MUNICH RE: BUILDING A FOUNDATION
FOR INNOVATING DIGITAL OFFERINGS
BUSINESS MODELS
BUSINESS MODEL TRANSFORMATION
DESIGNED FOR DIGITAL
INNOVATION AND STRATEGY
EXPERIMENTATION AND LEARNING
INNOVATION PORTFOLIOS
MIT
MANAGEMENT
CENTER FOR INFORMATION
SYSTEMS RESEARCH (CISR)
SLOAN SCHOOL
Nils O. Fonstad and Martin Mocker
AUGUST 2020 | CISR WP NO. 445 | 23 PAGES
CASE STUDY
an in-depth description of a firm’s approach to an IT management issue
(intended for MBA and executive education)
To remain relevant and mitigate disruption, traditional companies have
to engage in multiple fast-paced experiments in digital offerings—reve-
nue-generating solutions to what customers want and are willing to pay
for, inspired by what is possible with digital technologies. After launching
several digital offering initiatives, reinsurance giant Munich Re noticed that
many experienced similar challenges. This case describes how Munich Re
addressed these common challenges by building a foundation to help its
digital offerings succeed. The foundation provided prioritized and staged
funding; dedicated, hands-on expertise; and a digital platform of shared
services. By 2020, this foundation was helping to support over seventy ini-
tiatives, including several that were in the market generating new sourc-
es of revenue for the company by enabling its clients—insurance compa-
nies—to better service their own customers.
© 2020 Massachusetts Institute of Technology. All rights reserved.
 Fonstad and Mocker | CISR Working Paper No. 445 | 2

CONTENTS

INTRODUCTION...................................................................................................................................... 3

ABOUT MUNICH RE ........................................................................................................................... 4

DIGITAL OFFERING INNOVATIONS AT MUNICH RE ........................................ 4

MIRA DIGITAL SUITE....................................................................................................................... 5
REALYTIX ....................................................................................................................................................... 5
TITANIUM .................................................................................................................................................... 6
DIGITAL PARTNERS ........................................................................................................................... 6

A FOUNDATION TO SYSTEMATICALLY ADDRESS COMMON

CHALLENGES WITH DIGITAL OFFERING INITIATIVES .................................... 7
PROVIDING PRIORITIZED AND STAGED FUNDING .................................... 7
PROVIDING DEDICATED, HANDS-ON EXPERTISE......................................... 9
Providing Technology Skills ......................................................................................10
Acting as Co-Founders ...................................................................................................12
Offering Methodology Support ..........................................................................13
PROVIDING A PLATFORM OF SHARED DIGITAL SERVICES ............14
Building Excite, Initiative by Initiative.........................................................16
Selling Excite as Managed Services ...............................................................17

THE NEXT SET OF CHALLENGES........................................................................................ 19

APPENDIX A: DETAILED DESCRIPTION OF THE EXCITE
PLATFORM ............................................................................................................................................... 21
APPENDIX B: SUCCESS METRICS FOR THE EXCITE
PLATFORM ............................................................................................................................................... 23
 Fonstad and Mocker | CISR Working Paper No. 445 | 3

--- In May 2020, Dr. Joachim Wenning, Chairman of the Board

Munich RE ===- of Management of leading reinsurance company Münchener

Rückversicherungs-Gesellschaft Aktiengesellschaft (Munich
Re), stated on the company’s website: “Munich Re drives the
digital transformation to provide our clients with better, more
efficient, and tailored solutions.”1

To achieve this transformation, Munich Re had ramped up its custom-

er-facing digital innovation efforts significantly over the past few years.
Those efforts had led to, among others, Munich Re Ventures,2 cyber insur-
ance offerings,3 and several new internally developed business-to-busi-
ness-to-consumer (B2B2C) digital offerings. B2B2C offerings generated
new sources of revenue by provisioning operational services that enabled
businesses, like insurance companies or brokers, to deliver a better ser-
vice to their own customers.
Munich Re Internet Risk Assessor (MIRA) Digital Suite and Realytix, two
new digital offerings,4 grew their revenue and customers in just two
years. The MIRA Digital Suite consisted of multiple digital services that
enabled primary insurance companies to automate the process of han-
dling complex life insurance applications, including those that had previ-
ously required lengthy manual processing because of applicants’ serious
preexisting conditions. Realytix, using a cloud-based platform, reduced
the time it took an insurance company to underwrite non-life risks, such
as factory construction.

1 Munich Re, “About Munich Re,” Munich Re website, https://www.munichre.com/en/com-

pany/about-munich-re.html, accessed May 25, 2020.
2 Munich Re Ventures is the strategic venture capital group of Munich Re. Munich Re Ven-
tures website, https://www.munichreventures.com/, accessed July 6, 2020.
3 At the start of 2020, cyber continued to be a strategic growth field at Munich Re. In 2019
the company reported that its cyber portfolio had continued its trend of profitable growth.
Going forward, Munich Re sought “to maintain its market share of approximately ten
percent of the rapidly growing cyber market.” Munich Re, “Cyber insurance Risks and Trends
2020,” Munich Re website, https://www.munichre.com/topics-online/en/digitalisation/cy-
ber/cyber-insurance-risks-and-trends-2020.html, accessed July 2, 2020.
4 Munich Re used the terms “digital products” and “digital business� interchangeably.

This case study was prepared by Nils O. Fonstad, Research Scientist at the MIT Sloan Center
for Information Systems Research (CISR) and Martin Mocker, Professor at ESB Business School,
Reutlingen University, and Research Affiliate at MIT CISR. The case was written for purposes
of class discussion, rather than to illustrate effective or ineffective handling of a managerial
situation. The authors would like to acknowledge and thank the many executives from Munich
Re who shared their thoughtful and honest insights and provided helpful feedback; without
their collaboration, producing this publication would not have been possible.
© 2020 MIT Sloan Center for Information Systems Research. All rights reserved to the authors.
 Fonstad and Mocker | CISR Working Paper No. 445 | 4

Munich Re was keen to develop multiple digital offerings simultaneously. The company noticed, after launching
several initiatives to innovate digital offerings, that many experienced similar challenges. In 2016, Munich Re
started to build a foundation to help multiple, internally developed digital offerings succeed. The foundation pro-
vided prioritized and staged funding; dedicated, hands-on expertise; and a digital platform of shared services. By
the end of 2019, over seventy initiatives were relying on parts of this foundation. With that growth came further
opportunities and challenges.5

ABOUT MUNICH RE
By the end of 2019, Munich Re, founded in 1880, had 39,662 staff and was one of the world’s leading risk carri-
ers. It consisted of a group of companies that provided reinsurance, primary insurance through its ERGO division,
and capital investment through MUNICH ERGO AssetManagement GmbH (MEAG). Reinsurance accounted for
almost two-thirds of Munich Re’s gross premiums written. Munich Re managed life, health, and property-casu-
alty reinsurance contracts for over four thousand corporate clients from more than 160 countries. The company
conducted business in direct collaboration with primary insurers, but also via brokers and other strategic part-
nerships.6
From 2018 to 2019 Munich Re had increased its gross premiums written by 4.9 percent to €51.5 billion and its
profit by 17 percent to €2.7 billion. Based on gross premiums written, Munich Re was number one in the world,
with Swiss Re at number two.7

DIGITAL OFFERING INNOVATIONS AT MUNICH RE

In late 2019, it was clear to Munich Re management that digital technologies were substantially impacting its
reinsurance business model and that of its clients, primary insurance companies.

Traditionally, reinsurance was based on underwriting competence, of course, and capital strength. And
capital as a competitive element has become less important. As this competitive element is diminishing
in terms of its importance, we need to enhance our business model, our value proposition differently.
And therefore, we use digital technology.

DR. THOMAS BLUNCK, MEMBER OF THE BOARD OF MANAGEMENT, MUNICH RE

Given the potentially profound impact of digital technologies on the entire insurance ecosystem, Munich Re
sought to innovate digitally by expanding well beyond the continued automation of internal business processes.

There’s a big change in the field at the moment: There are new entrants coming into the market, new
forms of capital, interest rates are much lower than they have been traditionally, and we’re not going
to improve by just doing the same things we used to do, just more efficiently.

