Immo Querner: Some coronavirus-related changes are here to stay

The past few months have been dominated by the coronavirus pandemic and its impacts on the insurance sector. How have the effects been felt at Talanx so far?

Needless to say, Talanx has also not escaped the pandemic unscathed. Let's just take a look at the losses: in the first half-year we incurred coronavirus-related strains of EUR 824 million, which were only partially absorbed by the budgeted provision for large losses. On top of this, there were negative effects on the investment side amounting to a good EUR 170 million as well as those associated with the provision for premium refunds in the order of EUR 100 million.

That made a mark on the half-year result.

Despite these substantial coronavirus-related losses we generated Group net income of EUR 325 million. This is just a third less than in the strong first half-year of 2019. To this extent, it represents a dent in our results, but no more than that. If we look at our key metrics excluding the coronavirus effect, it becomes clear how good the Talanx fundamentals are – namely better than in the previous year.

Which metrics do you have in mind?

Had it not been for the coronavirus, our Group net income for the first six months would have been over EUR 500 million or even as much as EUR 600 million – depending on how you make the calculation – and we would be on track for a new record year. The combined ratio would have remained stable at 97.4 percent. And even with coronavirus and a growing portfolio the solvency ratio (excluding any transitionals) is still around 191 percent and hence at the upper end of our self-defined range of 150 to 200 percent. In other words, Talanx continues to be in very robust shape.

Market observers are talking about a new surge in digitalisation for insurance sales: What is your take on this?

The expectations of our customers and sales partners when it comes to digitalisation have risen sharply – driven especially by the experience of the coronavirus crisis. "Hybrid customers" – research online, purchase offline – already make up the largest customer group. And the group of "pure onliners" is continuing to grow. Rapid response times, prompt claims handling and straightforward channels for online advice and contract formation are becoming a make-or-break criterion in the competitive landscape.

What do you see as the major trends?

The digitalisation trend in the sale of bank and insurance products is also accelerating towards the platform economy as well as the creation and expansion of proprietary ecosystems so as to avoid abandoning the digital customer interface solely to fintechs and insurtechs. New cooperation models are emerging here that satisfy customer requirements for transparent, simple and flexible products and (digital) services. At HDI Bancassurance, for example, promising digitalisation projects are currently being pursued with our bank partners, including for example data-driven sales support in conjunction with behavioural economics.

Many insurers have moved their business operations to home office working at short notice: What medium- and long-term consequences do you see for agile working models?

Of the 23,000 men and women employed across the entire Talanx Group, significantly more than 20,000 have at some point been working remotely. More the 90 percent of our employees around the world are able to work seamlessly on a mobile basis. At some locations we have even had the entire team working from home at times. In the vast majority of cases this worked very well within a very short space of time. Going forward, this will likely prompt lasting changes for conferences, business travel and the organisation of individual work.

And those are?

Throughout the entire organisation we are seeing between 4,500 and 6,000 videoconferences a day at times. Not only does this conserve resources, it is also sometimes more efficient because the discussions are more focused. Looking ahead, video conferences will therefore make quite a number of business trips unnecessary. What is more, even before the outbreak of the pandemic, members of staff in many areas of the Talanx Group were working on a mobile basis for up to two days a week. We are keeping this policy in place and also looking to expand the available opportunities. On the other hand, we also realise that collaboration in the office remains important. It is the social glue and fosters creativity. It would be wrong to take an either/or approach.

The debate around business interruption insurance has also dominated headlines over the past few months: Various insurers have already suggested a public-private insurance solution. What is your assessment of this?

The operational impacts of a pandemic can also be insured privately through a business interruption policy: if reportable diseases or pathogens occur in a business, for example due to a pandemic, and if this business is closed by a specific official order, we shall continue to pay compensation in the future under our modified terms and conditions. The same is true if a business is closed on the basis of a specific official order so as to prevent the spread of reportable diseases or pathogens from a third-party business to the insured business. Stated again in clear terms: even the consequences of pandemics are insurable under business interruption insurance, but not across-the-board business closures based on general directives. This is where the insurance industry's rules of production, namely the static balance in the collective body of policyholders, break down.

And this is where public-private insurance solutions could come into play.

For the reason just mentioned, no purely private sector model is in a position to absorb such risks associated with a pandemic. What is needed here are models under which the private insurance sector and government compensatory mechanisms work together, possibly also with the participation of the capital market. With this in mind, we support the initiative launched by the German Insurance Association (GDV), which has created a project group to explore the issue.

Taking a quick look ahead to the second half of 2020: What are your expectations for the current financial year?

We know that the coronavirus still has more in store for us. Unfortunately, we do not know how much is still to come or where. For example, more events may be cancelled or businesses closed by specific orders. It is also unclear how the capital markets will respond. And it remains to be seen how we might be impacted on the premium side by a softening in economic activity if a second wave were potentially to follow. That's why, despite our optimism, we are currently refraining from providing any guidance for the full year.