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Innovation in (credit) insurance - rather evolution than disruption

By Dirk Hagener, Director Strategy and Corporate Development, Atradius

Dirk Hagener, Director Strategy and Corporate Development, Atradius

Innovation is, in most cases, the driver for evolution. Disruption is the exception. Everyone knows the story of individual organisations and products such as Kodak, Nokia and the DVD, but let’s look at big trends in major sectors such as energy, automotive or the food industry.

Renewable energy as part of our energy system is growing, but will it completely replace gas, carbon and nuclear power plants in the near future? Electro mobility is on the rise, but it is very likely that we will also see fuel, diesel and other synthetic fuels in mobility and logistics in the (nearer) future. Companies like “Beyond Meat” are stars at the stock markets, but for the time being the meat industry is not threatened with extinction due to the abundance of meat eaters

All of the patterns described below are evolutionary ones and we believe that the pattern for innovation in insurance will be the same. Now let’s have a look what will the driver of innovation in insurance. We believe it will be twofold: prevention and user experience.

Prevention

The sheer amount of available data and the models and analytics around them will surely improve prevention of insurance claims. But we strongly believe that the business model of insurance will not be completely disrupted. Also in the future human errors, fraud or bad management, means claims cases from an insurance perspective, will never be eradicated.

In business lines like car or health insurance several innovative developments are visible already: wearables help to monitor a person’s health status, intelligent car systems are helping to understand the driver’s behaviour.

Also in credit insurance, protection against the non-payment of B2B invoices, the evolution of the proposition is mainly connected to data.

To reduce the risk of defaults even further means for us, that we need to understand the ecosystem of our customers even better, and here we are strongly supported by the general acceleration of data analysis and modelling in the last years.

We are now able to access information in new ways, such as through social media, and new sources for company performance (e.g. webpage updates or supply chain monitoring).And we can use the data in more intelligent ways (e.g. web crawling with AI, data models with fuzzy logic).

At Atradius we have prototyped several analytical tools in the last years, both for our manual and our automatic underwriting of companies and have now rolled out several applications in different languages.

The performance of these new tools has been very encouraging, but the impact of the corona crisis on the economy will be a new reality check for these models, as the massive stimulus packages from the governments all over the world are an unknown and unprecedented factor for the predictability of defaults from companies.

User experience

The second main pillar of innovation in credit insurance is, as it is in all industries, user experience or UX. To illustrate this with an example from another sector: Tesla is not only popular because of not using carbon fuel and the low driving noise in its cars, but because the product is easy to use, all functionalities are at your fingertips and software updates will be installed via mobile devices.

Needless to say, that a complex product like credit insurance has a long way to go before getting a Tesla feeling. Different to other insurance lines, credit insurance customers have a lot of interactions with their provider, e.g. asking for credit limits for their buyers and notifying their insurer if a buyer has not paid on time. All these transactions are handled via our online tool Atradius Atrium, which is working with state-of-the art technology and which is designed for different user types. Nevertheless, information like a late payment or a fully used credit limit is information in the ERP system of our customers and in principle doesn’t need manual intervention via an online transaction.

Therefore, in the last years we have significantly increased our focus on building technical ways to improve connectivity. Our API suite has evolved,meeting the newest technical standard and is now far easier to use than previous web interfaces. We are offering an API library, in which the customer can choose the type of transaction (credit limit, buyer rating, etc.) she or he wants to use in a seamless way and connect these APIs with its ERP system.

One further step of integration is the reconciliation of a customer’s ERP data and data from the credit insurer, e.g. the alignment of an internal limit and CI limit or utilised versus unutilized exposure of a credit limit. This integration can either be done by the customer her or himself (with significant internal IT effort) or, even better, the ERP provider can support this integration by building a credit insurance feature in her or his system.

In recent years, together with Microsoft, we have built such an add-on in their B2B ERP application Dynamics 365, which is called Atradius Flow. This add on has been built for all their latest versions and lately as well for the cloud version, which means that we can offer our integrated version via the Microsoft app library.

Currently this service is available for Danish customers as we have piloted the service there due to the strong market power of Microsoft Dynamics in the Nordics, but we will roll this service out in other countries in the coming years with additional features and new APIs.

With this focus of user experience in mind, we are planning to offer the approach via other leading ERP providers, so that we are able to reduce the administration effort of our customers to an absolute minimum.

Even with this ambition in mind, we are conscious that even the most seamless proposition around credit management for our customers will never reach the Tesla or Apple status. Our product, like so many others, can never create the same level of fun or joy or achieve anywhere near their level of fandom. So our vision in credit insurance has to be more modest: Peace of mind for our customers using state-of-the art technology and to be a reliable partner in good and difficult times, two objectives we try to achieve every day.

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