JASON ENGELBRECHT, CHIEF TECHNOLOGY OFFICER, MUNICH RE

Many of Munich Re’s innovation initiatives sought to create digital offerings—and new sources of revenue—by
helping Munich Re’s customers improve their underwriting processes.
Munich Re’s reinsurance business traditionally employed a business-to-business (B2B) model. A business cus-
tomer, such as a primary insurer, would buy from Munich Re insurance on insurance policies the business had
written for its own customers. The insurance and reinsurance underwriting processes consisted of three stages,

5 This case study was based on discussions and interviews the authors conducted with eleven executives throughout Munich Re in Decem-
ber 2019, as well as internal documentation and publicly available data.
6 Munich Re Annual Report 2019, from Munich Re investor relations website, https://www.munichre.com/en/company/investors/re-
ports-and-presentations/annual-report.html, accessed July 2, 2020.
7 Ibid.
 Fonstad and Mocker | CISR Working Paper No. 445 | 5

typically referred to as the rate-quote-bind process: assessing the risk (rate), pricing the risk (quote), and con-
tracting (bind).
In contrast, many of Munich Re’s internally developed digital offerings followed a B2B2C business model. The
offerings sought to generate revenue in new ways by providing digital services that helped insurance companies
and other businesses provide a better customer experience and sell better and more insurance by improving
their own rate-quote-bind processes.

The insurance industry, and I can especially talk about Europe, is not good at delivering positive cus-
tomer experiences [. . .]. A couple of years ago, the net promoter score average in Europe used to be,
on average, negative. That means there’s a lot of things you can improve.

DR. THOMAS BLUNCK, MEMBER OF THE BOARD OF MANAGEMENT, MUNICH RE

With these new digital offerings, Munich Re generated revenue in two ways: by charging a service fee or by ne-
gotiating the use of its digital services into an improved and enlarged reinsurance contact.
Munich Re’s digital offering innovations included MIRA Digital Suite, Realytix, Digital Partners, and an initiative
code-named “Titanium.”

MIRA Digital Suite

MIRA Digital Suite (MIRA DS) was a set of digital services that helped life and health insurance companies to
further automate risk assessment, especially for complicated cases.8 The traditional risk assessment process for
a person with a chronic disease was lengthy, manual, and multistep. At the insurance company’s request, the
person applying for a life or health policy would undergo a health screening conducted by a medical doctor. Once
the doctor submitted a report (typically handwritten), the insurance company would process the report and de-
cide whether the person could be insured and, if so, under what conditions (e.g., raising the insurance premium).
MIRA DS’s MIRApply Physician module allowed insurance companies to send to the medical doctor a link to an
online questionnaire provided by Munich Re. As soon as the physician completed the questionnaire, a Munich Re
rules-based algorithm could provide a risk assessment to the insurance company’s underwriter. MIRApply Physi-
cian dramatically reduced the time it took insurance companies to assess high-risk policy requests.
Munich Re’s typical MIRA DS business customer was a life insurance company. Each MIRA DS module helped
business customers deliver a better rate-quote-bind process to their customers, usually individuals seeking
insurance coverage. The modules also helped business customers deliver better end-user experiences for other
stakeholders, such as brokers and doctors.
Due to its early, successful results, MIRA DS won, in December 2019, the “Digitaler Leuchtturm Versicherungen”
(Digital Lighthouse Insurance) award from German newspaper publisher Süddeutsche Zeitung and Google.9

Realytix
For non-life insurance, Munich Re had developed Realytix,10 a cloud-based platform enabling insurance com-
panies, brokers, and managing general agents (MGAs) to automate—and thus accelerate—the rate-quote-bind
process for single risk insurance or reinsurance.

8 Munich Re, “MIRA Digital Suite,” Munich Re website, https://www.munichre.com/en/solutions/reinsurance-life-health/mira-digital-suite.

html, accessed July 2, 2020.
9 The Digital Lighthouse Award marks pioneering ideas, projects, and solutions that play or could play a role in the digitalization of the
insurance industry as exemplary lighthouse projects. https://www.sv-veranstaltungen.de/de/event/versicherungs-leuchtturm/, accessed July
2, 2020.
10 Munich Re, “Realytix,” Munich Re website, https://www.munichre.com/landingpages/corporate/en/realytix.html, accessed July 2, 2020.
 Fonstad and Mocker | CISR Working Paper No. 445 | 6

The conventional process of crafting single risk insurance and reinsurance was paper-based, complex, and very
time consuming. By the end of 2019, Realytix had evolved into a digital service that (1) helped businesses that
wanted to provide single risk insurance to deliver a better rate-quote-bind process and (2) automated Munich
Re’s engagement with those businesses to reinsure their single risk insurance policies. Realytix reduced the typi-
cal rate-quote-bind reinsurance process from multiple days to ten minutes.

Titanium
Titanium, a new digital offering initiative launched in 2018, helped brokers offer highly customized insurance
products to customers with an especially complex set of needs.11 These customers represented a growing market
segment, however Munich Re—before launching Titanium—claimed a limited share of the segment. It was
especially challenging for brokers to develop simple and comprehensive insurance products for these (generally)
global customers because they typically owned many different kinds of assets with distinct risk profiles, policies,
renewal dates, and billing mechanisms. Managing all of these for any single customer was tedious and ineffi-
cient.
In mid-2018, a team within Munich Re investigated the idea of using digital services to underwrite an integrated,
highly customized set of insurance products for customers with complex needs. Munich Re focused on building a
digital offering for brokers and other insurance intermediaries that would redesign the entire B2B2C transaction
and address its inherent challenges.

A key objective for us as Titanium was to make sure that we [were] creating this wonderful relationship
between a multi-distribution front end with a multi-carrier backend. And the complexity to connect
those two parts sits in Titanium.

ALEXANDER LAY, MANAGING DIRECTOR AND UNDERWRITING MANAGER, MUNICH RE SPECIALTY GROUP

The Titanium team modeled risks—and products covering those risks—in a very granular and modular way,
allowing insurance brokers to configure an offering to address individual customers’ distinct needs. Titanium was
scheduled to launch in 2020.

Digital Partners
Digital Partners, launched in 2016, followed a different approach. According to its website, the organization
partnered “with insurtechs,12 fintechs, scale-ups, disruptors, and mature companies to innovate and digitize
insurance along the whole value chain.”13 For example, Digital Partners engaged with Trōv Insurance Solutions,
LLC, a start-up that develops insurance products for “the emerging insurance needs of mobility businesses and
commercial fleets.”14 By the end of 2019, Digital Partners partnered with seventeen different companies operat-
ing in four countries.
Insurtechs, struggling to provide regulated insurance services to their customers, were Digital Partners’ primary
target customers. Insurance services were complicated, highly regulated (with regulations varying by market and
country), and required a “very long technology stack.”15 For example, offering one insurance product in a specific
market in a specific country required building a system of components, such as a front end that supported the
customer experience, a policy administration system, a claims process and system, and an insurance balance

11 At the request of Munich Re, we have anonymized what specifically this new digital offering provided and for whom.
12 The term “insurtech” was inspired by the term fintech, and referred to companies, often start-ups, that used digital technologies to pro-
vide a limited set of services competing for customers with incumbent insurance companies.
13 Munich Re, “Digital Partners,” Munich Re website, https://www.munichre.com/digital-partners/en.html, accessed July 9, 2020.
14 Trōv Insurance Solutions, LLC, homepage, https://www.trov.com/, Trōv Insurance Solutions, LLC website, accessed May 21, 2020.
15 Munich Re, “6 insights from Andy Rear, CEO of Digital Partners,” Munich Re website, https://www.munichre.com/digital-partners/en.ht-
ml, accessed July 2, 2020.
 Fonstad and Mocker | CISR Working Paper No. 445 | 7

sheet with the correct regulatory architecture. Building these from scratch is an immense and expensive under-
taking for any start-up. Digital Partners executed this challenging work for the insurtech so that it could focus
on engaging with its customers, developing radically new insurance products, and helping its customers buy the
right insurance product.

We help to design the product. Then we underwrite the product. So, we define prices. Then we add a [reg-
ulatory approved insurance] license, if required. Some [partners] have a license, others don’t. And then
we add the function as a risk carrier. Sometimes fronting.16 Only in selected cases we do administration of
policies. That is not our sweet spot and it needs to be dealt with by the insurtech start-up themselves.

