The impact of information systems in ERGO Insurance after the merging

5.5 The impact of information systems in ERGO Insurance after the

66 Figure 8: Insurance products provided by Ergo information systems

It is important to be noticed the impact of information systems in the significantly reducing of the risk for insurers and policyholders. Information systems through the processing of financial data can predict any possible evolvements and future changes in the insurance industry. Insurance programs through data processing are more focused on the customer in order to cover his needs. Without a doubt, the change in risk creates new opportunities and dangers for insurers.

The evolution of information systems affects all operations of companies such the interactions with customers, the estimation of risks, and the design of products. It is important for companies to upgrade their technological infrastructure, educate their people in new technologies, and digitize any line of their business in order to meet the needs of market competition.

The digital transformation in insurance industry

The company acknowledges the impact of information systems in business and wants the new company after the merging to correspond to the increased customer expectations. Ergo wants to offer simpler and more compelling products through the company's digital information system, providing a truly omnichannel experience. Insurers want to:

✓ Digital Innovation. The digital innovation increases the abilities of insurers to provide their customers with innovative and attractive products. In order to achieve these expectations, modern information systems offer interaction with customers, personalize user experience, data mining, well-informed decisions, and business analytics. The continuous training of insurers with new technologies is the necessary condition in order to achieve the digital transformation in the insurance sector.

✓ Cloud adoption. Digital transformation has limits that are associated with the limitations of the existing technology. The large amount of data that a company has to manage requires huge storage space and great computing power. Most of the time companies have not the willingness or the ability to create the necessary technological infrastructures in order to be capable of managing a vast amount of information. The adoption of cloud technologies made the companies more flexible due to access to huge storage databases. Cloud today is the core of digital transformation.

✓ Service-enabled. Digital services should focus on customers by providing personalized solutions always based on their needs. The services should be of high quality and available to the consumer throughout the day

Ergo provides insurance products through its digital systems. These systems have the ability to process huge amount of data, evaluate the needs of each customer separately, collect data from different sources, and make the interaction between insurers and clients more efficient.

Through these systems, insurers can offer their clients modern and simplified products in different areas of general insurance.

68 Ergo combines its industry experience, software, hardware, and services and with its strategic partnerships with different vendors offers a fully integrated information system with the following capabilities:

✓ digital engagement platform for customers

✓ Modern user interfaces that are fully configurable by the system administrators, including the billing and claims systems.

✓ Ability to evaluate products and identify possible deficiencies

✓ Data analytics offering information for the consumer preferences

✓ A fully integrated environment including cloud computing, data mining, secure telecommunications, safe networks, cybersecurity, agile software, and disaster recovery techniques

✓ 24x7 daily support for all operations units (web application, technological infrastructure, network issues, cybersecurity)

Information Systems: An opportunity for change in the insurance sector

Information systems are changing the traditional interaction of clients with their insurance company. Due to the strong competition and the increased regulatory pressure in the insurance sector, companies consider the information system as a great opportunity to maintain their growth. The companies that embrace new technologies will gain great benefits.

On the other hand, many companies are trying to follow the digital revolution without having a clear strategy. We can notice that the majority of firms have the digital transformation in their priorities that mainly focuses on the removal of legacy systems or upgrading existing technologies. The problem is that all these initiatives are made without some clear strategic planning that focuses on the real business needs of the companies. Most of the time, these investments are reminiscent of product recycling.

The rewards for insurance companies that achieve digital transportation are remarkable.

Insurance companies should focus on the following issues:

✓ Customer-centric policy coverage: It is significantly important for insurance companies to have the necessary information in order to evaluate the possible risks and provide solutions based on the needs of each customer. The recent achievements in telematics have allowed the installation of digital equipment in vehicles that record the driving behavior of the driver. The driver behavior can evaluate for further risk assessment. Safe driving involves less risk for insurance companies. On the other hand, the superficial driving contributes to the increase in risk. In the future, companies will have the ability to offer products that reflect to the daily habits of customers.

