By Susanne Møllegaard, CEO and Co-owner of Process Factory
Maersk plans to become an insurance company. With the support of the general meeting Tuesday, April 10, 2018 the wording of the company’s articles of association has just been amended to include insurance services:
“The Company’s main objects are, directly or indirectly, to carry on shipping, chartering and related business, but it shall be a further object to engage in other transport business, commercial and industrial activities at home and abroad as well as offering services, finance and insurance services within the scope which is deemed appropriate by the Board of Directors.”
Initially, the aim is to offer cargo insurance to Maersk’s existing customers. Later, it may develop into other areas.
Thus, the road is paved for a new player in the insurance market that has the muscles to actually move market shares. It will be interesting to see, if Maersk will make use of subcontractors amongst existing insurance companies, or if they want to build their own internal insurance organization for the task and thus effectively become a competitor to the existing players in the industry.
Five sources of radical change
Maersk’s efforts are worth keeping an eye on because they represent one of the five major sources of radical change in the insurance industry, which I believe, we are beginning to see the contours of now.
Players from other industries
The hype about insurtech entrepreneurs has never been greater and I have no doubt that we will see many innovative ideas from their side that will help inspire the future development of the insurance industry. However, insurance is a capital-intensive and strongly regulated industry, which makes it difficult for a small entrepreneur to seriously create radical changes. Established players from other industries are a completely different talk. If major players like Maersk and Amazon seriously choose to invest in the insurance market, they will have a completely different chance of making an impact. They have the necessary capital, and perhaps even more importantly, they have a well-developed customer relationship that they can build on. Insurance can become the byproduct, which can make their core product even stronger.
The industry’s suppliers
A number of the world’s major reinsurers have discovered that digitalization opens up to new ways to compete in the industry. Munich Re has established its subsidiary Digital Partners, which invests heavily in insurtech entrepreneurs and collaborates widely with some of the most significant of the kind. As examples, I can mention Trov, Slice Labs, Bought-by-Many and Next Insurance. The reinsurers great interest in entrepreneurs may lead to new players being helped into the market. Furthermore, it may challenge the wellknown distribution of roles and power between the reinsurers and the insurance companies.
The industry’s clients
The big clients have already seen the advantages of insuring themselves. In 2012, Maersk established an internal insurance department to take care of their own insurance needs. A measure that, according to the company itself, has meant significant cost savings. The same applies to other large Danish companies such as Ørsted, Danish Crown, Arla, TDC and Carlsberg. Private customers are increasingly beginning to think in the same way. Around the world, we see peer-to-peer initiatives (a kind of group self-insurance), where customers are given the opportunity to help each other with smaller risks thus reducing the insurance premium. Although the peer-to-peer idea is appealing, it has its limitations when it comes to covering bigger risks for private customers. In the business market, however, I see an interesting potential for companies that are too small for self-insurance. They will be able to “make a Maersk” by joining homogeneous groups that share risks.
The most important alternative to insurance is the promise of no damage. And it may be achievable soon as our homes and property become intelligent and can help prevent damage. In some cases, insurance may not be necessary. Or the risk of damage becomes so small that the manufacturer is comfortable to include it in the general warranty. As our assets become increasingly digital and intelligent, new cyber risks arise, which may be the basis for a new lucrative business area for the industry. But it is far from certain. Firewalls, virus protection and what we otherwise see of weapons against digital burglary may be a much more attractive alternative.
The industry’s existing players
Insurance companies themselves are right in the bullseye. On one hand, they will be “victims” of the radical changes in the industry and, on the other hand, they themselves will be active contributors to the development. It is a demanding double role. They must develop and protect their existing business, which is probably best served if change is minimized, while at the same time they have to be curious, experimental and willing to transform. However, insurance companies hold two strong cards which undoubtedly will be an advantage in the quest for spotting the most viable new opportunities and converting them into concrete business initiatives: Credibility and a strong knowledge of insurance business.
About the writer
CEO and Co-owner of Process Factory
Process Factory offers it-consultancy services to the p/l insurance industry, assisting insurers and vendors of insurance systems with the layer of national interfaces and third-party integrations.
Read more: http://www.process-factory.dk
Blogger at Borsen.dk, Denmarks leading business newspaper
Areas of interest: insurtech, insurance and technology.
Co-author of the InsurTECH Book Twitter