TOM VAN DEN BRULLE, GLOBAL HEAD OF INNOVATION, MUNICH RE AND CHAIRMAN OF THE BOARD, INSURTECH
HUB MUNICH

According to CEO Andy Rear, Digital Partners’ value to Munich Re was three-fold.17 First, it supplied a new source of
revenue. Second, it was “an organizational and cultural experiment for Munich Re, finding new ways of working which
other parts of the group are learning from.” Lastly, it enabled Munich Re to support an ecosystem of insurtechs.

A FOUNDATION TO SYSTEMATICALLY ADDRESS COMMON CHALLENGES

WITH DIGITAL OFFERING INITIATIVES
Munich Re’s distinct initiatives to develop digital offerings shared similar growth challenges. Acquiring funds and
obtaining technologically and methodologically qualified staff slowed progress. Initiatives needed to rethink the
traditional approach to developing insurance products, adopting a more customer-driven approach centered
on identifying and addressing customer needs. Early initiatives required the build-out of rather basic software
functionality (e.g., for managing new types of user accounts). Constrained budgets and a focus on bringing new
product features to the market made providing operational support for their customers’ customers difficult.
Each initiative could, with sufficient resources, address these challenges on its own. However, Munich Re recog-
nized that subsequent initiatives would encounter similar issues and that continually addressing the same issues
would waste valuable time and resources. In order to innovate new digital offerings more efficiently and sustain-
ably, Munich Re decided to provide a set of centrally administered business and technology capabilities to all
initiatives developing digital offerings.
From 2016 to 2019, Munich Re constructed a foundation for more effectively generating multiple digital offer-
ings by deploying three types of resources: prioritized and staged funding; dedicated, hands-on expertise; and a
digital platform of shared services called Excite.

Providing Prioritized and Staged Funding

Procuring funding proved difficult for early initiatives. Traditionally, IT investment requests went through the IT
investment board. The board, composed of senior business and IT leaders, met regularly to determine which of
the many investment alternatives should receive funding.

Even a senior executive doesn’t have a budget for [a digital business initiative] because it’s IT budget.
And IT budget is handed out by a central board. You can bring in your proposal, [. . .] but then you are
competing against a project required for compliance purposes and you don’t know what’s going to
come out of this board.

LUTZ KÜDERLI, HEAD OF DIGITAL SERVICES, LIFE/HEALTH, MUNICH RE

16 Fronting is defined as “a risk management technique in which an insurer underwrites a policy to cover a specific risk, but then cedes the
risk to a reinsurer.” See Investopedia, “Fronting Policy,” Investopedia website, https://www.investopedia.com/terms/f/fronting-policy.asp,
accessed July 9, 2020.
17 Munich Re, “6 insights from Andy Rear, CEO of Digital Partners.”
 Fonstad and Mocker | CISR Working Paper No. 445 | 8

In May 2016, Munich Re established a venture fund and an “Innovation Lab.” The venture fund invested in exter-
nal start-ups, such as Internet of Things (IoT) platform provider relayr, which Munich Re acquired in 2018.18 The
Innovation Lab provided a funding mechanism, a space, and a set of processes for digital offering innovations
within Munich Re.
The Innovation Lab’s funding process allowed Munich Re employees to apply for a limited budget in order to
jump-start their digital innovation ideas. The Lab, with roughly thirty people by the end of 2019, aimed to distrib-
ute €100 million per year to around thirty initiatives. Applying to the Innovation Lab for funding was much less
formal than applying to the IT investment board.

[We have a] very lean process of pitching ideas and pitching for budget. It’s a five-question process
where you sit in front of a couple of people and say, “That’s what I want to do. Here is who’s on my
team.” We've also started coaching them during this pitching period because sometimes the idea is
good, but people are just not used to [pitching] it.

TOM VAN DEN BRULLE, GLOBAL HEAD OF INNOVATION, MUNICH RE AND CHAIRMAN OF THE BOARD, INSURTECH
HUB MUNICH

Teams used the funding, distributed in three stages, to pay for operating expenses such as hiring both internal
and external staff and paying for software licenses. If a team reached a stage’s jointly set goals (e.g., a certain
number of clients attracted for proof of concept, a certain volume of premiums transacted), it would continue to
receive funding. A first-stage initiative would receive €30,000 to €50,000 and roughly six months in the Innova-
tion Lab to develop a mock-up and find a potential customer. The initiative would receive funding for a second
stage if the mock-up confirmed that the digital offering was desirable to customers and feasible for Munich Re.
Second stage initiatives qualified for about ten times the original investment and spent six to twelve months in
the Innovation Lab developing a minimum viable product (MVP). If the MVP confirmed the digital offering’s de-
sirability, feasibility, profitability, and scalability, it received an investment of between one and five million euro.
At this stage, the initiative graduated from the Innovation Lab.
The Innovation Lab provided office spaces to the funded teams; its premises, in Munich’s East Station district and
away from other Munich Re buildings, allowed teams to concentrate on developing their digital offerings. Fund-
ed teams dedicated all of their time to their initiative and worked self-sufficiently, as a start-up would.

[We were working in a] separate workspace with people fully dedicated and a person who had the
power to decide things. We had autonomy. We could always decide things within a frame which was
given to us. That was incredibly important.

FLORIAN NIKLAS, HEAD OF REALYTIX, MUNICH RE

The Innovation Lab also provided mentoring and developed booklets that explained the various steps of the
innovation process.

We make sure that these people are not losing their time. We’ve had many experiences where teams fell
in love with their product [and] with the short-term iteration way of working: “Oh, cool. We’ve put this
together.” And it goes into a completely wrong direction. [We] have external mentors, our lab leads and
internal coaches, who ask them, “Why are you doing this? Who’s your client? What’s their problem?”

TOM VAN DEN BRULLE

18 Munich Re, “Case Study: relayr,” Munich Re website, https://www.munichreventures.com/funds/case-study-relayr/, accessed July 2, 2020.
 Fonstad and Mocker | CISR Working Paper No. 445 | 9

It was clear to Munich Re that, in addition to supplying funding and space, it needed to specify the type of
innovations it wanted to promote. While the company aimed to provide “clients with better, more efficient, and
tailored solutions,”19 it was unclear how exactly digital technologies would impact these solutions.

We don’t have a specific and narrow vision [for digital business innovation] because the world is
changing too quickly and we can’t predict it in the next five to ten years. We innovate iteratively in
selected key areas and adjust as we learn.

DR. THOMAS BLUNCK, MEMBER OF THE BOARD OF MANAGEMENT, MUNICH RE

In 2018, Munich Re’s management defined a target portfolio that prescribed the types of innovation initiatives
in which the company wanted to invest, based on what kinds of customer needs it wanted to address and what
kinds of business value it wanted to create. Munich Re organized the portfolio along three innovation horizons.
A quarter of total investments focused on the first horizon, dubbed “Near to Core.” These initiatives improved
existing products and processes for existing customers, keeping “the traditional business modern and digitized”
(Tom van den Brulle). Examples of Near to Core initiatives included projects that (1) applied artificial intelligence
(AI) to improve Munich Re’s own risk selection and underwriting, (2) explored biometric algorithms for life
underwriting, and (3) priced risks for small to medium enterprise (SME) customers. Initiatives in this first horizon
were expected to generate business impact within a year or two.
Half of all innovation investments centered on the second horizon, “New Business Models.” Within this horizon,
initiatives were expected to pursue new sources of revenue from five so-called strategic domains, each related to
a set of business customer needs: cyber insurance, IoT industries, digital cooperation models, digitally augment-
ed underwriting and claims, and mobility. This horizon included initiatives for digital offerings such as MIRA DS,
Realytix, and Titanium. These offerings were expected to demonstrate business impact within two to three years.
Finally, a quarter of the investments concentrated on the third, most radical horizon, “Disruption.” This group
included initiatives that, for example, explored distributed ledger technologies to completely reimagine the value
chain from insurance to reinsurance. Other initiatives in this horizon investigated the potential impact of quan-
tum computing on both the insurance and reinsurance industries. While these innovations were not expected to
create business impact for at least three years, investing in Disruption innovations was still deemed important for
Munich Re.

When I was asked “How are we ever going to make money with that?” I said, “We’re not going to
make money with that, but if someone else does, we’re in deep trouble.” So, we have to understand
what this means. [And you afford it] as long as you’re being successful [in the other horizons. Other-
wise] they’re going to put a lot of pressure on [the disruptive horizon investments].

