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Bitesize InsurTech: Euler Hermes Digital Agency

Euler Hermes Digital Agency

Euler Hermes Digital Agency  is a corporate innovation team that conducted 77 proofs of concept (POCs) in its first year of operation.

Euler Hermes provides insurance for B2B trade receivables (credit insurance). It is a subsidiary of Allianz. Its Digital Agency was founded by former strategy consultants Louis Carbonnier and Christophe Spoerry in July 2015. The number of POCs that it completed in year 1 makes it stand out as a corporate innovation success story. It currently has 30 employees in Paris, the UK and USA.

Euler Hermes
The team at their Paris office

Why was Euler Hermes Digital Agency founded?

Until recently, credit insurers enjoyed enormous barriers to entry. Euler Hermes has, for example, collected credit risk information on more than 50 million companies in over 150 countries over decades. This was an onerous process – combining disparate, normally national and sometimes hard-to-access datasets such as credit bureaus, bankruptcy gazettes and so forth.

But the world is changing.

First, the world is moving to global platforms such as cloud accounting systems (e.g. Intuit/QuickBooks, Xero) and e-commerce giants (e.g. Amazon, Alibaba). These platforms have huge insight on their users and customers, including credit data.

Second, the sources and depth of data is increasing every month, and the techniques to analyse that data are becoming more sophisticated.

Third, the FinTech wave is creating products that are credible substitutes for credit insurance. These include “new age factoring”, for example, which are often integrated into SMEs’ accounting platforms.

Compounding the threat, trade credit insurance is a somewhat remote island in the insurance landscape. There is little movement of people and therefore low exposure to external trends and influences.

Euler Hermes felt that its barriers to entry were being lowered. On the other hand, management felt that its existing competitive advantage was still considerable – it just needed to use its assets in new ways. Euler Hermes Digital Agency was born and given three objectives:

  • Monitor market trends;
  • Prototype new business models; and
  • Be a competency centre for digital.

What is Euler Hermes Digital Agency?

Euler Hermes Digital Agency now has five teams:

Innovation Lab, which is where the founding objectives of the business unit have landed. It operates as a prototyping engine that tests new business models and shares results with the wider business.

Data Lab tries to find new sources of data and better uses of those data to create multi-million Euro performance improvement. To do this, the team has built a data sandbox. “When the Agency was first launched, we noticed that data POCs were taking eight months”, says Louis . “That included six months to agree how to share our data in a safe way.” To address this problem, Louis and Christophe decided to take three months to build a “safe space” where the company could put its data and allow startups to run POCs against it.

This required the information security team to be comfortable, of course, but once built, POC testing times have come right down.

Louis and Christophe
Louis Carbonnier (L) and Christophe Spoerry (R), Co-Founders of Euler Hermes Digital Agency

It’s all part of a general concept that Louis describes as “porosity”. He wants to make it really easy for partners to access Euler Hermes, and for Euler Hermes to benefit from their skills as a result.

New Business Factory operates as a startup within the large corporate to scale up proven ideas coming out of the Innovation Lab (independently of the core business). Euler Hermes realised that there was still a considerable gap between a successful POC or pilot and a well-packaged product, ready to be sold by commercial teams. The New Business Factory appeared to be a pragmatic response to this issue, as well as a way to bring new skills to Euler Hermes (e.g. data scientists and product owners).

Digital Culture coaches employees outside the Digital Agency and helps change the way people work (e.g. to accept that failing is okay).

Spinoffs is a corporate venture fund. As Louis says, “few entrepreneurs wake up in the morning and want to do a trade finance startup”, so there is not so much startup activity in the space. On the other hand, Euler Hermes Digital Agency generates many ideas that don’t have a natural owner inside Euler Hermes. To solve this problem, Euler Hermes Digital Agency “spins off” these ideas with teams comprising both existing Euler Hermes employees and entrepreneurs.

Asked why the Digital Agency has been successful, Louis cites the fact that the team reports to the CEO which has allowed it to build the structure and processes to be successful.  Second, Louis cites the team’s frugality and notes that most ideas can be tested for €25k or less.  This is partly through strict adherence to the 80/20 rule: the team believes that “done is better than perfect”.

The Oxbow Partners view

77 POCs in year 1 says it all.

This has been a wildly successful venture and defines the “art of the possible” in many areas of insurance innovation. The data sandbox is a critical enabler – and is arguably something that any insurer doing data innovation should build because the problems it solves are exactly the problems from which most insurers are suffering.

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Chris Sandilands

Partner at Oxbow Partners
Chris Sandilands, ACII is a Partner at Oxbow Partners. Chris advises (re)insurers and brokers on a range of strategy topics and M&A. Chris started his career as a D&O underwriter at Munich Re, before joining Oliver Wyman, the consulting firm. You can reach him at csandilands@oxbowpartners.com.

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