Significant shifts in mobility preferences and behavior—triggered by technological advances, changing consumer preferences, awareness of climate change, and new regulations—have created looming threats to insurance carriers’ core business. But Klaus-Jürgen Heitmann welcomes the disruption. Heitmann, CEO of the HUK-COBURG Group—Germany’s leading motor insurer, with 13 million insured vehicles—is intent on addressing customers’ changing behavior as part of the organization’s core business and capitalizing on its strengths to power new business models. Most notably, Heitmann has led HUK-COBURG in creating a mobility ecosystem built on the company’s newer digital capabilities, access to motor customers, strong brand, and leading market position in direct insurance.
McKinsey Senior Partner Stephan Binder and Partner Ulrike Deetjen met Heitmann in Coburg to talk about trends in the insurance industry, direct insurance strategies, and how mobility ecosystems can create value for insurers and customers. The following transcript has been edited for clarity.
Mobility ecosystems are the future
Stephan Binder: HUK-COBURG is a household name in motor insurance in Germany. You’ve built a successful, trusted brand in that area, so why has the concept of mobility ecosystems become important for you?
Klaus-Jürgen Heitmann: Motor insurance is our core business, so of course we pay close attention to what’s ahead for this type of coverage or, better yet, for mobility in general. After all, mobility is an underlying need that people have. We believe that the mobility market—that is, the ways in which consumers purchase and consume mobility—is changing, and the role of motor insurance will change along with it.
Specifically, we expect that motor insurance as we know it today will generally become less important. Different factors are driving this development. New technologies play a role, but so does consumer behavior. Motor insurance is the first point of contact for many of our customers, and we take advantage of its “pull effect” to draw these customers into the HUK-COBURG universe. If the impact of this touchpoint declines in the future, because motor insurance either attracts fewer customers or results in less intense contact, we will need to know how to respond.
Stephan Binder: You’re building your ecosystem on customer touchpoints. What’s your thinking about how customers will access mobility services, and what other elements do you see making up a mobility ecosystem?
Klaus-Jürgen Heitmann: All our ideas about an ecosystem and our position within it are based on the key assumption that mobility will remain a fundamental need. In other words, people want to be mobile. What will change is how they purchase and use mobility options. If motor insurance is going to be less important in this overall context, we want to offer additional ways to connect with customers and meet their fundamental need for mobility.
For now, we are assuming that individual mobility as we know it today—the car as the main mode of transportation—will continue for the near future. For this reason, we offer our customers supplemental services for their personal vehicles. Examples of these services include providing oil changes and car inspections, buying customers’ used cars when they’re ready to make a change, or offering high-quality used cars for purchase. The underlying idea is always to build more points of contact with customers that are related to their fundamental need for mobility.
Partnerships can enhance mobility ecosystems
Stephan Binder: HUK-COBURG recently acquired a stake in a chain of automotive repair shops. Can you talk about the impact of that type of partnership on your services and its role in your ecosystem?
Klaus-Jürgen Heitmann: For years, our strategy has been to build touchpoints in automotive services alongside those we have as an insurer. Partnering with automotive repair shops follows this logic precisely because it significantly expands our car service presence. But that’s not all. In an ecosystem, we can also use the garage locations to handle physical aspects of our work, such as quickly inspecting and evaluating cars that we want to buy from our customers.
Stephan Binder: Could this be a model for other future services as well? To say that HUK-COBURG doesn’t need to do everything on its own—that it can work with others in partnerships or as co-owners?
Klaus-Jürgen Heitmann: That’s exactly right. In the past, our first reaction was often, “OK, we have to build that on our own.” But over time, we reflected on how well we succeeded—or didn’t. In this case, we decided to try a new approach by buying a stake in something that already exists and is a good fit. As we consider the next steps to complete the mobility ecosystem for our customers, we will continue to ask if there are already suitable providers for us to work with and what form of cooperation makes sense.
An obligation to customers fuels new products
Stephan Binder: It sounds like you’re increasingly moving away from the motor insurance business and into other parts of the automotive market. Insurance is still your core business right now; will it stop playing a role at some point?
Klaus-Jürgen Heitmann: Let me be clear: motor insurance will be the focus of our business activities for some time. But we can see changes ahead in the long term and we need to be ready for them.
As an insurer, we have millions of touchpoints with customers year after year across all the channels we use. We obviously know exactly what cars they have insured with us and whether the cars had claims. And thanks to telematics, we know more and more about customers’ driving behavior. In short, we’re sitting on a trove of data that we’re not fully leveraging today. There are endless opportunities to use this data for activities beyond our core insurance business.
And it’s not just our truly comprehensive database that’s valuable—our regular contact with customers is, too. Insurance products represent an ongoing obligation. And HUK-COBURG has very loyal customers, with relationships that stretch over many years or even many decades. All this means that we know our customers extremely well. We will make sure that this advantage drives our thinking about new products and services.
Stephan Binder: So you are building on your existing customer base to promote these new services. Does it work in the other direction, too? Do these new services also boost your core business?
Klaus-Jürgen Heitmann: That’s the idea, eventually. To put it simply: we hope that if we can offer customers real value—in terms of an attractive range of used cars, repair and maintenance options, or other services—we will build those initial contacts with them. We’re strong today because customers come to us, and we want them to keep coming, not only for motor insurance but also for other products and services that appeal to customers. I never get tired of repeating this: it’s our obligation to offer products that are good and affordable and fit with our brand as a result.
Steering the organization through new territory
Stephan Binder: Based on what you’re saying now, you’re entering new territory. How is the organization responding to new technologies, and how do you address the challenges or resistance that might come up?