TOM VAN DEN BRULLE, GLOBAL HEAD OF INNOVATION, MUNICH RE AND CHAIRMAN OF THE BOARD, INSURTECH
HUB MUNICH

Providing Dedicated, Hands-On Expertise

Initially, teams leading innovation initiatives did not view Munich Re’s IT unit as very helpful to the development
of new digital offerings.

Internal IT at the time was used to working on SharePoint and our [other] internal IT systems. But they
did not have a clue about developing the sort of external service for our [initiative].

KARSTEN STEINMETZ, HEAD OF UNDERWRITING, CLAIMS, MEDICAL RESEARCH AND DIGITALISATION, MUNICH RE

19 Munich Re, “About Munich Re,” Munich Re website, https://www.munichre.com/en/company/about-munich-re.html, accessed May
25, 2020.
 Fonstad and Mocker | CISR Working Paper No. 445 | 10

IT’s focus on internal systems prompted Munich Re’s leading digital offerings, such as MIRA DS, to use external
contractors early in the development process to access key skills, including Agile project management and appli-
cations development using cloud technologies.
To provide this expertise internally, in early 2018 Munich Re’s IT unit established a separate unit—Business Tech-
nology—outside of the classical IT organization.

Providing Technology Skills

Business Technology helped digital offering initiatives by providing them with talent—mostly technology staff,
such as developers versed in current technologies—who worked in a very hands-on way.

It’s not about strategies, it’s not about high-level slide production. It’s more about be there, do it, get
it done in close collaboration with our business colleagues. That’s basically our value proposition. And
that resonated very well. We managed to get from more or less not known in the company to if you
have an innovative idea, it’s very likely you want to see us and also want us to internally support your
initiative. We do have externals, to a big extent even. But it’s really about the people who work here,
have the right skills, understand the company and buy into the business model who really make the
difference for innovative initiatives.

DR. OLAF FRANK, HEAD OF BUSINESS TECHNOLOGY, MUNICH RE

Business Technology reported to the CIO, but was established as a separate and distinct unit from traditional IT
and communicated to the rest of the business accordingly.20

[When you engage with us] you’re not talking to the internal IT department. You’re talking to Business
Technology which is helping you bring new digital business ideas to life.

DR. DIRK HEISS, HEAD OF DIGITAL PLATFORMS, BUSINESS TECHNOLOGY, MUNICH RE

Business Technology’s ambition was to help initiatives succeed by becoming an integral part of the team and pro-
viding the required technical expertise—whether internal or from trusted external partners. Business Technology
staff also contributed regulatory and security compliance knowledge.

Many times, [a digital offering has] to have a connection back to data we have inside the company
and our clients [have]. When insurance companies give us data, they want to be sure that we have
approval sign-offs from [different regulation bodies], [ . . .]. When [innovating] in a regulated industry,
you can’t just publish an app, see if it’s reaching the market, and if yes, then maybe you try [to make it
compliant to regulations].

DR. OLAF FRANK

Several initiatives, frustrated by internal IT processes, elected to develop their digital offering using external
resources. Most eventually returned to Munich Re’s IT unit to take advantage of available internal resources.

Sooner or later, they all came back because the lengthy and expensive part was always to get from—
not idea to product, that was mostly not so important—but to make it compliant with all the different
regulations and other aspects [. . .] and then to scale.

DR. OLAF FRANK

20 Just before the introduction of Business Technology, the Chief Information Officer’s reporting line had changed from the CFO to the CEO
of the reinsurance unit.
 Fonstad and Mocker | CISR Working Paper No. 445 | 11

Demand for Business Technology’s resources grew rapidly. After eighteen months of operation, Business Technol-
ogy had grown to 105 internal people and several external staff. About 60 percent of these people were based in
Munich, with others based in London, New Jersey, and Singapore.
Digital offering teams used large parts of their funding (received from the Innovation Lab, or—more traditional-
ly—via the IT investment board) to engage with Business Technology. In the case of Realytix, around 80 percent
of the team members were Business Technology people.
Members of Business Technology were colocated with other members of an initiative’s team.

We have a super strong alliance between business and IT. A really extremely positive aspect of our cul-
ture and agile methodology is that all colleagues sit together in one room, see themselves as one unit
and discuss business and IT aspects together. Realytix is one team, Titanium here in London sits in one
room, same also for MIRA Digital Suite and the other teams. Business and IT sit together, work hard
together, get things done. That’s really amazing, and I think this is one of the key success criteria.

MARTIN THORMÄHLEN, SENIOR IT ARCHITECT, BUSINESS TECHNOLOGY, MUNICH RE

Business Technology aimed to get involved with an initiative as early as possible—ideally, when a team was craft-
ing the pitch for funding.

With Titanium, I was involved early on. We had initial discussions where Alex [Lay] and his colleagues
explained the business idea, approach, and IT need. Alex asked directly for IT support. We crafted the
first draft of the architecture, including the opportunity to expand globally. And from there, we evolved
everything together. Business-wise, IT-wise, discussing with the intermediary and customers, all of
that. The same is true for Realytix and MIRA DS. I think this is also one of the common success criteria:
working together from day one and not staying outside of Munich Re and asking IT for help only once
everything is up and running and problems come along with regards to security and operations.

MARTIN THORMÄHLEN

Dr. Frank summarized it as follows:

You don’t come see us after you know what you do and you’ve failed with your external consultants.
Ideally, you see us when you have the idea and we can help shape that and focus that and have the
right discussions. We try to help shape the digital aspect of your go-to-market.

DR. OLAF FRANK, HEAD OF BUSINESS TECHNOLOGY, MUNICH RE

Business Technology measured its success by the annual growth in initiatives seeking its support and the amount
of income generated by the digital offering it supported. Business Technology also sought to decrease the
“length of projects” or the time it took an initiative to introduce a digital offering to the market. Between 2017
and 2019, Business Technology reduced the average length of projects by 20 to 30 percent.

Quite often in insurance companies, it takes such a long time to go to market with anything [that] we
miss the market. So, if we reduce the average project length to eighteen months, to a year, to even six
months, that’s great. We’ve actually got some projects that we get out to market now within about
twelve weeks. That’s revolutionary for a company of our size.

EXECUTIVE (ANONYMOUS), MUNICH RE

 Fonstad and Mocker | CISR Working Paper No. 445 | 12

Acting as Co-Founders
Business Technology treated each initiative as a start-up and dedicated a team to the start-up’s success.

[An initiative is] like a start-up. As a start-up, if you always care for the rest of the planet, it’s difficult.
You have to first try to survive, and your full focus can be on what we need to produce. We found that
it’s simpler to just be part of those initiatives. We have to make them a success, full stop.

DR. OLAF FRANK, HEAD OF BUSINESS TECHNOLOGY, MUNICH RE

Business Technology found that committing a team 100 percent to an initiative—and empowering that team to
influence strategy and execution—was important to the initiative’s success.

The most vital value proposition for us is to take the initiative seriously and to make every effort to
make [it] a success. If you as an initiative owner can choose between (a) someone who has a little bit
less skill, but they will die to make you successful, or (b) the opposite, most people will choose the one
where they have 120 percent commitment and maybe only 95 percent of the skill. And that’s really a
differentiator in the initiatives.

DR. OLAF FRANK

One indication of Business Technology’s commitment to individual initiatives was that it assigned a senior archi-
tect to act as a co-founder of each large effort.

The aspired model [is one where] the CEO function is done by someone from the business side and the
CTO function is done by someone from [Business Technology]. And in the CTO function, we see also a
driving aspect. It’s not just […] “wait and see what the requests are.” Hopefully, you engage yourself in
shaping the digital component, which to some extent is a big part of the products. So we have a driving
and influencing role here.

DR. OLAF FRANK

To formalize this role, Business Technology introduced Initiative Chief Technology Officers (iCTOs).

What [initiatives] really need is technology ownership: they need CTOs. We have this concept called an
“iCTO,” which is an initiative CTO. And this is really about somebody who is like a co-founder. When a
business person is coming up with a new idea, we find somebody who can pair up with them and be
the CTO for that initiative. They understand the organization, they understand technology, [and they]
provide that ownership and that guidance on how to actually make a product and architect it.

