Six months on: how Microsoft and SAS are working together in the insurance industry

Last year, Microsoft and SAS opened a strategic partnership agreement. In November, my colleague Kenneth Koh talked to two experts from Microsoft in the US to discuss how that strategic partnership is helping insurers to accelerate digital transformation. Six months on, I wanted to see how the journey was starting to play out, and whether the experience in Europe was different. I caught up with Manuel Holzhauer, Insurance Industry Executive, to find out more.

Manuel, let’s start with the insurance business landscape. What are you seeing among your clients?

Insurers perceive that they are moving rapidly towards digitalisation. However, I think my view is more that during the pandemic, the industry was able to maintain business operations and continue to serve customers, working remotely. I am not belittling that achievement in any way, because a few years ago it would have been impossible. Customers can use now digital channels for service, but this is not really digitalisation. Real digitalisation is more than that, and I don’t think we have seen it yet. We are on the right track, and the conversations are becoming easier, but we are still a long way off.

What is your perception about the skills and capabilities required for digital transformation in your clients?

Technologically everything is there. However, the challenge is not really technology, it’s culture. We all know that culture eats strategy for breakfast, and it’s especially true in this industry. It’s easy to work together across an organisation, if the culture in the company means that people are used to working together, and sharing information and data in a truly collaborative way. The organisational structure doesn’t matter if the culture is right. However, that is a big problem in the German insurance industry. There is very much a culture of accepting things the way they are, and not trying to push boundaries. It’s all very comfortable—but it’s not really improving things for customers.

How much democratisation of AI and analytics are you seeing among your clients?

That’s a very good question, and one that separates the wheat from the chaff a bit. The big companies, have invested in training and further education, and have really tried to take employees with them. They are full of intelligent people who all have degrees and doctorates, not necessarily in data science or artificial intelligence, but with a wealth of knowledge. It’s relatively easy to help them become fit for the future. However, other companies are not doing so well. Some of them are not even fully remote yet. It’s a matter of creating the right conditions: giving people the opportunity to acquire the skills.

On a scale of one to ten, where ten is the most optimistic, where would you say insurance companies are on digitalisation in Germany, and how might they develop in the next few years?

Here, too, I think it is helpful to make a distinction between the large, listed firms and the smaller firms. The large ones are perhaps an eight, though that may be optimistic. The smaller ones are significantly behind. However, the groups are very heterogeneous, and some are further ahead than others. Over time, I think we will see further separation of the smaller firms. Some will catch up with the big firms, and others probably won’t, because they simply don’t see digitisation as a priority. You see a similar distinction in the use of the cloud.

How are your customers approaching the need to innovate?

I think the big focus is solving concrete problems via use cases. This means you have short-term goals for short-term success, and can solve a problem in the short or medium term. This works very well because firms are all set up differently. Some have a central innovation unit, and others work in silos, but either way, business units can develop use cases and try to drive them forward. There is really no right or wrong way, and every company has to decide what is best. It’s not exactly like a start-up, because insurance companies are so big, but it’s using the idea. Entrepreneurs take risks very consciously, and it is hard to build that culture, but I think it’s essential. Some insurers appreciate that their business is managing risk, and this is just a risk like any other, to be estimated and managed.

Manuel, thank you for sharing these valuable insights.