Klaus-Jürgen Heitmann: We have been extremely successful over decades, especially in motor insurance. Now, the time has come to convince our organization that things may not always continue as they have been. People are quick to offer counterarguments. Let’s take a major technological driver of change: self-driving cars. The first counterargument is usually, “I don’t believe for a minute that self-driving cars will really never have accidents.” My answer is that we may indeed be far from that point. But the problem doesn’t first appear when there are no more accidents at all; it emerges along the way as the number of accidents goes down significantly.
A second common reflex is the idea that other insurance products can simply take on the unique role that motor insurance plays for us today: getting customers to come to us on their own. But I don’t believe that other product categories can come close to playing the role of motor insurance for us. Motor insurance is mandatory in Germany, and it represents a significant financial outlay, at least today. German consumers are used to comparing motor insurance offers, too.
You can easily find reasons to avoid addressing whether a certain degree of reinvention is necessary. It takes a while for the organization to internalize this need. But it’s important to drive the change so that the organization can work to make new things possible. And as we work on these new topics, the challenge is not forgetting to maintain our strength in motor insurance, because this is the foundation that allows us to develop new models for our future success.
We don’t think a dramatic shift is coming next year or even in the next three years. Instead, we’re expecting change in the medium or long term. So it’s natural to ask, “Why are we making this effort now?” But the answer is relatively clear: change takes time.
Stephan Binder: It sounds like there are still quite a few skeptics. You’ve said that the business is going very well, which gives you the time you need to prepare for any changes. How are you using that time? How are you getting your people on board?
Klaus-Jürgen Heitmann: I refer to motor insurance as a “magnet” because it draws customers to our company. If you ask our people about the topics we’re emphasizing, you will quickly hear that what I’m discussing now—the work on new magnets—gets a lot of attention.
Critics question whether this amount of attention is justified. But in fact, we are doing many things at once, and we discuss them regularly, as we always have. We have also set relatively clear targets and quantified where we want to be in 2025—a year I consider to be an important milestone in our journey. Our people need to break down topics into their essential parts, almost mechanically, and assign clear tasks toward accomplishing specific goals.
Here’s an example: to approach customers about many different products and services, including those beyond insurance, you need a legal basis that permits you to have these conversations. Just grasping the implications as a company is a big job. Consent management is just one of the areas you need to consider.
In the end, it’s vital to talk about these issues and what could come so that people not only understand it but also ideally share it. And all this should happen without making people fear the future. They should have the feeling that change is ahead, but we are capable of adapting and finding a good way forward for ourselves.
Thriving in an aggregator environment
Stephan Binder: HUK-COBURG Group includes HUK24. This digital-direct insurer also finds itself in a new world with many fintechs and insurtechs. How is HUK24 holding its position in this environment? And do you have any concerns about your progress?
Klaus-Jürgen Heitmann: As you can imagine, we are extremely happy about our decision to found HUK24 back in the early 2000s. The company is on a permanent growth track, and its main core business is motor insurance. And despite new competitors—aggregators come to mind—we’re successfully keeping our key advantage: independent access to customers, with no middleman. We consider this access to be a prerequisite for surviving in a market where price competition is high.
We are certain that we will need to keep making large investments in this business model. Developing, expanding, and investing in HUK24 services and functionality are good for the HUK-COBURG Group, which essentially has an omnichannel presence as a result. Just look at the position we have reached so far and the brand awareness it brings, the strength of both brands in the HUK-COBURG Group, and our ability to achieve economies of scale far beyond those possible for other companies. Plus, we can make additional significant investments.
I’m not worried about whether we can continue to make progress. That’s a worry for the new would-be attackers, who have come to see that getting access to customers isn’t easy. To put it bluntly, accessing customers is expensive because to do so, aggregators have to work with big advertisers. Our brand strength, especially for our two core brands, is an enormous advantage here.
Stephan Binder: Can you talk about how you add market share even without aggregators?
Klaus-Jürgen Heitmann: I always say that aggregators truly offer a big value proposition for customers. That’s why we are following these developments so carefully. At one point in the past, we tried to do something similar ourselves. But those efforts ended when we realized that we were nearly too late to build our own brand for this purpose.
We have achieved a position of strength that is inseparable from the price perception of our two brands. We want to further expand on this position to keep ahold of our underlying objective.
Now, however, we have achieved a position of strength that, in my view, is inseparable from the price perception of our two brands. We want to further expand on this position to keep ahold of our underlying objective, which provides the basis for our success as a company. Specifically, we don’t want to lose our independent access to customers.
Growing beyond mobility
Stephan Binder: When you think about HUK-COBURG in ten years, what do you see?
Klaus-Jürgen Heitmann: I see a company that remains Germany’s largest motor insurer and is hopefully even further ahead of the competition than it is today. I see us holding a significantly stronger position in other product categories, especially property and casualty. I see our role as a health insurer being much larger within the group structure. And finally, I see a life insurer that may not be among the largest in our industry but is one of the best and with good growth.
That’s where I see our insurance business, but there’s another aspect to mention, at least in terms of mobility: in ten years, we will have become a truly relevant provider that meets a full range of private customers’ mobility needs. Customers will turn to us when they want to change cars. This could mean buying a new car, obtaining it for use in some other form, or selling or trading in their old car. We will handle vehicle maintenance and inspections, too, ideally for a stable monthly rate the customer can easily plan into their budget. We will manage everything, all-inclusive.
And of course, ten years from now isn’t the end point. In a decade, we’ll be taking similar paths to those we’re on now for aspects of life beyond mobility. At the same time, it’s important to remember that time goes by much faster than you expect. We’ve got a lot to do.