JASON ENGELBRECHT, CHIEF TECHNOLOGY OFFICER, MUNICH RE

By the end of 2019, Business Technology was involved in seventy-five separate initiatives of varied sizes. The ten
largest initiatives had an iCTO assigned to them; however, according to Engelbrecht, that was not enough—many
of the remaining sixty-five initiatives would benefit from an iCTO as well. It was difficult, though, to find individu-
als with the breadth of knowledge needed for the iCTO role.
 Fonstad and Mocker | CISR Working Paper No. 445 | 13

Our biggest barrier as an organization is [that] we don’t have enough iCTOs. It’s really difficult, be-
cause it’s not just about being a technologist. It’s about understanding the organization and how to
get things done. But unless you actually put somebody who understands Munich Re, understands the
system, understands the architecture of the organization, unless you put that person there, projects
will fail. The iCTO is about leadership, but it’s also about that practical knowledge. The person who can
actually say, “Okay, you want to get this product to market. I know how to navigate the organization
and navigate the technology.” They won’t let anything drop.

JASON ENGELBRECHT, CHIEF TECHNOLOGY OFFICER, MUNICH RE

After working together for nine months, the business lead of the Titanium initiative explained how having an
iCTO propelled the effort.

Martin [Thormählen] is my sibling in spirit. We have this almost perfect symbiotic relationship. Martin
is, in his official title, the lead architect. He understands the tooling and the plumbing and the wiring
and he sees the entire end-to-end Munich Re architectural context. And that was absolutely critical
for us because the one thing that wouldn’t work in Munich Re is if we were to go down our own little
track with technology, with our own little insular solution. We, as a company, would completely lose
the benefit of something that could serve a much wider audience [. . .]. Martin really was effectively my
guiding light in terms of company, architecture, technology and how we articulate my business idea in
a data-driven world [. . .], he’s the engineer on it [. . .].

We both speak IT and business well enough on both ends of our spectrum that we have a very big
overlap here [. . .], this overlap is a massive critical success factor.

ALEXANDER LAY, MANAGING DIRECTOR AND UNDERWRITING MANAGER, MUNICH RE SPECIALTY GROUP

Offering Methodology Support

When a team embarked on a new digital offering initiative, most of its members had experience in developing
traditional reinsurance products. However, developing a B2B2C digital offering required an altogether different
mindset and operational approach.

As a reinsurance company, you have one opportunity per year to sign a contract. So you want to have
everything in place to be prepared, and you don’t want to wreck your reputation. [It] is overburdening
all the [digital] initiatives, if you can’t find the point where you say, “Okay, this is not perfect but it’s
good enough.” [You need to find the] balance: if it’s not working, don’t go out; but if you try to have it
[perfect], then you’ll probably never make it to market.

[Finding] the minimum viable product is a painful compromise where you have to be very careful that
you don’t wreck your reputation or your value proposition, but leave everything else out. It means you
have to know what your value proposition is. You have to know what your clients really want and need
and are willing to pay for.

DR. OLAF FRANK, HEAD OF BUSINESS TECHNOLOGY, MUNICH RE

Having had decades of experience with reinsurance clients, it wasn’t always natural for some initiatives to
assume the point of view of the customer’s customer. Business Technology employees recognized this struggle
while working with individual innovation initiatives. There was a need, they realized, for defining and applying
methodologies (e.g., Design Thinking) to developing digital offerings.
 Fonstad and Mocker | CISR Working Paper No. 445 | 14

[The initiative] had modeled the risks in an absolutely amazing and brilliant way, but they hadn’t done
any customer engagement. They hadn’t gotten in front of brokers and [end customers], they didn’t
understand their motivation, they didn’t understand the barriers [. . .]. They just hadn’t thought about
it [. . .]. Because quite often with a large organization, there’s this feeling that, “We make it, they will
buy it,” and that doesn’t necessarily happen with new digital models and ways of working. [So I helped
them] understand what is the customer journey and who is the actual customer. And it was amazing.
We found out that [in this case], the [end customer] isn’t the individual that purchases their insurance.
Quite often, it goes via their secretary or their spouse.

EXECUTIVE (ANONYMOUS), MUNICH RE

As more executives with ideas for digital offerings contacted Business Technology for support, scaling these
broader, higher-level business-education efforts became challenging.

It takes a lot of time to train people. They prefer one-to-one coaching, they want you to run the work-
shops for them, which can be quite a challenge just from a resource point of view.

EXECUTIVE (ANONYMOUS), MUNICH RE

In response, Business Technology sought to develop and distribute “a business development offering or capa-
bility” (Dr. Dirk Heiss) that would help initiatives employ methodologies and tools such as design thinking, the
business model canvas, customer journey mapping, and Agile.

We know how to do design thinking with a customer, we know how to build a business model canvas.
We know how to translate the business idea into a technology. It was actually [Business Technology]
who brought the concept of design thinking to Munich Re.

[For example, we have hired one person who is] going out with the business unit and [who] says, “If
you want to talk to digital banks, this is how they want to interact with you. It’s not the traditional
reinsurance way. You have to say, ‘These are my API specs. This is how you can test it out.’” So we’re
already doing that, but we don’t have that as a written down proposition that we’re delivering. I think
[we] should not only provide the technical services but also a business development framework.

DR. DIRK HEISS, HEAD OF DIGITAL PLATFORMS, BUSINESS TECHNOLOGY, MUNICH RE

Providing a Platform of Shared Digital Services

Most early digital offering initiatives were embracing a start-up culture and, as part of that, were aspiring to be
highly independent from Munich Re. For example, the Realytix team was located offsite, in a lab at a Munich
university in January 2016.

Everybody wanted to be as far away as possible [from Munich Re headquarters] for good reasons¬
because [then] they don’t get bogged down.

DR. OLAF FRANK, HEAD OF BUSINESS TECHNOLOGY, MUNICH RE

Independence also meant that the first initiatives had to trailblaze; they needed to create foundational software
capabilities that did not yet exist within the company.
 Fonstad and Mocker | CISR Working Paper No. 445 | 15

We were the project which was building infrastructure functionality like customer identity and access
management. I said, “This cannot be true that I’m the one who has to think about that. I’m building
out data extraction pipelines for reporting. [I’m] thinking about how customer-identifying data can be
stored in the cloud.” We did all of that stuff. It didn‘t exist. Basically, the only thing was, “Well we have
an Azure subscription here, use it.” If all this existed, I would probably only need like half of this budget.

LUTZ KÜDERLI, HEAD OF DIGITAL SERVICES, LIFE/HEALTH, MUNICH RE

Creating these basic technology capabilities was causing financial strain for these early digital initiatives. Product
owners were prioritizing differentiating service features over basic capabilities. And because the product owners
were allocating less time to building out foundational functionality, service quality and compliance issues arose. For
example, limited budgets impaired the initiatives’ ability to provide consistent and satisfactory customer service.

Because they were so focused on developing the features of the product, they were falling short on
some of the “boring stuff,” such as supporting customers who forgot their password, having single
sign-on [for] multiple services from Munich Re, or the whole API management. They were trying to do
that for one year. It was always delayed [and stayed] in their project backlog.

DR. DIRK HEISS, HEAD OF DIGITAL PLATFORMS, BUSINESS TECHNOLOGY, MUNICH RE

One way that Business Technology sought to help initiatives develop offerings more efficiently was through Ex-
cite, a platform they built to support shared digital services.

[The more time a company spends innovating], the more people realize you don’t want to build ev-
erything yourself. But that’s a learning curve. It’s easier for us to trigger the conversation between the
businesses [. . .] to get all the different business stakeholders at one table so they can see they have the
same questions. Before that, they don’t even know. When you have the discussion [they] say “Now, I
see that we talked about the same problems and the same opportunities here, [so] why don’t we share
some of the things we need to go to market instead of everybody running for themselves?”

DR. OLAF FRANK, HEAD OF BUSINESS TECHNOLOGY, MUNICH RE

One executive explained that “Excite helps [to accelerate] new business initiatives.”21 Another explained that
the platform provided services which can “be reused and recombined into new business ideas [. . .] and [which]
make the scaling faster and easier for projects.”22
Excite consisted of more than thirty services, organized into three layers: (1) digital front-end services (such as
for connecting a digital offering to Amazon’s Echo, an iOS or Android mobile app, or a web app); (2) insurance
services (such as for advanced pricing or claims handling); and (3) data- and analytics-related services (such as
for managing data models). Appendix A provides a graphical overview of Excite’s service offerings, as well as a
deeper analysis of its reusable components.
At the start of 2019—about a year after Business Technology was launched—the Munich Re Board of Manage-
ment agreed that an enterprise-wide platform (Excite), paid for by individual initiatives, made sense for the
company. As well, the board agreed to form a Digital Platforms unit within Business Technology that would be
dedicated to developing Excite. The new unit was led by Dr. Dirk Heiss, who co-led Business Technology togeth-
er with Dr. Olaf Frank. In 2020, Dr. Heiss was reporting “in a dotted-line” to the Head of Strategy at Munich Re.
While his direct reporting line was to the CIO, the budget for Excite was part of a strategic initiative and, as a
result, was not affected by the IT department’s budgeting concerns. By December 2019, ten digital offering initia-
tives were using Excite services.

