A look back and a look ahead: Interview with Thorsten Krüger, Chairman of the Management Board of Volkswagen Versicherung AG and Managing Director of Volkswagen Versicherungsdienst and with Simona Loges, Member of the Management Board of Volkswagen Autoversicherung AG with responsibility for Sales.
Volkswagen Versicherungsdienst (VVD) will be 75 years old at the end of February and Volkswagen Autoversicherung (VWAV) turns ten in April. That's reason enough to take a closer look at the insurance business at Volkswagen Financial Services. Thorsten Krüger, Chairman of the Management Board of Volkswagen Versicherung AG and Managing Director of Volkswagen Versicherungsdienst, and Simona Loges, Member of the Management Board of Volkswagen Autoversicherung AG with responsibility for Sales, spoke to Corporate Communications about how things have gone up to now and the plans for the future.
Mr. Krüger, you're a seasoned veteran in the insurance business operating under the umbrella of Volkswagen Financial Services: you joined VW FS in 1999 during the time of the integration of Volkswagen Versicherungsdienst. How has the insurance business developed since then?
Around 24 years ago, VVD's insurance business consisted of brokerage activities for motor vehicle insurance, of used car warranties, and of business insurance for our dealers and subsidiaries in Europe and Brazil. Furthermore, in addition to VVD, some international subsidiaries of VW FS had also begun to broker motor vehicle insurance, among other products. With the founding of Volkswagen Reinsurance AG in 2006 and its further expansion into a primary insurer for extended warranties five years later, the business continued to gain momentum. But that wasn't all: 2013 marked the foundation of Volkswagen Autoversicherung AG, our joint venture with Allianz. And elsewhere, too, our teams have continued to advance and develop the business field. Not only to be an intermediary, but also to be a risk carrier ourselves where it makes economic sense – that was, and is, the goal. In 2017, for instance, Volkswagen Credit (USA) also began to assume the risk for extended warranties. And when it makes sense, we enter into far-reaching strategic cooperations with insurers that cover several countries at once. This improves the conditions we receive for brokering. In the meantime, the sale of vehicle, warranty, GAP and payment protection (residual debt) insurance has become an integral part of the business of almost every international subsidiary of VW Financial Services. This shows our enormous progress.
What figures can you mention to illustrate the growth of the insurance business at VW FS?
Our portfolio is currently around nine million contracts. By way of comparison, we had four million contracts ten years ago. But this is by no means the end of the story. We intend to keep growing and see particular potential in vehicle and warranty insurance and in easy-to-buy supplementary products. Our goal is to have up to 25 million contracts on our books by 2030, because we are convinced that the markets, digitalization and the capabilities of both the Volkswagen Group and its brands and Volkswagen Financial Services offer further growth opportunities. We should keep the following in mind: the VW FS insurance business supports the Group and its dealer partners because we ensure that the customers get their vehicles repaired at a Group workshop in the event of any damage. This increases loyalty to the respective brand and to the dealer. The so-called return-to-workshop rate, whereby the vehicle is steered to an authorized service partner for repair, is currently around 90 percent worldwide. To further increase the relevance of our insurance business, our goal is to have every fourth car of the VW brands insured through us by 2030.
This all sounds pretty ambitious. How will it be achieved?
Through a whole bundle of measures that our highly committed teams around the world are working on – and with the help of a clear plan. It's very important to note that insurance, as a core product, is part of the VW FS "Mobility 2030" strategy. That is why we adopted the so-called "Insurance Growth Plan 2030" last summer. This mainly comprises insurance solutions for vehicles and their users – for a lifetime of mobility.
What kind of insurance solutions do you mean exactly?
We mean motor insurance for all customers and vehicles – regardless of how the vehicle is used. This can range from short-term rentals or our subscription models to older used vehicles. After all, one thing's certain: everyone needs motor insurance. There's still considerable potential, especially in the area of fleet customers. We want to establish an attractive all-round offer including insurance in every market where it is legally possible. In the future, motor insurance will also move even closer to the car itself, will become more individually connected. In concrete terms, this means that individual vehicle and customer data directly from the car will play an even greater role in attractive products for both commercial and private customers. As the Group's insurer, we have to make sure that we're at the forefront of this development.
But we also see further growth prospects in warranty insurance for used cars. With simple products and processes, we want to increasingly reach customers who are capable of easily renewing their warranty insurance online, for example directly within our brand apps. Last but not least, we will add further products for securing and supporting mobility to our payment protection insurance and offer simple, clever products from the insurance field. These create real added value, for example protecting the contents of the vehicle when parking with just one single click.
How important is internationalization in your growth plans?
