“Low-cost insurance shouldn't mean lower quality”

Photo: The director of Digital Business at DKV Group, Josep Celaya. Credit: Courtesy of the interviewee

By Marta Sotres

The coronavirus pandemic (COVID-19) has disrupted the market. Every industry has been forced to rethink its dynamics and open up new avenues of growth to stay afloat, an against-the-clock transformation that has not spared the insurance sector either. In order to overcome it successfully, the Director of Digital Business at DKV Group, Josep Celaya, believes that the insurance world has to stop making the same old mistakes, such as immobile strategic plans and meetings based on inertia, and start coming up with flexible and creative solutions to face its challenges.

Celaya is confident that implementing a more agile mindset in organisations and a more innovative and sustained application of technology use cases in the market will be two of the cogs that will accelerate the pace of the insurance industry.

With 20 years of experience in the insurance sector, how has the emergence of COVID-19 affected you in the industry?

During the pandemic, we have learned to work remotely and learnt to understand what worked and what didn't in our previous way of working. In every organisation there was, for example, too many meetings based on inertia. Now we are going to be much more pragmatic. What was irreplaceable, neither then nor now, is the human aspect, which is so necessary for professional relations. The culture of a company is not that which is stated in its values, but that which is lived on a day-to-day basis.

Certainly, the working world is going to look very different in the future. In the end, there's a lot of self-fulfilling prophecy involved here; because we all convince ourselves that it's going to be different, it will be different. And now everyone's thinking that the future model of work will be hybrid, and so it will be.

Are you seeing differences between the insurance industry as you have always known it and the one that is emerging as a result of the pandemic?

The pandemic has undoubtedly accelerated digital transformation, and this has made everyone get to work on finding what works digitally. So, what does work? In a sector still undergoing transition, such as insurance, there has been a real boom in the use of digital channels, which has made it possible to speed up both work processes and interaction with customers. The consumer has suddenly changed, and companies have had to adapt.

At DKV, for example, our Doctors against COVID initiative demonstrates how useful these digital channels can be. Faced with uncertainty and demand from the population, we made a platform available to society in which some doctors, on a voluntary basis, provided consultations in Spain and some Latin American countries. We already had the innovative tool ready, but we adapted it to meet a sudden customer demand. We offered it free of charge and made it accessible to everyone as a response to the urgent situation we found ourselves in.

Is the consumer changing? How will this affect the industry's new business models?

One of the most obvious trends we are seeing amongst consumers is that their concern for health has increased, and people who had not previously considered it have an appetite for safety and security. This has translated into high growth in health insurance, which prior to the pandemic had relatively average levels of penetration in Spanish society. As a result, the winner in the insurance industry has been this branch, which has become a promising bet on the future for many agents in the market.

Faced with increasingly long-living populations, how will the insurance industry manage to preserve its customer base, while offering the same high-quality service for more years and maintaining profitability?

Longevity, along with attracting younger audiences, are two of the great challenges that all market players are tackling. They are two very important focuses of action because of their social function, not only for their economic interest.

It is a challenge to consider how we are going to be able to care for our elderly in a society with such brutal demographic pressure on Western welfare systems. We live in countries with very high levels of protection; we are very privileged in that sense, but the economic viability of all this is, to say the least, complicated.

Starting to imagine creative solutions is key. With technology and new business models, we will be able to create products and services that cater to these population groups, for example, assistance for vulnerable people at home, availability of insurance at reasonable prices for certain groups, and so on.

It is estimated that ‘millennials’ will represent more than 70% of the global workforce by 2025. How will the industry become indispensable to the younger generation?

For younger people, I see it as important to democratise health insurance. Nowadays, it is a burden on their budget, so our challenge as an industry is to make this insurance accessible to them through technology, while at the same time offering them improvements in the service. In other words, somehow, we have to break the argument that a low-cost product is of lower quality. And technology can help us to lower the cost, without this implying a loss of quality in the product or service.

It is not an easy path because insurance companies have important legacies, but health insurance will be one of the most important playing fields in the future.

In the medium term, once the pandemic is under control and the majority of the population has been vaccinated, will the industry be more likely to return to pre-COVID business dynamics out of convenience, or will it continue to use innovation as a growth strategy?

Whenever a crisis comes, it takes a part of the economy with it, which is a social and human disaster, and entails a very painful transition. But, of course, it cleans up resources and shifts the focus to other areas of activity. The positive thing about all this is that it will lead us towards an economy that is far more oriented towards high-growth sectors.

You can't survive in the world today if you don't innovate, no matter what your product is or which direction you want to go in. Either you invest and put blind faith in innovation on a sustained basis, or your business models will be unsustainable in the long term in a time of transformation.

Professionally, does the word “planning” still have the same meaning for you?

The way organisations plan is still, in most cases, wrong because strategic plans are understood as fixed braces for a long period of time. Having a long-term business plan makes sense, but you have to be aware that you need to review it at least annually, be able to adapt it and not worry too much if the landscape changes and you have to change direction.

There has been a significant increase in flexibility in this area, but I am somewhat pessimistic and believe that we are still falling into this error of planning. I think that, little by little, there will be a transition towards a more agile corporate mentality typical of start-ups, but this has not yet reached the corporate world. In many cases, the top management layers are only just beginning to understand these new models.

When you think about future insurance ecosystems, do you envision a scenario of well-balanced alliances between insurtechs and large companies or one in which large, increasingly digitised companies predominate?

A key factor in a corporation's success in the coming years is to become more agile through its transformation. How? One of the most important ways will be through interaction with the entrepreneurial ecosystem, with start-ups. There are different types of start-ups: there are those that come to compete, but there is also a large number that offer solutions in value chain processes to large companies. For example, a symptom checker for health insurance, or an image assessment in car insurance.

Collaboration with these types of start-ups is key to accelerating your transformation process. If you are quick and agile in doing so, you transform faster, and that will enable you to be more competitive. Today, these collaborations have to be at the top of a CEO's agenda.

What are the technologies that you think will shape the future of the insurance industry five years from now?

Rather than technologies, I would emphasise use cases, i.e. how a company uses these technologies. In insurance, I would highlight four key areas of the value chain: customer acquisition, pricing and risk assessment, customer service and delivery. Use cases related to data and the generation of algorithms from data are of most importance.

What are the challenges ahead for the insurance sector both globally and in Spain?

Geography is important, but in this industry the challenge declines more in terms of branches and product lines. Within the sector there are very different businesses (life, health, etc.), however, I can see common challenges, such as transformation: companies that fail to transform are not only going to be under pressure from incoming competitors, but also from existing players that have successfully transformed themselves.