21 Martin Thormählen, Senior IT Architect, Business Technology, Munich Re.

22 Dr. Dirk Heiss, Head of Digital Platforms, Munich Re.
 Fonstad and Mocker | CISR Working Paper No. 445 | 16

Building Excite, Initiative by Initiative

When Munich Re started to build multiple innovative digital offerings at once, it refrained from making a large,
upfront investment in a common technology platform for digital initiatives. Instead, the company wanted to
learn organically what kinds of technologies and services its early initiatives would require.

Back in 2016 [. . .] [t]he board of management said, “We definitely don’t want to have huge, top-down
initiatives funded centrally. We don’t want to invest hundreds of millions, betting everything onto
exactly one card without [knowing whether] it’s really the right approach.” Therefore, they said, “Let us
first explore with separate initiatives and learn which ones are successful, and how much they overlap
[. . .].” It’s better to have smaller projects with little funding but which are very fast and can adjust eas-
ily, because they don’t have to align that much with others. If you try to build central components from
day one, then the alignment is super hard [. . .]. And therefore, there was no overall Excite platform
approach […].

It’s not helping if we have a platform team that is only considering what could be built, in a kind of
enterprise architecture style, [suggesting] “Wouldn’t it be great if we do it like this?“ Our understand-
ing is that this is not the right way to [build a platform]. We [prefer to build it] bottom up, so that we
know this project needs a specific set of API products and services. Do we have them? Yes. Then just
use them. If we don‘t have them, then we introduce or build them.

MARTIN THORMÄHLEN, SENIOR IT ARCHITECT, BUSINESS TECHNOLOGY, MUNICH RE

In fact, Excite was—as Karsten Steinmetz, Head of Underwriting, Claims, Medical Research and Digitalisation,
put it—“born out of” functionality developed by early initiatives for digital offerings such as MIRA DS. Many
of the services that made up MIRA DS, such as access management, were foundational—that is, not unique to
the digital offering. It did not make financial or operational sense for separate initiatives to develop very similar
technologies and services in isolation.
As Business Technology was engaged with more and more digital offering innovation initiatives, it was learning
about which existing—and developing—digital services could be reused in the future.

This is part of the Excite approach: We offer services. If they fit the next project, we’ll use them. If they
don’t fit, the next project will be consulted by us what would be a better fit, and then bring this compo-
nent into Excite so that others can reuse it. So, it’s a learning, growing and maturing on the go. If, as a
simple example, we have property and motor data enrichment for UK and it’s demanded next also in
the US, we will just amend and tweak the service for the US.

MARTIN THORMÄHLEN

The innovation initiatives had to decide which digital services they wanted to develop themselves, while Busi-
ness Technology had to evaluate which services would enhance the shared Excite platform.

Everything that makes a difference for the business model of the initiative, we always said you build
that [as part of the] initiative and we see what we want to reuse in our underlying layout.

DR. OLAF FRANK, HEAD OF BUSINESS TECHNOLOGY, MUNICH RE

Initiatives were not forced to reuse Excite digital services.

[It’s on an] offering base. You don’t have to. If you feel [an alternative will] make a difference to you,
you’re free to go, but you have to bear in mind that it’s maybe more costly and it takes longer.

DR. OLAF FRANK

 Fonstad and Mocker | CISR Working Paper No. 445 | 17

An example was the Titanium initiative:

Excite doesn’t tell Titanium to use everything which is available, but we can pick and choose what we
need. And we need some services from day one, others we might need after Release two or three. In
the example of […] Titanium, we start with a small number of brokers. An external service portal is not
needed from day one because the distribution manager and underwriter know all the brokers by heart
and by name. But we know already that we’ll use the Excite external support portal once we need it.

MARTIN THORMÄHLEN, SENIOR IT ARCHITECT, BUSINESS TECHNOLOGY, MUNICH RE

As an initiative evolved and scaled, it could select different digital services from the Excite platform, depending
on the initiative’s needs.

Regarding data analytics, if a new initiative [like Titanium] starts, it’s not really super relevant for us
because we don’t need a data lake, because we don’t have that much data. But once we grow and
want to recombine and analyze the data to get new insights, then this becomes relevant, but we don’t
have to use every [service] from day one.

MARTIN THORMÄHLEN

Excite’s growth and development presented a conflict of interest for some of Business Technology’s senior
architects. On the one hand, these leaders were acting as iCTOs to help make individual initiatives successful. On
the other hand, they were the ones identifying, designing, and overseeing the build-out of Excite’s shared digital
services platform. Individual initiatives were the iCTOs’ priority; their intense focus on initiatives left little time to
thoughtfully architect and develop the cross-initiative platform Excite.

Selling Excite as Managed Services

Building Excite from the needs of initiatives, rather than from a predetermined menu of services, helped
subsequent initiatives—even those most protective of their autonomy—recognize and appreciate the value of
shared services.

It’s difficult to help someone if they don’t feel they have a problem. So as long as you believe you know
what to do, I’m just a pain in your neck if I try to tell you to do something else, right? [Especially in the
beginning] the hype was “I do everything myself. To get away from the company.”

DR. OLAF FRANK, HEAD OF BUSINESS TECHNOLOGY, MUNICH RE

Having initiatives develop an independent appreciation for shared services was an important milestone. The next
challenge was getting them to pay for shared services.

In an abstract way, everybody supports the model up to the day when they have to contribute.

DR. OLAF FRANK

Initially, in 2019, the only funding for Excite was coming from individual initiatives. Starting in 2020, Excite develop-
ment efforts were funded by a central budget; this budget was created from equal contributions (or as per agree-
ment) from initiatives with an interest in the resulting Excite service. The Excite budget was approved by the Board
of Management and managed by the Excite program. Excite offered co-funding for the development of services or
components that could be reused by other projects. If a project wanted to use a developing Excite service or com-
ponent, it had to pay for the service with its technology budget. By spreading the cost amongst recipient projects,
Excite leveraged cost synergies during a service’s production phase. Business Technology’s assumption was that
between 40 and 50 percent of the initiatives’ technology spending would be spent on services that could be provi-
sioned by Excite (i.e., on services that could be developed and reused across multiple initiatives).
 Fonstad and Mocker | CISR Working Paper No. 445 | 18

The Excite team had moved to the co-funding model to increase the speed of decision making on which
components to develop in line with the organization’s strategic objectives, and to have the interest of
the enterprise better represented [during] the alignment with individual initiatives. Basically, co-fund-
ing triggered cross-project exchange by discussion of individual projects with the Excite team and with
each other. The fact that we [the Excite team] have a budget, gives us a lot more drive and steering
possibility. Now we can steer [Excite investments] in line with our strategic objectives—of course, al-
ways in a co-funding setup and based on strong collaboration. But it gives us more freedom and drive
to say, “We sponsor what we consider to bring most value to the organization, and we want to have a
say in this and have the opportunity to set it up in a way that we think is most efficient and effective.”

LISA WEGE, PROGRAM MANAGER EXCITE, MUNICH RE

Before the shared financing model was introduced, individual initiatives were reluctant to pay for common digital
services—despite recognizing their value.

In general, it makes sense if [Excite] is delivered by somebody else and this is shared across multiple
projects. Now, obviously, if this implies that the money is taken from our budget to build it out for
everybody, I’m not happy. Or if all development costs [for reusable digital services] are allocated to my
project, even though I’m not the biggest user. If it means that there’s a distribution key and according
to this key, I pay something and receive something, then I’m fine.

