Why you should be watching the big moves that Softbank will be making in Insurance

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When I look back at many of the Insurtech predictions for 2018, including my own, there is a lot of talk about ‘big tech’ entering Insurance.

When the word ‘big tech’ is thrown around, it is often referring to Google, Apple, Facebook and Amazon (GAFA).

This prediction started to come to the foray recently with Amazon’s recent trifecta matching with JP Morgan and Berkshire.

But there is another tech giant out in the East making moves like nobody’s business, and is ripe for getting into Insurance.

No, I’m not talking about Alibaba.

I’m talking about Softbank.

Softbank is not traditionally labelled as a tech giant.  However, I do believe they deserve to fall into that category.  

Softbank has been on an investing tear with their Softbank Vision Fund (SVF) since the launch at the end of 2016.  This has been across a variety of verticals, the full list which can be seen here from CB Insights.  

Within the Insurance world, some of the moves that Softbank is making, specifically the rumors as it relates to Swiss Re, signal much bigger plans on the horizon.

This week, I take a look at:

  1. What is Softbank?
  2. What does Softbank’s strategy mean for Insurance?
  3. How does Swiss Re come into play?

What is Softbank?

It’s not easy to define what Softbank is or what exactly they do.  

Look at the introduction on Wikipedia of Softbank:

SoftBank Group Corp. (ソフトバンクグループ株式会社 Sofutobanku Gurūpu Kabushiki-gaisha)[4] is a Japanese multinational conglomerate holding company headquartered in Tokyo, Japan. The company wholly owns Softbank Corp., Softbank Vision Fund, Arm Holdings, Fortress Investment Group, Boston Dynamics, and also owns stakes in Sprint (ca.85%), Alibaba (29.5%), Yahoo Japan (42%), Bright Star (87.1%), Uber (15%), Didi Chuxing (ca.20%), Ola (ca.30%), Grab (ca.60%), Renren (42.9%), InMobi (45%), Hike (25.8%), Snapdeal (ca.30%), Brain, Fanatics (ca.22%), Flipkart (ca.20%), Guardant Health, Improbable Worlds (ca.50%), Mapbox, Nauto, Nvidia (ca.5%), One97 Communications (ca.20%), Oravel Stays (42%), OSIsoft, PingAn Heath Cloud (7.41%), Plenty United, Roviant Sciences, Slack Technologies (ca.5%), Vir Biotechnology, WeWork (ca.22%), Zhongan Online P&C Insurance (5%), Compass (ca.22%), Auto1 (ca.20%), Wag (45%), Kattera (ca.28%).

The company is known for its vision and leadership by founder Masayoshi Son.[5] It now owns operations in broadband; fixed-line telecommunications; e-commerce; internet; technology services; finance; media and marketing; semiconductor design; and other businesses.

That’s a pretty impressive line-up across a number of verticals and there is enough tech in there that can justify my labelling of Softbank as ‘big tech’.  

But it still doesn’t explain what Softbank actually does.  

Aside from what they actually make, produce and own, to get a real sense of what Softbank really is and what they aim to be, one needs to look at the CEO’s message, Management Policy and Vision.

CEO Message:

Softbank CEO

Management Policy:

The Company is guided by a corporate philosophy of “Information Revolution — Happiness for everyone.” The Company aims to maximum enterprise value and to be a provider of essential technologies and services to people around the world through its endeavors in various businesses in the information and technology industries.

Vision:

Becoming a Corporate Group needed most by people around the world.

The SoftBank Group’s aim to contribute to people’s happiness through the Information Revolution, and to become “the corporate group needed most by people around the world.” To achieve its vision, SoftBank will continue to concentrate its operations in the information industry, and advance the Information Revolution with leading technologies essential to the times and superior business models.

These are some powerful statements.  Softbank’s famous CEO, Masayoshi Son has some similarities with Steve Jobs’, ‘I want to put a ding in the universe.’

Softbank is not merely looking to acquire companies and make a nice return on it.  They are looking to change the way that people interact, operate in their day-to-day lives and contribute to individuals happiness.

Not convinced in that statement?

Take a look at this presentation done in 2010 by Masayoshi Son on the 30-year vision of Softbank which actually sets out the vision and statements made above.   

The FIRST question in the presentation is “What would be the saddest thing in your life?”  The presentation then describes scenarios of Death, Loneliness and Despair.

After giving some facts on this, he then asks “What would be the happiest thing in your life?”

This question is followed up by this graphic:

Screen Shot 2018-02-20 at 3.32.31 PM

The presentation then goes into how the ‘information revolution’ and technology can help lead to people’s happiness.  

I highly encourage going through the whole presentation, it’s a great read and quite ambitious/inspiring.  

This is a company focused on connectivity for the purposes of making lives better.  The strategic investments that it is making are along the lines of just that.  

What does Softbank’s strategy mean for Insurance?

Reading through the 2010 presentation of Masayoshi Son felt like one of the many pitch decks I have read from Insurtech start-ups as well as some of the new initiatives being done by some of the incumbent carriers.  

