Building Up a Swiss Health Insurer on a Greenfield
In less than a year, AXA has established a supplementary health insurance with an innovative business model. Following the go-live in July 2017, more than 10’000 new customers had been acquired by the end of the year. This success was down to five important factors.
First, there was the benefit for customers. Before even thinking about strategy, organization or profit, AXA asked itself: «By launching a new health insurance policy, can we offer customers any added value compared with existing insurance supply?» Accordingly, the entire project began by asking customers what their pain points would be and what they would like to see in any new offers. In addition, a market analysis of competitors, trends, key figures and other general conditions was carried out.
Three important findings
The evaluation of the customer survey and market analysis made three things obvious:
- Significant added value can be created for customers.
- AXA’s specific strengths enable the insurance company to operate several business models with considerable market differentiation in the health care market.
- The market itself offers attractive potential for tapping new customer groups and strengthening AXA’s existing customer base.
It soon became apparent that AXA could not offer its customers any significant added value compared with existing providers when it came to basic health insurance. The possibilities for innovative products and entrepreneurial freedom in this highly regulated environment were considered too limited. Nonetheless, the question of basic insurance was very relevant to the customers surveyed. Two particular pain points were mentioned over and over again: excessive premium increases and the amount of effort involved when switching to a new insurer respectively the possible disadvantages out of it.
Comparisons of premiums show that a family of four may save more than CHF 2’000 per year if it changes its basic insurance. Nevertheless, many in Switzerland are reluctant to switch. In the surveys conducted, the effort involved, and the uncertainties associated with a switch were the frequently mentioned factors. Apprehension about the additional effort involved and uncertainty are additional reasons why the majority of Swiss citizens bundle their basic and supplementary insurance with one provider. Indeed, a typical customer question in response to the idea of splitting basic and supplementary insurance was: «Who would I send the bill to?» Such uncertainties are the reason why many customers continue to pay too much for their basic insurance or do not have the best possible supplementary insurance cover.
The business model
A value proposition that maximizes customer benefits needs to address precisely these points. This was what drove us to come up with the idea of offering customers a switching service for basic insurance that automatically takes care of all the formalities recurring annually if the customer so desires. At the same time, customers can choose modular supplementary health insurance packages according to their needs. Last but not least, AXA enables its customers to send it all their invoices from service providers (i.e. doctors). It immediately forwards those that relate to basic insurance. Customers do not, therefore, have to worry about where they need to send their invoices to.
While this idea may be simple enough to describe in a paragraph, implementing it is no small matter. It was necessary to clarify an array of operational, technological, organizational, financial and legal framework. AXA also looked at whether it should implement its business model with an established partner as a joint venture, through an acquisition or by itself. Following a thorough evaluation, the company chose what initially looked like the most challenging option: AXA would go it alone.
Setting the whole thing up virtually from scratch; employees, organization, IT and processes, may seem very optimistic at first glance. There are, however, many significant advantages. These include:
- Avoiding conflicts of interest with potential partners at the expense of customers, for instance when switching basic insurance and positioning supplementary insurance;
- Preventing the typical challenges that accompany an acquisition, such as creating synergies and a common working culture;
- Remaining autonomous from the products on offer and the switching service, which means AXA does not receive any commission for the contracts concluded when customers switch their basic insurance.
Such an offer also delivers added value in relation to the increasingly important health care ecosystem. These topics are interelated from the customer’s point of view. AXA’s own solutions, which can be optimally dovetailed, allows it to address both issues. In addition to having the largest sales force in the Swiss insurance industry, this allows AXA to differentiate itself in a way that is hard for others to imitate.
At the same time, the new customers acquired through AXA bring a number of advantages for basic insurers. Here is an example: Due to the general practice in supplementary insurance of underwriting across all age ranges, this customer group has a slightly lower claims risk than the population as a whole. Furthermore, AXA places no constraints on the customer relationship with regard to basic insurance. Customers can decide for themselves who they think will best look after them.
The five success factors
Once the basic questions were clarified, the company began the implementation. In just under a year, a «greenfield» supplementary health insurance was set up with people, systems, processes, products and services. Following the go-live in July 2017, the company slightly exceeded the target it had set, winning 10’000 new customers by the end of the year.
A whole series of factors came together to make this possible. Five key success factors can be derived from this.
- Greatest possible degree of independence: AXA’s Swiss unit is a large company and part of an even larger group. It would not have been possible to achieve a market launch in July 2017 if everything had been perfectly integrated beforehand. Together with the company management and the group, it was agreed in advance which areas should be integrated from the outset (e.g., sales, CRM and accounting). Other departments – including IT – were given the greatest possible degree of entrepreneurial freedom.
Takeaway → If speed and innovative strength are vital to a new project, this should be considered in the implementation requirements. One lesson could be to grant subunits greater authority to make decisions – and to postpone full integration at the outset.
- A shared vision: At the beginning, the team set out the vision in detail and reconfirmed it. It was also made physically visible to everyone in the team member’s own premises. This helped to keep the team focused on the essentials when the priorities were unclear or when discussions relating to criteria came up.
Takeaway → Implementing your own project is a very strong driver for motivation and performance. This is even more the case if those responsible for its implementation are also involved in its strategic alignment and planning. Communication of the common vision within and beyond the team reinforces all employees’ identification with the project.
- A team with a culture: The core team worked solely on «AXA Health» and was not responsible for any other tasks. Great importance was attached to team-building. In addition, employees of external partners were accommodated on the same premises. This meant that the exchange of information was direct, rapid, frequent and short. The premises were separate from the other AXA buildings. This focus meant that everyone identified strongly with AXA Health, and there was no friction in terms of responsibilities. The closeness prevented misunderstandings and undesirable developments from the get go. The ability to have frequent, short exchanges increased productivity greatly.
Takeaway → Crossdivisional cooperation within a new team and, in addition with external partners is not something that can be taken for granted. It is worth investing actively in the culture and concept of «one team, one goal».
- The minimum viable product (MVP): One of the first activities was the joint MVP planning for the launch, which required everyone to focus on the essentials. The delivery results were described strictly from the customer’s point of view, while further MVPs were defined before and after with this in mind. As a result, all work streams were coordinated and able to understand the many interdependencies, which also greatly shortened discussions about the scope.
Takeaway → An unambiguously defined and communicated MVP is a basic requirement for efficient work. How can you know whether what you are doing today will pay off tomorrow if you do not have a substantive blueprint of the delivery result? Once underway, the scope of an MVP project can change as a result of various factors. But the reasons for the change the disclosure of it must be both easy to understand and plausible.
- Strong leadership: AXA Health was set up by independent product teams managed by a single business owner. This owner was always available and therefore an important driver for the team’s confidence in their own projects. Short distances made it possible to reach rapid and perfectly coordinated decisions. This ensured that the right priorities were set across the board and that conflicts could be resolved at an early stage.
Takeaway → Although an agile approach often enables teams to work independently, clear leadership is very important. It provides the framework for the culture and interaction. The leadership also defines the common goal and directs the project. The intention is to further develop the offer on an ongoing basis. The plan looks beyond the pure insurance business and takes into account the expansion of the larger health care ecosystem, where the interests and needs of customers and insurers converge. This opens up completely new possibilities – both in terms of customer interaction and in the make-up of the offers.