LUTZ KÜDERLI, HEAD OF DIGITAL SERVICES, LIFE/HEALTH, MUNICH RE

To increase Excite’s appeal, the platform was sold to initiatives as a set of managed, shared, hassle-free services.
For each service offered by Excite, Heiss and his team developed Service Level Agreements (SLAs) that described
in detail the services Excite would provide in exchange for payment. According to Heiss, the SLAs made it clear
that “you pay us this and you will get this, all tested, regulatory/compliance approved, etc.”

I didn’t go out with my board slide and say, “Give me 40 percent of your money, because the board decid-
ed so.” The way I approached it with each and every project was, “We already have these digital capabil-
ities. What if I take that from you, provide it to you, support you. [I will also create] a roadmap for these,
because next year [you may] have to add some capabilities [or] scale up customer support capabilities. I
will take care of that and you give me some money for that. We have a clear service description, service
agreement on the things we’re delivering to you.” [That is how] I got the buy-in from projects.

DR. DIRK HEISS, HEAD OF DIGITAL PLATFORMS, BUSINESS TECHNOLOGY, MUNICH RE

Heiss and each respective iCTO worked closely with the product owner of each digital offering to forecast how
much of the technology budget could support initiative-specific efforts, and how much could support shared
services. Both Heiss and the iCTOs did not want to stifle the autonomy of any initiative or suffocate innovation.

Connecting [initiatives] and bringing them all to the same platform constrains them in their speed and
agility and it creates so much overhead. Probably also because in former times, IT always said, “Okay,
this is our standard architecture, you must use it.” So a lot of people were afraid of this governance
around standard components.

DR. DIRK HEISS

In April 2020, the Excite team ran a workshop, similar to the popular reality TV show Dragons’ Den, where leaders
of digital innovation initiatives and their iCTOs pitched ideas for how to enhance Excite. For Example, the Titanium
team proposed an “insurance in a box” effort, which modularized Titanium’s services so that other initiatives could
use its granular components (e.g., services related to risks and insurable assets, or risk-related products).
 Fonstad and Mocker | CISR Working Paper No. 445 | 19

The Excite team emulated Business Technology’s approach to tracking and measuring success. At a high level,
the team strove to accelerate time to market (i.e., achieve a minimal viable product faster than the projected
non-Excite effort), provide a seamless experience for initiatives using Excite, contribute to cost reduction and rev-
enue growth, and encourage collaboration throughout Munich Re. Starting in 2020, the Excite team measured its
success along four objectives that aligned with these goals, including (1) time to market for digital products, (2)
customer experience ratings (using a Net Promoter Score model), (3) revenue growth achieved through Excite’s
digital offerings (internal and external), and (4) cost savings due to reuse of existing components. Appendix B
outlines these objectives and related financial goals in greater detail.

THE NEXT SET OF CHALLENGES

Munich Re had invested considerable effort to address the challenges of early digital innovation initiatives and to
build a foundation that would ensure future initiatives’ success. Yet, several challenges remained.
For example, management had to decide, for each initiative, whether it should be integrated with Munich Re’s
existing business or left as a standalone entity.

Bigger initiatives [like Digital Partners] we tend to spin off from the normal organization. They have
more freedom, more leeway to implement their own structures. The upside is they can move faster,
they can start from scratch. They have no legacy. They can design their own processes. The downside
is they don’t harvest synergies with the rest of the organization. Smaller projects get implemented in
the normal business unit world and then the struggles are prioritizing between resources and over-
coming tradition and old processes in those business units. The business unit wants to invest, invest,
invest [into a digital offering innovation initiatives]. But at the same time, we still have a cost reduction
program in place and we tell them to lower their cost base, and then they start, “But this has to grow”.
And then we say, “Yes, but the overhead costs are getting too high.” And then you run into the barriers
or conflicts that a normal organization always has.

DR. THOMAS BLUNCK, MEMBER OF THE BOARD OF MANAGEMENT, MUNICH RE

The innovation teams themselves were often seeking more freedom from Munich Re.

Munich Re is where we get all the business from. For getting bigger, it’s the perfect world. Because we
have a secured distribution network. But in two years’ time [. . .] then we are just limited to the Munich
Re world and we want to expand the boundaries. We would need more power to be an entrepreneur.

FLORIAN NIKLAS, HEAD OF REALYTIX, MUNICH RE

At the same time, as initiatives scaled, they learned more from each other and generated demand for a new set
of shared services.

All the digital initiatives are running completely independent[ly]. And I’ve always wondered, why can’t
we group after the lab phase all digital initiatives together and do a Munich Re digital approach with
IT as part of it? Because [we can learn from each other with regards to] how we market, compensa-
tion models, fee income, how we generate revenue. We know each other but we don’t sit next to each
other. If you sit next to each other, you get much better communication.

FLORIAN NIKLAS

Another set of challenges confronted initiatives that had outgrown existing support mechanisms within Munich
Re, but were not generating enough profits to appeal to a Munich Re business unit. Those medium-sized busi-
ness initiatives struggled to secure ongoing funding and worried about longevity.
 Fonstad and Mocker | CISR Working Paper No. 445 | 20

It’s a fairly uncomplicated process to receive funding for the innovation hub. But as soon as you drop
out, you basically have to acquire funding from the business. And that is difficult. You proved that
somebody likes your initiatives, and then the Innovation Lab says, “Hey, there’s a business value. Why
should we pay for it?” And the business is, “Yeah, okay, you showed some business value, but [now you
want us to] take on all the risks for a new business model ourselves?” So you’re basically dropping in
this gap as an innovation project.

LUTZ KÜDERLI, HEAD OF DIGITAL SERVICES, LIFE/HEALTH, MUNICH RE

As an external startup, after you got seed funding you get a round A, round B financing. But internally,
there is no concept in the company how to do an internal round A or round B financing. There is the IT
investment board. But there we [compete for funding] with IFRS 17 projects. There’s a hole and we are
struggling at the moment how to find funding for the next two years.

FLORIAN NIKLAS, HEAD OF REALYTIX, MUNICH RE

Despite its many existing innovation efforts, Munich Re’s senior management was looking for more—especially
ones that could position Munich Re as an ecosystem owner.

We have not found a business model where we own a platform and then all others can connect very
quickly and it scales exponentially. We’ve given it a lot of thought but we haven’t found that yet.

DR. THOMAS BLUNCK, MEMBER OF THE BOARD OF MANAGEMENT, MUNICH RE

For example, Excite’s internal success spurred some executives to wonder whether the service could be sold to
external customers.

Excite could be something that could just power [our own] products, or it could be a new source of ser-
vice revenue for us. So Excite is used internally to get our own new products to market faster. But it can
also become a platform as a service. [. . .] It’s hard, because it is a new area. You don’t make a new line
of business very easily, it takes work.

JASON ENGELBRECHT, CHIEF TECHNOLOGY OFFICER, MUNICH RE

Even though the idea to turn Excite into an external, revenue-generating platform was still in its infancy, several
customers had expressed interest and the Excite team had prepared a revenue target. Munich Re believed that
Excite’s credibility—thanks to years of internal use—was a competitive advantage.

Once we know we can use it for ourselves, and we’ve repeated the process a few times, we then can
sell it by itself. We’re going to get a competitive advantage because, unlike a normal software provider
developing for other people, we develop it for ourselves as well, which means we understand what it
really means to get a product to market. This is what we see as our unfair advantage.

JASON ENGELBRECHT

Opportunities and challenges notwithstanding, Munich Re’s management was committed to ongoing growth and
development of Excite to support digital innovation initiatives.

The challenge will be to keep the eyes on the ball and keep playing, even if not every day is nice.