✓ Innovation: New entrants in the insurance industry have changed the insurance market. By investing heavily in technology and innovation, new firms are trying to increase their market share from traditional insurance organizations. New entrants have developed innovative information systems with the aim of attracting new customers, especially the younger generations who are more familiar with the technology. They offer digital insurance products and services based on the digital profile of their clients. Traditional insurance companies in their effort to compete with the new entrants have invested significant funds for their digital transformation. The result is that market competition benefited consumers with new and innovative insurance products.

✓ Big data analysis: The amount of data that companies will manage in the coming years will grow. The full digitization of economic activity will inevitably increase the volume of information. The big challenge for the insurance industry is to be able to manage the generated information by offering better products and upgraded services to their customers.

✓ Vendor strategic alliances: In recent years, insurance companies have increasingly sought for possible strategic alliances with vendors from the technology sector. These alliances will allow them to upgrade their technological infrastructure.

We will proceed below with the impact that information systems have had on the company's profitability after merging. More specifically we want to evaluate whether the transfer of the

70 company's economic activity to selling insurance products only online and through its information systems affected sales.

As we observed previously before the merger, the gross registered premiums of the three companies (ERGO Property, ERGO Life, ATE Insurance) were estimated at 265.1 million euros.

The ancestor of the current company, the Ergo Property had 145.9 million euros sales of gross registered premiums with the largest percentage coming from sales of products online through the company's information systems. With a strong technological infrastructure, 92%

of sales came exclusively through the company's information systems.

Εrgo Life, the next subsidiary of the group had problems with its technological equipment, having had legacy systems that did not cover the needs of the insurers and the market. Εrgo Life had 1.6 million euro sales of gross registered premiums with 69% of them coming through information systems.

ATE Insurance had 114 million euros earnings from sales of gross registered premiums, with 61% of them coming from sales of insurance products through information systems. Despite ATE's efforts to digitize its services, it has failed to promote the vast majority of their products online.

Ergo Insurance which was created after the merging of the three companies in 2017 had 246,2 million euro earnings from sales of gross registered premiums with 98% of them being sold via information systems. Τhe possession of upgraded information systems has allowed the transfer of all economic activity of the company via its digital systems.

The following graph depicts the sales percentages of insurance premiums via information systems for the merged companies, as we saw previously.

Figure 9: Sales percentages of insurance premiums for the merged companies via information systems

Source: Data from research

Although the company proceded to complete digitalization of its operations, this fact did not translate into an explosion in its sales. As we saw previously, the new company after the merging recorded revenue of 246.2 million euros from insurance premiums sales in 2017.

The use of information systems did not benefit the new company in the short term targets and a decline in its profits was recorded. This is due to the failure of Ergo to absorb the ATE's customer base.

We must note the culture of the Greek consumers which is characterized by high confidence in public companies such as ATE. The guarantee that the greek state provides, despite the bankruptcy of 2010, generates higher confidence to consumers. Consumers would definitely be cautious with a private multinational company, despite its strong international portfolio in different markets.

72 Τhe digital profile of ERGO seems that not excited ATE's client. As we mentioned earlier, the digital sales of ATE insurance products through information systems reached 61% of the total sales. The remaining 39% of ATE's customers insisted on non-digital insurance.

The author believes that these clients of ATE, whether they were insurers or individual customers, were not thrilled by ERGO's digital services. The reasons range from technological illiteracy to the avoidance of the strict framework set by the information systems since machines never make mistakes.

However, the technological superiority of ERGO certainly did not help to attract ATE's customers and it certainly had a share in the decreasing gross registered premiums which reached 246.2 million euros when the merger process took place.

In the next graph, we can observe the total profits of Ergo Insurance that came from the sale of premiums for the period 2017-2019. The company after the merging continued its profitable course with 249,8 million euro earnings from gross register premiums in 2018 and 253,3 million euro in 2019.

Figure 10: Gross Registered Premiums of Ergo Insurance during the period 2017-19 Source: Data from research

Today all the products of the company are promoted through its information systems. Having a strong network of insurers that have been educated on its digital systems combined with younger generations' familiarity with technology, it seems that the company's choice for its full digitalization will be justified in the long run.

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