantage, even if competition toughens dramatically.

Manuel also hopes to be given an opportunity to expand his digital plans to the entire ERGO Group in the future. And he isn’t discouraged by the fact that it may very well prove to be quite a challenge.

“Historically, insurances have generated a lot of money and been very successful in their own right. And now, understanding that the model might change; that we have to amend the way we attract customers, treat customers, build products and handle service interaction cases is a big issue – a big difference. We have to make sure that we understand what the benefit is in every single item, how digitalisation can help to shorten periods and optimise customer experiences in every aspect. I think that is the biggest challenge we will face”.