DR. OLAF FRANK, HEAD OF BUSINESS TECHNOLOGY, MUNICH RE

Just as Business Technology was helping many initiatives go to market and scale successfully, the department itself
was learning how to grow and expand. By May 2020, Business Technology had grown into a valuable resource. The
department’s next challenge was to develop a plan to ensure its sustained growth and continued success.
 Fonstad and Mocker | CISR Working Paper No. 445 | 21

Appendix A: Detailed Description of the Excite Platform

EXCITE- Digital Building Blocks Munich RE

~ Multi-Channel, self-service driven Digital Customer Experience

Digital
Front-en ds
IA
6d Mob,lo
(10S / Aad~•) I D Wob/\pp

EM+► ¥@1110
Ffii+l::4
Customer Identity & Acc. Mgmt. Customer Service Portal 11 API Gateway 11 Orchestration I Workflow 11 File Exchange
~------ ~------

Insurance
Services

Data&
••••••••••• Client f Partner
Forms
Management
Notification
(incl. eMail)
Marketing
automation
Settlement/
Replace
D ··

iii Analytics Data Platform

Data Analytics Infrastructure Portfolio Opt1m1zat1on

Operational Insights (Logging,

Monitoring)
Msg Bus & Event Bus
Data Landing Platform
{Digitalization, OCR)
Data Pipeline Services II ML Mode l Management

Martin Thormählen, the lead architect of Excite, described the platform as consisting of different types of reus-
able components.
One parameter for these components was the degree of “variety” they provided (i.e., the range of options
provided to address geographical differences in regulation and procedure). For example, within the group of re-
usable services titled “Insurance Services,” there were multiple options—one per market— for “Advanced Pricing
Engine.” Because of important differences across markets, there was limited value in identifying a single global
service provider for that service. Instead, for each geographical market where digital services were offered, Busi-
ness Technology provided a recommended service.
However, more generic services (refer to the light boxes in the architecture diagram) did not need variety; these
services were “general purpose” and “would work anywhere” (Martin Thormählen). These widely adopted
services—which were globally deployed and dynamically scaled—necessitated a high degree of service standard-
ization.
The ten largest digital initiatives relied on varied sets of Excite services—sets that changed and evolved as ini-
tiatives advanced through different stages of development. By May 2020, Excite’s suite of digital building blocks
were organized into three groups:
A. Digital Front-End Services:
• A front-end design system for fast, consistent deployment of applications on web and mobile devices.
• Customer identity and access management to allow a seamless and secure user experience for customers
logging on to Munich Re systems.
• A customer service portal to support users who experienced issues with Munich Re systems including a knowl-
edge base, chat functionality, and a 24x7 helpdesk. The customer service portal was also used by end consum-
ers in B2B2C cases where Munich Re provided a “white label” service embedded into the primary insurer’s
product.
• An API gateway where Business Technology publishes all their APIs for internal and external use. As more
customers switched from using Munich Re’s web application as “software as a service” to integrating digital
 Fonstad and Mocker | CISR Working Paper No. 445 | 22

services (e.g., geo-risk scoring) via APIs, secure and global delivery of APIs through a central infrastructure
became essential.
• A file exchange to facilitate interaction between Munich Re and primary insurers and brokers, who typically
exchanged risk information in flat file formats.

B. Insurance Services:
• A rules editor and rules engine for automated processing of insurance risks according to predefined risk factors
and scoring information.
• An advanced pricing engine that interacted with the rules engine to determine individual insurance price
quotes based on risk assessments.
• Policy administration as part of the core, back-end administration system for insurance policies. However,
Munich Re used its policy administration services selectively, as most primary insurance clients used their own
policy administration systems and integrated Munich Re services via APIs.
• Natural language processing (NLP) and text mining to provide toolsets to automatically process and evaluate
various types of insurance-relevant documents (e.g., damage reports, insurance contracts, medical records) or
company analyst reports.
• A sanction check via API to identify relevant financial sanctions and politically exposed persons in business
transactions.

C. Data & Analytics:

As part of its general data strategy, Munich Re had started to develop a comprehensive data platform, analytics
infrastructure, and toolset to enable insurance portfolio analytics and optimization in 2016. Excite integrated
these existing services into its overall service portfolio, ensuring easy access for new digital initiatives and global
availability of these services. Components were also designed and enhanced so they could be deployed in differ-
ent business contexts and geographies.

We try to make the right choice: what is really [the] differentiating business capability of a certain
product. So, for example, this doctor risk assessment in MIRA will always stay in MIRA, but the under-
lying component, which is a so-called rules engine, is basically a piece of software which is completely
business agnostic. If it’s a medical rule, like if you have diabetes, then this is the add-on to your insur-
ance premium, or if you’re, I don’t know, driving a fast car, you’re paying a higher premium for the car.
So the rules engine is something we will bring into Excite, but design it in a way it can be decoupled
from the actual business application.

DR. DIRK HEISS, HEAD OF DIGITAL PLATFORMS, BUSINESS TECHNOLOGY, MUNICH RE

 Fonstad and Mocker | CISR Working Paper No. 445 | 23

Appendix B: Success Metrics for the Excite Platform

Starting in 2020, Excite received funding from a central budget, set aside by the Board of Management, to fur-
ther develop the capabilities for Munich Re’s digital initiatives. Consequently, Excite was managed as a business
investment with financial and quantitative objectives in line with its four objectives:

Objective Metric Target

1. Accelerate time to market for Time for business idea to first prototype / 12 weeks for simple digital insurance
digital products minimal viable product product

2. Improve customer experience Net promoter score (NPS) of Munich Re Achieve higher score than NPS of
with digital insurance solutions customers of digital services customers of traditional reinsurance

3. Revenue growth Annual revenue of digital services Double revenue every 12 months;
utilizing Excite components 100+ million Euro revenue after
3 years

4. Cost savings with component Number of projects using Excite 4+ components are used by
reuse components 2+ additional projects each year

Number of components used by more

than one initiative
MIT SLOAN CENTER FOR INFORMATION SYSTEMS RESEARCH
Founded in 1974 and grounded in the MIT tradition of rigorous field-based research, MIT CISR helps executives meet
the challenge of leading dynamic, global, and information-intensive organizations. We provide the CIO and other
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CISR RESEARCH PATRONS BNP Paribas (France) Heineken International B.V. Principal Financial Group

Information as of August 2020

Bristol-Myers Squibb (The Netherlands) QBE
AlixPartners LLP
BT (UK) Hitachi, Ltd. Raytheon Technologies
Avanade
Canadian Imperial Bank of HSBC Technology & Services Reserve Bank of Australia
Cognizant Commerce (USA) Inc.
Royal Philips
Microsoft Corp. CarMax Insurance Australia Group (The Netherlands)
The Ogilvy Group, LLC Caterpillar, Inc. Iron Mountain Santander UK/Grupo
Pegasystems Inc. CEMEX (Mexico) Johnson & Johnson Santander
PricewaterhouseCoopers Charles River Laboratories, Kaiser Permanente Scentre Group (Australia)
Standard Bank Group Inc. King & Wood Mallesons Schneider Electric Industries
(South Africa) Cochlear Limited (Australia) Marathon Oil Corp. SAS (France)
Commonwealth Markel Corporation SIGMAXYZ Inc.
CISR SPONSORS Superannuation Corp. State Street Corp.
Mater Private Hospital
Aetna, a CVS Health business Coril Holdings Ltd. (Canada) (Ireland) Stockland (Australia)
Air Canada Credit Suisse (Switzerland) MLC Life Insurance, a Suncorp Group (Australia)
Allstate Insurance Company DBS Bank Ltd. (Singapore) Nippon Life Group Company Teck Resources Ltd. (Canada)
(Australia)
ANZ Banking Group Ltd. Doosan Corporation (Korea) Tetra Pak (Sweden)
(Australia) National Australia Bank Ltd.
ExxonMobil Global Services Trinity Health
Australian Taxation Office Company Nomura Holdings, Inc. (Japan)
Truist Financial Corporation
AustralianSuper Ferrovial Corporacion, S.A. Nomura Research Institute,
Ltd. (Japan) UniSuper Management Pty
Banco Azteca (Mexico) (Spain) Ltd
Fidelity Investments OCP S.A.
Banco Bradesco S.A. (Brazil) USAA
Fomento Economico Org. for Economic
Banco do Brasil S.A. Co-operation and Webster Bank, N.A.
Mexicano, S.A.B., de C.V.
Bank of Queensland (Mexico) Development (OECD) Westpac Banking Corp.
(Australia) Pacific Life Insurance (Australia)
Fortum (Finland)
Barclays (UK) Company WestRock Company
FrieslandCampina
Bayer AG PepsiCo Inc.
General Motors Corporation Pioneer Natural Resources
Biogen, Inc.
Genworth Financial USA Inc.
BMW Group
Hanover Insurance Group Posten Norge AS

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Team | Kristine Dery, Christine G. Foglia Associate Director,
Nils O. Fonstad, Amber Franey, Dorothea Gray-Papastathis,
Cheryl A. Miller, Leslie Owens Executive Director,
Joe Peppard, Ina M. Sebastian, Nick van der Meulen,
Peter Weill Chairman, Barbara H. Wixom, Stephanie L. Woerner

cisr.mit.edu | 00