Axa boss predicts competitive threat from Faangs
The chief executive of France’s Axa believes that the insurance industry’s “competitors of tomorrow” will be the huge data-driven tech companies such as Facebook.
“If your endgame is to be an orchestrator of a community of the insured, with the aim of helping each other and leveraging the collective wisdom, which is the business model that you see in today’s market that is closest to that?” asked Thomas Buberl, who has run Axa, the second-largest insurer in the world by assets, since 2016.
The answer is “Facebook, Google, or Apple . . . I believe those are our competitors of tomorrow, and not Lemonade or other small insurance companies,” he said, referring to the largest of the “insurtech” start-ups, which was valued at a reported $2bn in its latest funding round.
Under Mr Buberl, Axa acquired the Bermuda-listed insurer XL in March last year, and then listed Axa Equitable, the group’s US life insurance company, shifting the company’s portfolio from market-dependant life and investment products to underwriting-dependent property casualty and health products.
The way to win in the latter businesses is to provide services to customers that helps them reduce risk, rather than simply paying claims when risks bite, Mr Buberl told the Financial Times in a recent interview. “My conviction is that in the long term an insurance company will not be [primarily] a claims payment company any more.”
Tech companies are already creeping into insurance: Tesla’s announced last month that it would begin selling insurance directly to Tesla drivers, underwritten by its partner Markel, and said it had plans to become a fully fledged insurer in time.
“You don’t have a classic case of a car any more,” Mr Buberl said, but “a rolling tech stack” that provides a wealth of information about future maintenance costs and risk. Using data gathered from customers to help those same customers cut risk will be at the heart of the insurance businesses in the future, Mr Buberl argued.
Industry insiders agree that the data amassed by big tech has competitive implications.
“The life insurance industry is a capital intensive, long-term oriented business” that tech companies might hesitate to enter, said Joel Albarella, who runs New York Life Ventures, the venture capital arm of New York Life. “That said, better tech will theoretically originate better risk assets,” he said, arguing that the Tesla case shows the potential in property and casualty.
Axa’s strategy for dealing with competition from big-tech companies is to become their partner of choice. “I don’t think [big tech] will always go into the business [directly],” Mr Buberl argues. “The question is who partners with whom? Facebook and Google will probably only have one partner . . . and these partners [will] need to be global because those companies do not want to talk to 163 different insurers.”
He cited Axa’s partnership with Uber — the insurer provides disability and maternity/paternity protection for drivers — as a step in that direction. He thinks there could be potential for the data collected by Uber drivers’ smartphones to help underwrite property risks, too.
Mr Buberl has pushed significant changes since taking the helm at Axa, based on his view that low interest rates, changing demographics and the threat of disintermediation will pose structural challenges to the life insurance business for years to come.
He is not dismissive of insurtech start-ups but sees them as more opportunity than threat. He noted that Axa serves as a reinsurer for not only Lemonade (renters’ insurance) but also the start-ups Pure (property protection for wealthy families) and Oscar (health).
These relationships help AXA learn about new business models, he said. “We believe what they are doing is very smart.”