We already offer insurance in practically every country where Volkswagen Financial Services are present. The task now is to leverage the potential that we still have in all these locations. As part of the Insurance Growth Plan, we are therefore working even more closely with our international companies and our local insurance experts in our capacity as "Insurance Headquarters" so as to transfer good solutions from one country to as many others as possible. In warranty and payment protection insurance, for example, we are already in close contact with our markets as the risk carrier through Volkswagen Versicherung AG. Here we want to focus on expanding online sales with as much central development as possible to relieve the burden on the countries. And for new products, we want to cooperate centrally with as few insurers as possible in order to increase the speed of implementation for our colleagues in the international subsidiaries.
Ms Loges, on the subject of car insurance: where do you sell most motor insurance – online or in the traditional way at the dealership?
Just as before, via the sales staff in the dealer showrooms belonging to the brands Volkswagen, Audi, SEAT, CUPRA, ŠKODA, and Volkswagen Commercial Vehicles. Online policy purchases via our website or our apps still play only a minor role, but they have risen steadily over the last two years. The share is currently around six percent. Our target is to achieve an online share of 25 percent for all contracts concluded by 2030.
How do you manage to motivate sales staff in the car dealerships to sell motor insurance?
On the one hand, through commissions, of course. On the other hand, by repeatedly pointing out that a Volkswagen car insurance policy sold at the dealership also leads to follow-up business in the event of a claim – repairs in the workshop, for example, or a rental car as replacement. Our common goal is to make claims handling part of an overall pleasant experience for the customers and to enhance their satisfaction and loyalty. Experienced car dealership owners and sales staff, in particular, are well aware that every satisfied insurance customer is also a loyal dealership customer. Incidentally, for some time now we have been offering a premium-free trial month so that customers can convince themselves of the advantages of car insurance from Volkswagen Autoversicherung – quite straightforwardly, so that sales staff and customers at the dealership have it as easy as possible. When the end of the trial month approaches, we at Volkswagen Autoversicherung contact the customers and make them a suitable offer. With our services, we are convincing the customers to commit to us and our dealers in the long term. Together with the brands, we want to expand this program further.
Electric vehicles are set to replace combustion engine models more and more. How does Volkswagen Autoversicherung support this strategy pursued by the Volkswagen Group?
For e-vehicles from the Volkswagen Group, in particular, we have a very attractively priced range of products in Germany with extensive benefits. You could also say that as an insurer, we offer an inexpensive all-round carefree package to allay any fears the customer might have about electric vehicles. Those who have never had an e-car may well ask themselves what happens if the wallbox breaks down, or if the charging cable is damaged, for example by vandalism, or lost as a result of theft. That's exactly where we come in with our special service offering for electric car owners.
What else is being planned in cooperation with the brands?
Working together with the brands, we want to further push the direct business. Our insurance offers are already integrated into the ecosystem of some brands, for example in the Volkswagen and myAudi apps. But we aren't marketing this facility yet, for instance by sending the user a push message with an insurance offer. But our experts are working hard to create the technical preconditions to do so.
The more safety-relevant assistance systems in the vehicle, the lower the premium – this is also advertised by Volkswagen Autoversicherung. Why?
We reward customers with a bonus when they invest in vehicle safety equipment, because we know from experience that the advancing technology of safety equipment, such as distance control or a lane assistant, is having an increasingly positive impact on the frequency of claims. This positive effect is also reflected in the type class calculations of the German Insurance Association (Gesamtverband der Deutsche Versicherungswirtschaft or GDV), but only as an average value across all brands and vehicle classes and only with a very long time delay.
What does Volkswagen Autoversicherung do differently?
We individualize this average value by working even more closely with the manufacturers and can use the vehicle configuration or chassis number to precisely calculate the insurance tariff based on the safety features actually installed and their impact on possible claims frequencies or claims histories. This is done automatically, by the way – much to the delight of the sales staff. This individualization can lead to us going beyond the GDV average, improving pricing, and offering the insurance at a lower rate. This is a unique selling point in the highly competitive market for motor insurance. We are proud to be the only ones offering this system in the market.
What do you wish for the insurance domain at VW FS in the future?
Our teams have been doing an excellent job for years and are constantly bringing innovative products onto the market for our Group's customers – and they are doing so in what is an increasingly fast-changing environment. This is a great achievement, thank you very much for that! Let's continue on this path together!
Volkswagen Versicherung AG
100% subsidiary of Volkswagen Financial Services AG
Markets: primary insurance – Europe, reinsurance – worldwide
Volkswagen Autoversicherung AG
51% Volkswagen Financial Services AG / 49% Allianz SE