It used to be that owning a cool car was a status symbol – especially in countries like Germany that are home to some of the coolest. In others, such as China, owning a car in itself is a status symbol. But that concept is crumbling. Today’s urban youth and digital nomads who spend their money on lifestyle experiences don’t want to be bogged down by hefty payments for cars, repairs, and insurance. They want to pay as they go.
“As an insurer, we are heavily invested in shaping the upcoming shift,” said Karsten Crede, board member of ERGO Digital Ventures AG, responsible for the insurance organization ERGO Mobility Solutions. “Motor insurance is still one of the most important lines of business for most insurance companies around the world.”
The production side of the auto sector is undergoing massive changes. Car manufacturers are feeling pressure to become more sustainable, for example, by sourcing green steel. This in turn has prompted suppliers to redefine their business models. One of the steel giants supplying most of the German auto industry, for example, has transformed its entire production cycle into a circular model that reduces, reuses, and recycles energy and materials. The company has even installed six massive turbines at its manufacturing facilities to produce its own green hydrogen.
“The same kind of systemic transformation must also happen on the retail side,” said Crede, speaking at the recent SAP and SAP Fioneer Financial Services Forum Europe in Frankfurt, Germany. “As insurers, we need to reinvent our business model and be integrated in the customer journey as early as possible.”
According to Crede, from an insurer’s perspective, understanding the automotive customer journey begins with understanding vehicle technology. Shaping the insurance model of the future requires knowledge about the technological characteristics of the car, such as the battery or assistance systems.
For this reason, the company created its own Mobility Technology Center – a highly unusual approach for an insurance company – to gain insights into the quality and performance of the batteries and the efficiency of assistance systems. ERGO has learned, for example, that there are significant variations between manufacturers when it comes to battery lifetime.
“If we as an insurance company don’t have this expertise, we won’t be on an equal footing when it comes to discussing costs with technology experts from the automotive side,” he explained.
The knowledge gained at the Mobility Technology Center will also be used to develop warranty solutions for batteries, particularly important for the development of stable used car markets. Using digital twin technology to analyze battery performance, ERGO can determine the impact of factors such as temperature, vehicle care, charging behavior, and weight within eight to nine months versus the eight to nine years of a battery’s actual life.
“All this technology requires changes on the insurance side,” said Crede. “We need to know more about technology and software, how it impacts our business, and how it connects to the world of the carmakers.”
But it’s not just about understanding technology; ERGO is taking the lead in other areas as well. Besides being more environmentally conscious, today’s real-time, tech-savvy generation expects simple, one-click solutions for purchasing products and services such insurance and car rentals.
To better meet the needs of this emerging consumer group, ERGO has initiated pilot projects with SIXT SE, NIO, and Volvo. These companies are shaping the future with new mobility formats such as subscription models, battery concepts, and digital and data-based services. “We want to seamlessly integrate our insurance solutions into the customer journey. Simple and intuitive processes are among the most significant success factors”, said Crede.
ERGO Mobility Solutions, part of Munich RE / ERGO Group one of the world’s leading reinsurers and risk takers, is running the SAP S/4HANA Insurance solution to power its digital IT platform. Using SAP’s open platform integration enables the company to address new mobility formats such as insurance on demand or car as a service.
The SAP solution provides a modular encapsulated structure and a powerful product engine with predefined generic models and sets of rules. This enables independence from classic release cycles, leading to smooth integration of customer requirements and considerable efficiency gains.
“Unlike the automotive industry, the insurance sector is not primarily known for technology innovation,” Crede commented. “We are business developers and investors focused on long-term solutions. That makes us good partners for collaborative endeavors and startups.”
Technology promises a more productive and sustainable future. Investing in innovation is necessary to create better, more-efficient vehicles. “The history of innovation is an ongoing cycle of investing in ideas,” said Crede. “Translating technology into insurance solutions is our contribution to innovation and sustainability. That’s how we can keep protecting people, property, and business in the most efficient and cost-effective way.”
According to Toni Tomic, SAP Global Head of Insurance, the digital network economy, enabled by the cloud and leveraged by Generative AI, is on the rise for Insurance. “SAP’s partnership with ERGO Mobility Solutions is proof that insurance, technology companies, car manufacturers, mobility providers and infrastructure facilitators can build advanced business models to power a superior customer experience,” he said.
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