In May 2016, Munich Re established its Digital Partners program offering capacity, product development, data analytics and more to emerging tech startups selling insurance.
The group has been busy, to say the least. Today, Munich Re Digital Partners announced its seventh partnership with online small commercial insurance startup Next Insurance, backed by $13M in funding from Ribbit Capital, TLV Partners, and Zeev Ventures, to launch a product targeting commercial photographers.
We caught up with Andrew Rear (@andrewrear), chief executive of the Digital Partners program for Munich Re, to hear his thoughts on challenges in the startup-reinsurer partnership process, evaluating the success of the program, and more.
How would you describe what Digital Partners does in 1-2 sentences? What was the impetus for starting it and what types of companies (stage, focus area, etc) are you looking to partner with?
Digital Partners is a platform to enable insurance tech. We offer insurance capacity, product development and data analytics, API-enabled back office technology, and venture capital financing. The idea came from our experience of working with one start-up. We realized that to be fast and flexible we needed a dedicated team who own the whole proposition. We work with partners who have a proposition for digital customer engagement in property and casualty insurance in the US or Europe. Our partners are responsible for customer acquisition and UX: we don’t partner with ‘pure tech’ companies who don’t have an ambition to acquire and manage customers.
You’ve announced seven partnerships now since launching in May. Can you describe briefly a step-by-step of how Digital Partners is identifying startups to work with, determining the right structure and finalizing those partnerships? How long from first contact to finish on average has it taken to finalize current partnerships? What has been the selection rate of startups you’ve worked with?
We look for the same things that most VCs would look for, in terms of team quality, opportunity size, and scalability. We expect our partners to have at least one senior who understands the technical details of insurance. Inevitably, we see many start-ups, perhaps 50-100 a month, and select only a small proportion to work with. We make the go/no-go decision as a team. We have a standard on-boarding process which enables us to move quickly, but the time this takes depends on what is involved. If the technology build is relatively small then we can go from contact to launch in a couple of months, but other partners take six months or more to go live.
What’s typically the most challenging part of the partnership process (both for the entrepreneur and Digital Partners)?
For the entrepreneur, often the most challenging part is understanding the regulatory requirements, and the burden this places on them. Insurance is a long-term and highly regulated business, and being a start-up does not exempt you from this burden. For Digital Partners, the most challenging part varies a lot by partner. Sometimes the product is complex: for example, on demand is a new concept to most insurance regulators. Sometimes it is the technology build involved, particularly if it involves a lot of data integrations.
How do you think about failure among the startups you partner with? How do you judge the success of Digital Partners in the medium to long-term?
It is inevitable that some partners will fail, and we have a plan to manage it so that no customer gets disadvantaged and we meet regulatory requirements. Naturally we hope that the involvement of Munich Re will reduce the failure rate. In the long-term our ambition is to help our company and the insurance industry engage with digital customers and at the same time to be commercially successful: to be writing sustainably profitable business and creating value with our investments.
Can you describe the resources Munich Re has put into the Digital Partners program? Can you give an example of how one of the companies you’re working with is leveraging Munich Re resources on the product or tech front?
We don’t publish our team size, but this is a significant effort from Munich Re. All of our partners use our product development support and technology resources. The exact service varies from partner to partner depending on what technology and insurance expertise they have. We have developed for one partner a bespoke product and built it on our policy admin platform. At the other end of the spectrum, one partner came to us with a fully-fledged product which required only some underwriting review before we were able to launch it.
Looking at Digital Partners, as well as other initiatives like Hannover Re Partnership Solutions and RGAx, there has been a lot of discussion around reinsurers playing a key role in insurance tech innovation. What are the main reasons reinsurers are playing that role today? How do you this theme proceeding into the future?
Reinsurers like Munich Re have the ability to learn right along with the companies they insure, and to provide existing clients with new insights, access to new tools and the latest technologies for distribution, service and product opportunities that will help them adapt to a changing market and expand their businesses. Additionally, many of the necessary skills, such as underwriting, are core for reinsurers, while the commoditization of the reinsurance market creates the need to begin to explore new sources of revenue.
Any areas you foresee more entrepreneurs in insurance to target looking ahead to 2017?
One of the lessons I’ve learned is not to predict anything. The insurance tech space is changing almost daily. One area I would like to see more of is AI-driven customer engagement, for example chat bots for selling and servicing insurance.