Heck, the images used in the beginning part of the presentation (family and loved ones) are basically the same as what you see from many Life Insurance carriers.  

In the age of wearables, telematics, Internet of Things and data analytics, ‘being connected’ is a concept that we all already experience in our lives and will only get more dynamic as the years go on.  

In Insurance, specifically the personal lines space, we already see this at play.  From sensors for Home/Renters Insurance to telematics for Automobile Insurance to wearables for Life and Health, we are seeing news ways for carriers to interact and reward their customers for better behavior.  

We are seeing this not only from an engagement perspective but also for better prevention in all lines of business.  

This is also taking shape in worker’s comp, marine Insurance and other commercial lines, giving individuals and insurers the tools needed to better monitor and assess risks.

These carriers and Insurtech start-ups are building mini-ecosystems.  This allows the Insurer and Insured to better interact with each other and to do so more than just when it comes time to collecting premiums and paying a claim.  

As far as ecosystems in the Insurance world go, Ping An, as covered by Daily Fintech, has built some of the, if not the best, Insurance ecosystems around.  For the record, Softbank is a recent investor in Ping An’s Good Doctor.

Back to the original question, What does Softbank’s strategy mean for Insurance?  

Simply put, they are building a global ecosystem.  A global ecosystem that is connected for all aspects of a person’s life.  One that which is fully connected to enable people to focus on enjoying time with their loved ones, while the rest of their life ‘runs’ because it is ‘connected’.

Insurance comes into the foray because it gives people piece of mind while they are going about their day to day lives.  Peace of mind means that they have the protection in place that if something goes wrong, they will be covered.  

If Softbank builds a globally connected ecosystem for people, then this peace of mind and protection is a key offering that Softbank must make available.  

Acquiring an Insurance company may not achieve this goal.  Yes, they may have the infrastructure to do all the Insurance related things (underwriting, pricing, policy issuance, claims, etc).  However, they will probably bring with it the legacy too.  

What would be the next-best option, or perhaps the best-best option?  A reinsurance company.

How does Swiss Re come into play?

4 of the top 10 reinsurance companies (based on 2016 reinsurance premium collected) have been quite active in the Insurtech space.  These are Swiss Re, Munich Re, Hannover Re and RGA.  

I have a two-fold hypothesis to why reinsurers have been so active in this space.

Number 1 – They are more lean and have the ability to do so.  They are not encumbered by legacy systems as much as traditional carriers and can be more nimble in trying new things

Number 2 and more importantly – The model of reinsurance as it exists today will fundamentally change in the years to come.  

Let’s focus on Number 2.  

Insurance carriers use reinsurance to reduce their risk exposure.  This is a pretty simple concept.  

With the rise of Insurtech and new models to better predict and manage risk, Insurance carriers may not need reinsurance companies in the traditional sense anymore.

Insurance carriers may know so much about their customers with the influx of data they have that they are comfortable with taking on all the risk themselves.  

That means, reinsurers need to either find new products and services to help their Insurance carrier clients in managing risk (stay relevant) or bypass their Insurance carrier clients and offer their own risk covers to end consumers (disrupt relevance).  

Swiss Re is the biggest on the globe, so when it comes to risk management, they know a thing or two.  

Softbank has a long list of risks that they need to manage.

Couple that fact with the global ecosystem that they are building and need I say more about why the rumored investment in Swiss Re by Softbank makes sense and fits into Softbank’s master plan?

Summary

Softbank’s management policy of ‘Happiness for All’ is truly amazing.  I admire a company that aims for an individuals happiness.  After all, that’s one of the key things we want in life, right?  To be happy.

‘Peace of mind’ in the Insurance world relates to ‘Happiness’.  If our consumers are protected, then they can focus on living lives with the ones that make them more happy.

Will Softbank get a stake in Swiss Re?  Will they even enter Insurance at all?

It remains to be seen.  From my perspective, it does make sense.

Regardless though, I do think there is something that our industry can learn from Softbank’s approach and strategy.

We often talk about customer engagement.

Let’s start talking more about customer happiness.

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Stephen Goldstein is an experienced Insurance executive and Insurtech dealmaker with a core focus on growing revenue, launching go to market initiatives and advising industry leaders.

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One comment

  1. The FT article about Softbank and SwissRe is behind paywall. MarketWatch has some data;

    https://www.marketwatch.com/story/softbank-eyes-10-billion-stake-in-swiss-re-ft-2018-02-19

    SoftBank is exploring the possibility of taking a $10 billion stake in reinsurer Swiss Re, the Financial Times reports, citing unnamed sources.

    –The Japanese conglomerate hopes to take a number of seats on the Swiss Re board in a deal that it hopes will give it influence over the reinsurer’s management of its $161 billion in investments, according to the FT.

    Whether deal will happen or not is unclear. What is clear is Softbank wants to get into Insurance and has the will and capital to do so, making Stephen’s post a great headsup.

    Like

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