Erste Digital’s quest to be the Paypal of Annex Insurance

By Rick Huckstep

When you work with start-ups, as I do, it can be truly inspiring to see the determination, ingenuity and adaptability that defines them. And when you’ve spent 35 years in the corporate world, as I have, then it is also fascinating to compare and contrast the modus operandi of the old with the new.

The traditional corporate organization is bunged up with internal process and bureaucracy. It is more focused on its internal perspective than ever getting out and talking to customers. The start-up would never get “started”, let alone “up” if it took that approach.

In The Lean Startup, Eric Ries’ Haynes manual for the entrepreneur, the management process is simple. You take your idea, build the minimum you need, then validate the idea by talking to customers. “Build-Measure-Learn” is the mantra! (of course, there’s more to it, but you get my drift?)

However, in the traditional corporate organization, the management process is very different.

You take your idea and build a business case showing the Return on Investment, cash-flow projection, resource profile, financial forecasts and a risk assessment. This is presented as a strategic plan to the monthly management committee representing all corners of the business. This goes through several iterations (and months) refining the strategic plan and the business case for the committee, before the strategic proposal goes before the finance committee.

It goes without saying that the finance committee will require some adjustments to the projections to meet the company’s financial hurdles. Finally and quite a few months later, the business case gets approved.

But that is not the end (or the start) of it! Then you have to submit it into the annual project planning cycle (which can be best part of a year away if you’ve just missed the cycle) …where it stands in line against all the other good ideas and long list of mandatory “keep the lights on” projects. Mandatory projects always take priority over discretionary ones and there is no guarantee the good idea will see the light of day, not this year anyway!

Is it any wonder that traditional businesses stifle innovation and all the bets are being placed in the world of the Fintech start-up!

But this is not a new phenomenon. In an article written in 2001 in the Ivy Business Journal by John S McCallum, entitled “Adapt or Die”, McCallum writes in his forward;

“Dinosaurs are an apt and widely used metaphor today. After all, if a firm can’t or won’t adapt, it’s straight to the dustbin of business oblivion. A business enterprise is not totally dissimilar from a dinosaur, ignore rapidly changing circumstances, and a leader authors his or her company’s demise. Adapt to rapid changes better than your competitors and you’ll make great strides.”

Which is why Armin Molla, CEO and founder of Erste Digital, gave up his role with a traditionalErste_Digital-2015 insurance firm to build a startup. After 20 years in the insurance industry, Armin’s last role was to build and run the Ergo Digital Lab. Armin is very complimentary about Ergo as a traditional insurance business. But like all traditional insurance companies (provocative!), they are incredibly slow to introduce the innovation and new technology that they know they need to stay in the game.

Armin found three co-founders that shared his vision and brought different aspects to the team. Dominik Groenen covers sales, Christian Berlage covers IT and Achim Hepp covers all things digital and the social web. Together they worked on their idea to build a B2B digital broker platform selling “annex” insurance, i.e., protection insurance as an add-on or attachment to a purchase. The key to their platform is that the annex insurance is sold through social media channels or as an embedded buy button in a mobile app.

The idea came from seeing the change in customer behavior and the whole shift towards social media, mobility and digital apps. It should be no surprise to known that Erste Digital are based in Germany where I see a lot of activity for insurance startups in the distribution space as well as the emerging sharing economy sector.

Armin estimates that the annex market in Germany is under-insured by about a third, which represents a €500m opportunity for new business without having to attack the established market. To access this market opportunity, Erste Digital has integrated their broker platform into YouTube, Instagram, and Facebook. They also have a “SCAN2INSURE” offering that is a stand-alone app, but also integrates into other mobile apps. SCAN2INSURE allows the app’s users to scan a barcode and in real-time, return an underwritten insurance quote to protect the product.

The goal for Erste Digital is to become the PayPal for this market. As easy to use as PayPal for buying a product online, Erste Digital will offer the same level of ease and speed to buy insurance protection through your mobile device and on the web. This is a business model that can be delivered in different markets outside of Germany too, especially on Continents such as Africa, where under-insured mobile users are the majority!

Here’s the thing with Erste Digital (and the link back to the beginning of this article)…Armin formed the business with his three co-founders just this year! They got going in April and have now integrated with 9 insurers on their panel. The public beta testing of SCAN2INSURE is happening right now and Erste Digital are listening and learning from their customers and their customers’ customers.

Where the traditional insurer would still be discussing the merits of their business plan, what could go wrong and the fictitious margins it might deliver one day, Erste Digital have already built their minimum viable product and are testing the market for feedback.

Where traditional insurers will measure their adaptability in numbers of years, the start-up will measure it in weeks and months.

To quote Charles Darwin, “It is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change.” And when it comes to the Battle of the Dinosaurs versus the Unicorns, who would bet against the Unicorns coming out on top!


  1. Loved this bit “It is more focused on its internal perspective than ever getting out and talking to customers.” I recall getting a business card from a Megacorp (now deceased) which only had an internal number. The guy literally did not expect to interact with people outside his company!

  2. […] Erste Digital – first featured here back in July, Erste Digital is a German intermediary that is providing annex insurance at the point of sale. Annex insurance is a secondary purchase; you buy your iPhone then you insure it. Erste Digital are planning their expansion into the UK market and have refined their platforms that integrate with Facebook, Twitter and Instagram as well as offering a B2B2C platform for intermediaries to offer annex. […]

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