Mark Klein is Chief Digital Officer of ERGO Group, an insurance company owned by Munich Re that operates in 30 countries in Europe and SE Asia. The company has 40,000 employees and in 2018 recorded premium income of €19 billion. Prior to joining Ergo Group in September 2016, Klein was CEO of T-Mobile Netherlands and led its digital transformation. He also held management positions at Vodafone and Deutsche Telekom. Within ERGO Group, Klein, an engineer by training, leads ERGO Digital Ventures and is responsible for transforming the insurer’s business model, operations and building up new additional businesses such as nexible, a purely digital company, and new business lines such as the ecosystem ERGO Mobility Solutions. Klein, a speaker at DLD Europe in Brussels on September 9, recently spoke to The Innovator about the group’s digital transformation, its AI ethics policy and reskilling the workforce.
Q : Where is ERGO Group in its digital transformation ?
MK : Digital transformation is a journey. It is an ongoing process and it will never end. What I can say is that digital is working at ERGO and we are in the process of scaling up our different initiatives. Our business model transformation has three key pillars: the first one is to take our current business model and beef it up with digital capabilities to enable a very modern omni-channel approach with seamless integration of our agents, telephone service and online working together on the service side. We have a brand new customer portal that has attracted over a million customers, we created a unified product offering and pricing available across all channels and we have implemented a CRM system that allows us to run integrated campaigns. We have generated 150,000 leads already this year from online to our agents. This is an example of how digital is increasing the performance of our agents. The second pillar is creating new, purely digital businesses. For example, we have created a pure digital player for motor insurance. There is no telephone contact, everything is automated, the only exception is for reporting personal injuries — for this we always offer telephone service. We are really getting market traction for this. We now have over 60,000 customers of our purely digital business, representing €28 million in premiums after only two years on the market. The third leg of our strategy is automation of processes based on three technologies: robotics, AI/data analytics and voice. In robotics we now have 30 robots active in Germany, 10 in India and another five in Poland. By the end of this year we will have 40 in Germany. We are taking processes currently done manually and we are using robots to do this work instead. We are using the robots for really simple and repetitive back office tasks. This frees our employees to do jobs that are more fulfilling. In parellal robotics will work with AI or machine learning. Our first use case for machine learning is automating the allocation of incoming email. It used to be that whenever someone sent an email to info@, an employee would have to read the message and put it in the right bucket. We receive hundreds of thousands of such e-mails here annually. Now it is a machine learning network that reads the texts and classifies them and sends them to the right email address. This is already live since the beginning of this year. We have also implemented an algorithm to help us determine whether customers are still eligible for continuous health insurance payments. We have trained neural network to better steer our agents to make the process much more efficient.
Q : How is the adoption of new technologies impacting your work force ?
MK : Some people say AI is a job killer but I believe AI is mainly a job transformer. It is difficult to say whether this will hold true for all jobs both now and in the future but how I see the technology right now is that it enables us to eliminate repetitive tasks and instead give people more innovative tasks. We will see a movement of employees from the back office to the front office. The employees who in the past were copying files and felt like they were just a gear in the system will instead be serving customers and ensuring their happiness. We are a premium insurer so this is one central selling argument if we can deliver better service.
Q : How are the employees and the works council (shop-floor organizations representing workers that functions as a local/firm-level complement to trade unions)responding to the introduction of automated systems ?
MK: There were a lot of questions from the works council when we started with the first robot. We were very open about what robotics does and we showed them so that they could really see that this was augmenting and not replacing workers and then they said ok. It is really important to be fully transparent about what you are doing and what you are planning. Two weeks before we went live we shared the information and they supported it. There was no blockage. Employees are really important when it comes to digital transformation. They know processes better than anyone and exactly how a robot could be of maximum help. The devil is in the details. In Germany there is now a law that says for health insurance you need customers’ exact dates of birth. We don’t always have this, because this information was not mandatory before. Sometimes we don’t have the exact date but ,for example, just a year, so an employee had to send out emails to obtain the exact dates and input them into the system. Once that job was automated the person who was doing this — amongst other tasks — did not see his job disappear. His time was suddenly freed up to do more interesting, different tasks. We have gone into the various departments and explained how automation can help with other processes. Once we had five robots live we did a presentation in front of employees and asked them how they felt about it. Their response was extremely positive. The works council even said it is really great we have these robots. This is what cultural transformation is all about: you take the people affected by the technology and explain it so that they don’t fear it and earn their support for the implementation. This is the European way. People in Europe are more protected that is why we really have to get their support by offering them work that is much more interesting and more fulfilling. We need to educate people to do higher value jobs. Some jobs will be lost but we are not talking about 30% to 40%. The number is closer to the number of people who will be retiring anyway.
Q : You mentioned onstage at the Sept. 9 DLD Europe conference that ERGO Group adopted an ethics policy before implementing AI. What was the impetus for this ?
MK : One of the key drivers was the works council. They asked us to develop ethical guidelines. It was a great nudge in the right direction. It is good to have an ethics policy. We put together a very small team of experts, screened ethics policies that are already available in Germany and in the U.S. to help us determine what was really important and then developed our own ethics policy out of this. We condensed this into seven basic rules that are very clear, made sure that our policy was in alignment with the works council, and then we issued a joint communication.
Q : What type of experts did you consult ?
MK : Mostly mathematicians and physicists. We did it in a very analytical and condensed way. We didn’t want to produce the equivalent of a PhD thesis. We decided to look at what is already there and condense it into something that reflects our values and how we want to drive the technology. Our AI guys have put up a big print-out of our policy on their wall. They are really proud that we have our own ethical guidelines. It creates trust.
Q : What advice would you give to other chief digital officers ?
The key element of a digital transformation is not the technology it is the business model. It is about digitizing your existing business model, disrupting yourself — in our case trying to become the NetFlix of insurance — and thirdly it is about building new business models. And, you have to take your people with you. Last, but not least, if your digital transformation is missing a cultural transformation you will not be successful. Digital transformation needs to be driven from the top down as well as from the bottom up. By top down I mean it requires a clear mandate from the board to empower and enable people and the openness to give certain decision power to people running the processes. If the board wants full control of everything it is difficult for digital transformation to move forward. At the same time you need to go bottom up — to get your people fully aboard by being fully transparent about what you plan to do and the effect it will have on them. You need to make it visible to the works council, the employees as well as the middle management and take them with you on your digital transformation journey.