How Swiss Re’s iptiQ became greater than the sum of its parts

“Our goal is to ensure that the partners we work with make the successful transition to online sales of insurance.” Carl Christensen, Swiss Re chief executive officer at iptiQ EMEA L&H.

· Business already has strong foothold in Europe and US, with its sights now set on Asia Pacific
· Ecosystem offers tech investment scale-ups beyond what is achievable alone
· Valuation of $1 billion in 2019 earns iptiQ the label “first unicorn” of Swiss Re’s digital initiatives
· Age of large one-off tech investments is over, innovation requires “constant investment flow”

For anyone still unconvinced of the benefits of digital in 2019, COVID-19 ushered in an unplanned global experiment that has more than proved its worth. Society has been converted en masse to the value of digital working and retail in a matter of months.

This relatively sudden shift to greater digital activity has caught some businesses on the hop, with those that could not transform fast enough, or were too far behind in their digital adoption, facing dire consequences.

For the insurance sector, the challenge is not just about speed of change.

Carl Christensen, Swiss Re chief executive officer at iptiQ EMEA L&H, says that for the insurance sector going digital can still be expensive, difficult, and involve a lot of failures and learning.

As the EMEA L&H lead for Swiss Re’s iptiQ, the reinsurer’s digital insurance engine that helps insurers to go digital, Christensen understands this better than most. The platform offers white-label underwriting capabilities that make insurance products and services available to partners under their own brands.

Behind the white label sits the might of Swiss Re and the anonymised and analysed data from its iptiQ partners. Christensen says this ecosystem of partners—that crosses product lines and geographies—enables individual firms to scale technology investments in a way they could not do alone.

With 36 partners, the model is active in 10 regions including Europe, the US, Australia and New Zealand, and has more than 400,000 active customers.

Origins of the model

The business officially launched in 2016 but its genesis came much earlier. Christensen started his career in technology and programming. He moved to Switzerland in 2002 to work in insurance and since then has been setting up new insurance operations with technology at their heart. This has been his role since joining Swiss Re in 2013.

At that time a number of technology initiatives that would ultimately become iptiQ began to connect.

“We had started a lot of different technology initiatives that touched on distinct parts of the value chain of insurance, life insurance in particular. We had put a number of initiatives in place for automating underwriting, or to simplify claims processes, or put focus on behavioural economics from a pre-underwriting perspective,” Christensen explains.

“iptiQ was established to consolidate all these initiatives and develop an end-to-end solution, including a fully-fledged primary licence approach, but doing that in a way that was truly white-labelled, creating end-to-end insurance solutions for partners so that they sell insurance through their brands.”

The business model started operating in Europe in 2016 with L&H, then migrated to the US. It evolved further to include operations the reinsurer had in Australia in 2018 and in 2019 a P&C unit launched in Europe.

Christensen says iptiQ always sees commonalities in spite of the differences between countries and buying behaviours. This means it can offer “a lot of cross-fertilisation” of learning via the “ecosystem” of partners, which is key to scaling technology investments and learning for partners.

“Our value-add to these partners is that they don’t have to make some of the simple mistakes, as we can provide those learnings as they go to market even though it’s their responsibility to distribute the product, and their responsibility to define their marketing strategy.

“We can give them a lot of insights through our analytics technology to ensure they can optimise their go-to-market approach,” he says.

With relatively fast expansion in a short time it is no surprise that the digital platform and white-label provider is now looking to grow into the Asia-Pacific region.

“Asia-Pacific and China, in particular, is an interesting market for us,” Christensen says.

A unicorn among initiatives

Christensen says the business is a “risk tech company” in one sense because it has a risk balance sheet and does technology, focusing on everything from end to end.

“We’re not a distributor but we provide those brands with the capability to optimise distribution,” he says.

The business has four categories of partners including reinsurance clients moving to greater use of digital formats, and ecosystems, which are partners that have a large client base and big customer reach that might be more oriented to retail customers, such as IKEA.

Banks, such as UBS in Switzerland, are another category of partners as well as insurance intermediaries.

“We assist insurance intermediaries to become more digital even though we believe that digital to a large extent can be directed to end consumers directly—there are complexities in products that will still require an advisory component.

“We might all believe that artificial intelligence (AI) will solve it one day but until that is achieved intermediaries are still an important feature of people getting the right advice,” he says.

Before COVID-19, the business was experiencing strong growth of 50 percent year on year to 2019. Christensen says that if iptiQ was compared to other insurtechs it might not have the same valuation as some, but it has achieved something many insurtechs have not—scale.

“Scaling up is a big challenge for insurtechs,” he says, while cautioning that his own platform’s 2020 growth is yet to be confirmed.
“We were part of Swiss Re’s investor day last year and were given a valuation of around $1 billion, so we call iptiQ the ‘first unicorn’ of our digital initiatives,” he adds.

“Our ambition is to help our clients evolve digitally—and when we see them constantly evolving that means growth for us.”

In fact, he explains, the business’ real ambition is lower acquisition costs and operating costs, which ultimately can be handed back to the people who need it the most: the customers.

However, he adds: “The current reality is that digital sales are not per se more cost-effective than, let’s say, intermediary sales, because you need to invest quite heavily in marketing activities to sell online.

“Our goal is to ensure that the partners we work with make the successful transition to online sales of insurance.”

But, he says, even though conversion of sales made purely online has increased, online access is really about creating engagement with consumers.

“We see a constant increase in consumers seeking to take out insurance online. Optimising that process and engagement is one of the key capabilities that we provide to our partners.”

Consumers may like having online options, but Christensen says drop-off rates remain quite high.

“If we achieve conversion rates of 5 percent or so of customers we’re very happy. The conversion rate for an intermediary remains quite a bit higher; many customers still seek the comfort of a voice on the other side, especially as these insurance selections can be quite complex even if we would like to make them simple.

“Until we’re at the stage when AI has evolved to manage the complex engagement process it is important that we optimise the process for existing intermediaries to enable them to become more effective by focusing on advice for end users.

“That has also formed our approach to using our technology for intermediaries,” he explains.

COVID-19 impacts

Digital is obviously a growing market but Christensen remains cautious when asked about expectations for 2020.

“The reality of COVID-19 came in February and March in different phases for different countries. If I look at Europe, this has clearly had an impact on sales. We have signs from the market that sales are down 25 to 35 percent overall.

“This is not well known yet; we will see that come out at the beginning of next year when people publish their results. But across the board we’re getting those indications from the relevant notices in the market,” he says.

Although the pandemic has highlighted how heavily the market still relies on intermediated sales, iptiQ’s partners, even those that are intermediary-related, have been able to convert themselves to operate from a home environment.

“In that sense we are maintaining the same sales this year as we had last year, which itself is a great achievement when generally activity is down 25 to 35 percent,” he adds.

This ability to pivot quickly when needed has been hard won, with a strategy of continuous innovation and renewal. One of iptiQ’s strengths is its modular system framework which means when one part is no longer fit for purpose it can be replaced with something more modern.

“The business is on to the third generation of our front-end tools with our partners,” he explains.

“We don’t believe in one-off large investments. For technology strategies, it is a thing of the past that you invest in bulk and then assume you can amortise that over the next 10 years.

“We believe to ensure technology innovation you need to have constant investment flow and you need to constantly evolve it to enable innovation.”

As threats evolve and circumstances change, so too should the solutions. Ensuring digital agility is certainly worth the investment and the effort, he concludes.