In this interview, Arina Man, CEO of K2G AG, talks to Dr. Jürgen Cramer, former Managing Director of Sparkassen Direktversicherung, about the biggest technological changes in recent decades, strategies for attracting young customers and the future of the insurance industry. Particular focus: the role of (Gen)AI and what impact this technology will have in the coming years.
Arina Man: You shaped Sparkassen Direktversicherung for over 28 years. What major technological changes have you experienced during this time?
Dr. Jürgen Cramer: The most important one was certainly the Internet. S-Direkt was founded in 1996 - two years after Amazon and two years before Google. Of course, we had already created an Internet presence back then - very quickly with an online application route. This also included the early reservation of attractive domains, such as the domain autoversicherung.de, which is still used today as a comparison portal.
In this early phase of the Internet, it was claimed that insurance could never be sold on the Internet. However, this was a similarly naive assessment as that of Kaiser Wilhelm many years earlier, who is said to have replied to the question about the future of the automobile: “I believe in the horse, the automobile is a passing phenomenon.” Cloud computing is of course one of the most important technology trends. In my opinion, the old question of “make or buy” in software development still has no clear answer. Of course, the topic of (Gen)AI will also be very exciting in the future.
Arina Man: What strategies do you think are crucial for attracting young customers to insurance?
Dr. Jürgen Cramer: First of all, you have to realize that younger customers do not necessarily have a higher affinity for online shopping. For example, younger customers are more likely to use travel agencies for vacation bookings than older customers, who are more likely to book online. Amazing, isn't it? You don't have to be particularly “funky” either, or rather, you shouldn't be. Some providers have tried, but failed.
After all, young customers also expect seriousness from an insurer. Whether Facebook, Instagram, TikTok or similar channels are suitable for insurance sales should therefore be viewed with skepticism. The level of content on these channels is more akin to conversations at garden parties. And who wants to talk about insurance there? I am therefore not aware of any really successful cases. Of course, isolated successes cannot be ruled out. It also goes without saying that the customer's need for convenience must be met.
To a certain extent, this is a “conditio sine qua non” - in all age groups, but perhaps even more so in the young segments. It is also important to identify products that are relevant to the target group and then offer them in the appropriate marketing mix. This of course means - in all its banality - that term life insurance cannot be offered to the over-90s and building insurance cannot be offered to young customers who are not yet homeowners.
Arina Man: You ran an early and successful direct insurer. In your experience, what factors are decisive for success in the insurance industry?
Dr. Jürgen Cramer: In the real estate industry, it's always “location, location, location”. In sales, and therefore also insurance sales, you could speak of “brand, brand, brand”. Without a strong brand as an anchor of trust (especially in insurance and particularly in Internet and direct sales), sales are difficult and expensive. You also need to offer very good service. And if you present yourself with a brand and service, you don't have to go for “cheap, cheap, cheap”.
Many direct insurers have failed in the past because they presented themselves as a no-name and then believed that the customer could be satisfied with “pure play Internet”. Of course, excellent cost management is also part of a successful presence. Because at the end of the day, the direct insurer - even if it has a strong brand and excellent customer service - must also be able to offer the customer an attractive price level.
Arina Man: Which technological developments will change the insurance industry the most in the next three years?
Dr. Jürgen Cramer: (Gen)AI is perhaps just behind the “Peak of Inflated Expectations” in Gartner's Hype Cycle at the moment, but this is where I see the greatest potential - especially in terms of cost management for customer service issues in the broadest sense (including claims processing).
Arina Man: You have not only dealt with the content of artificial intelligence, but have also applied it in a very concrete way - including with K2G technology. What are your main findings?
Dr. Jürgen Cramer: Depending on the initial situation and field of application, (Gen)AI can achieve slight to substantial improvements by incremental rather than disruptive means. One of the biggest challenges with AI (here not GenAI with regard to the cost management mentioned above) is the question of explainability and traceability, but also the stability of the results. This is relevant with regard to the decision-makers, but is also of regulatory importance. As the statistician says so well: “Correlation is not causation”. And the famous “common sense” is still needed. It's also a bit reassuring 😉