Insurance and Industrial IoT | Innovative business models of the insurance industry for loss prevention and their impact on the market | Dr. Verena Brenner | HDI Thinx

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In this Industrial IoT Podcast episode, I talk to Dr. Verena Brenner, the managing director of the 
HDI TH!NX
(subsidiary HDI Global SE), about industrial insurance use cases, what HDI even considers a use case, and what insurance risks are in this context.

Introduction | HDI Th!nx and Group

The episode starts with the introduction of Dr. Verena Brenner, Managing Director of HDI Th!nx. Verena holds a PhD in International Logistics and prior to joining HDI has developed experience primarily in cold chain monitoring. She has over 6 years of experience through HDI Risk Consulting in the industrial insurance industry and has been advising clients on business interruption risks and new business models ever since. Since the beginning of 2019, she has been working at HDI as Project Manager IoT and since the end of 2019, she has been successful as Managing Director of the spin-off HDI Th!nx. 

At the beginning of the episode, we will first classify HDI Th!nx as an independent company within the HDI Group and talk about internal cooperation and positioning. The focus of HDI Th!nx is on driving forward industrial IoT use cases, reducing loss drivers and developing new solutions and products. In doing so, the employees work very closely with the engineers of the HDI Risk Consulting together. Verena also explains the tasks of underwriting in this context. The tasks are mainly to define the scope of coverage of the insurance with the customer and how big the technical risk is. The technical risk is calculated supportingly with the unit of HDI Risk Consulting. HDI Risk Consulting employs around 180 engineers worldwide who come from a variety of scientific backgrounds. Verena elaborates that internal collaboration in the use cases depends heavily on the focus. From loss prevention, natural hazards, technical insurances like e. g. Machinery breakdown or construction risks to transport insurance for heavy transport or bulk cargo, several areas are represented. 

Verena explains that the HDI Th!nx focuses on defining impacts for existing insurance policies and developing needs for existing insurance models. To this end, HDI is primarily talking to individual industrial customers, who are often also owners at HDI with correspondingly close relationships. Verena elaborates that many industrial customers have started to look at IIoT. Often, customers are already using solutions with corresponding sensor technology for condition monitoring in order to create transparency to defined processes. This is often done in the form of so-called POC’s (Prove of Concepts). HDI’s know-how can be used to supplement these analyses. However, not all losses can be predicted on such a basis. Depending on the application, different risk models are developed, Verena explains. Customers’ insurance needs change over time, and many are looking for new partners in other industries.

HDI Th!nx’s customers are represented in all industries. This comes primarily from the history of the HDI Group. From customers in the chemical, textile, steel, food sectors through various stages of the value chain, HDI Th!nx plays a role.

“We need to distinguish between use cases and buzzwords”

Use case identification at HDI Th!nx is subject to a stringent process. The start of the use case identification process is an idea from either internal or external sources. This then goes through a qualification phase and is subsequently evaluated according to various criteria. Verena notes that the effort required for subsequent product development is often underestimated by many. It is important to substantiate the first idea early on. She cites the example of water leakage. For HDI Th!nx, the leakage as such is only a use case when certain requirements are met. These are, for example, the type of leakage expression such as fresh water or wastewater, micro-leakage or pipe bursts, and the assessment of technical feasibility. The frequency of the damage, the target group and the different interest groups are also influencing factors.

Risks that have existed for a long time or new risks that arise are either tried to be minimized or transferred in the use case consideration. In addition to technical feasibility, there is also the added value discussion. Cost reduction, loss reduction and earnings potential must be balanced. Verena elaborates that a scalable approach is sought that goes beyond individual consulting.

There are different approaches in the business models. Verena cites an example from the area of performance guarantees. Here, HDI Th!nx sits down with the client and underwriting in an interdisciplinary team to understand the product and define the value-added guarantees. Questions such as “What are the requirements for the data basis?”, “What interfaces are available?” and “How can we ensure that reproducible results are achieved?” find room for discussion here. To make this topic tangible, Verena brings an example from mechanical engineering. For the machine manufacturer, there are two possibilities in an IIoT use case. Either he achieves greater savings such as energy savings or he achieves a higher output such as a greater production volume or reduced scrap. The machine with sensor package is more expensive for its end customer here but offers advantages if this performance is guaranteed.

Pay per use models entail significantly higher expenses for the machine manufacturer. There is a significant impact on the balance sheet of the company and the management of sales. Sales and other key financial figures are accounted for differently than through classic machine sales. Here, companies often need a larger consulting team and corresponding restructuring, Verena elaborates.

Read expert article on pay per use now

Dipl.-Ing. Steffen Himstedt
Geschäftsführer

HDI also incurs expenses for underwriting. Fixed costs become variable costs, which are no longer covered by business interruption insurance. This results in risk shifts in existing risk assessment models. Verena gives the example of a paper press, which no longer belongs to the company and therefore no longer has the responsibility of the risk of failure. In this context, Verena addresses the blurring boundaries and complexity of these risk allocations – for example, when a revenue loss occurs.

From her professional background, Verena cites an example use case from the field of cold chain monitoring to help understand the topic. Not all players in this supply chain have any interest at all in transparency of their performance. Consequently, exceeding the temperature of a critical good during transport leads to a liability issue with corresponding consequences.

Verena then brings another exciting use case for monitoring avocado shipments to Europe. Here, the transporters are often robbed and the corresponding insurance losses occur. Technologies like blockchain can help promote transparency of such incidents here. When implementing such solutions, however, care should be taken to ensure that they involve established transport chains with steady players. Verena also notes that not every company is directly interested in sharing the data with the insurer either. Damage issues and use cases with a win-win situation should be the focus here.

To round off the topic of damage patterns, we also talk about natural hazards and fire risks in the course. There are established early warning systems for natural hazards, for use cases such as backwater, flood or dedicated water damage. Verena notes that fire causes can vary widely. Electrical causes by humans, dusty environments, short circuits or faulty components in the machine itself, for example, can lead to fire. Stronger networking of protection systems can save documentation efforts and time through walk-throughs for audits.

Read expert article on “Natural hazards” now

Peter Rüegg
IT Application Manager at OBT AG

Finally, Verena gives us an insight into the future of the insurance industry through Industrial IoT solutions. Insurance solutions will become smarter and sensor data will be increasingly used as a source for risk calculations. New business models with loss reductions for the customer require cross-industry cooperation and interdisciplinary collaboration. Insurance needs are changing, new products are emerging and interaction with the customer is becoming more intense, Verena elaborates. HDI Th!nx wants to tackle “production development on the fly” for this, approaching it with the right experts and continuously working on solutions and new products. These will secure existing insurance business models and help to understand new ones.

Are you interested in working with HDI Th!nx?
Reach out to them through Linkedin!

Dr. Verena Brenner
Managing Director HDI Thinx

More about this implementation partner

 

HDI TH!NX is a Berlin-based IIoT and blockchain solutions provider that collaborates with the industry to develop innovative services and business models. The scope of HDI TH!NX is to develop digitally enhanced and digitally disruptive products, services and business models related to industrial insurance. HDI TH!NX is a start-up with the financial stability of a global industrial insurance company. Our clients range from hidden champions to international companies in all industries. The mission is to develop technology-driven solutions to protect and enable business models.

 

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Ing. Madeleine Mickeleit
Digital Business Development | IIoT

Please do not hesitate to contact me if you have any questions.

Ing. Madeleine Mickeleit

Host & General Manager
IoT Use Case Podcast