A common criticism of life insurers is that they trail businesses in other sectors in adopting new technologies and business methods. One industry titan endeavoring to counter that perception is AXA. In February of this year, the Paris-based carrier launched a #x20AC;200 million venture capital fund, AXA Strategic Ventures, to "foster entrepreneurial discovery in insurance and financial services" and to enhance the customer experience.
To learn more about the initiative and its aims, LifeHealthPro Senior Editor Warren S. Hersch interviewed Manish Agarwal, a general partner at AXA Strategic Ventures. The following are excerpts from that interview.
Hersch: Why did AXA establish its venture capital fund? What does the insurer hope to achieve?
Agarwal:Start-ups tend to spearhead ideas, technologies and business models that will likely have an impact five years or more in the future. So the idea of the strategic venture fund was to create a vehicle through which we can gain access to these ideas early in their life cycle. Of particular interest are emerging innovations relevant to insurance, asset management, financial technology and health care services industries.
Many of these innovations, we expect, will help us improve our core insurance and asset management businesses. We also hope to derive a strategic benefit in learning about what start-ups are doing. And, because we're a venture capital fund, we aim to achieve a return on our investments.
Hersch: What skills do you bring to the venture?
Agarwal: I've been with AXA in the U.S. for about 10 years. I have expertise in corporate development, M&A [mergers and acquisitions], as well as private equity investments. So I have an understanding of strategic investments, both from a business perspective and a financial perspective.
Hersch: Which companies and technologies are of most interest to AXA Strategic Ventures? Where are you investing your capital?
Agarwal: One U.S. company we recently invested is called PolicyGenius. The New York-based business provides an online platform for people to buy several types of insurance: life, disability income, renters and pet insurance.
They're also targeting a market segment — the mass affluent — that's additive to our core business. The company has built a creative and engaging web platform for interfacing with prospective insurance buyers.
The site includes several features: Insurance Checkup to determine how much insurance you need, a quoting tool, plus helpful resources like product guides, Twitter hashtags and blog posts. We're interested in learning from their business model, while also driving sales to their online platform.
Hersch: Looking at the PolicyGenius.com website now, I see references to several insurance competitors — Metlife, ING and Transamerica — but not AXA. Why not?
Agarwal: You touch on a key point. We separate our investment activities from our commercial activities. We invested in PolicyGenius because we believe in the company and their platform.
Today, they're not selling our products, but we do see them as a potential distribution partner. There are, however, certain technologies we would need to implement to make that happen.
Hersch: What advantages does PolicyGenius offer over AXA's existing online capabilities in serving the mass affluent market for, say, term insurance?
Agarwal: When someone comes to AXA's site and requests a policy quote, we can connect them with an agent or advisor who will do additional fact-finding and process the application. On PolicyGenius.com, customers complete the buying process online. The selected carrier handles medical underwriting offline, but all of the up-front work the applicant needs to complete to secure the policy is done through the portal.
Hersch: Interesting. Can you talk about one or two other companies that AXA Strategic Ventures has invested in?
Agarwal: A second company is FLYR, a San Francisco-based start-up that enables airfare predictions up to 120 days in advance of a flight. So you can decide if you want to buy based on the price now on offer or wait for a better deal.
The company forecasts future fares using data based on historical movements of airfares and proprietary price-forecasting algorithms. So you can see the price you're you get now and the price you likely can secure in the future. The company is a big data-driven play for us.
Hersch: You see the value of this investment purely in financial terms, opposed to one that might benefit AXA's agents and advisors, yes?
Agarwal: We don't see benefits, direct or indirect, for life insurance agents and advisors in the U.S. But outside the U.S., where we offer P&C and other travel-type products, we do see potential benefits, such as the ability to offer services associated with AXA's travel assistance business. We're interested in creating products to help insure customers against future price movements.
Another company we've invested is Evercontact, which markets an automated cloud-based service that finds and updates outdated or missing contact information in your address book. The service integrates with a range of CRM [customer relationship management] and address books, including Gmail, Outlook and SalesForce.
We plan to roll out this service at some point to a broad population of both our internal people at AXA and our agents and advisors, availing them of an automated way to update and manage their contacts.
Hersch: Is AXA Ventures also looking to make investments in companies that have a social media focus?
Agarwal: We are looking at a number of social media companies. One area of interest is in figuring out how we can use social media to help our field advisors more proactively communicate with their clients.
For example, we've implemented — not as an investment, but as a tool for our producers — a product suite from Hearsay Social. The solution enables them to post messages on Facebook, LinkedIn, Twitter and other social media in a compliant way.
This solution was rolled out two or three years ago to our advisors. We're interested in exploring similar tools that will help them more effectively use social media for their own marketing needs.
Hersch: How do you decide on which companies to invest in? Do you follow certain guidelines? And who at AXA is involved in the decision-making process?
Agarwal: We find out about investment prospects through internal research, and via our business networks and conferences. Sometimes, start-ups contact us directly about funding.
Thereafter we put them through a vetting process, learning about their products, market focus and strategic alignment with our core businesses. If a company meets our criteria, an investment committee will vote to approve funding.
Hersch: How large is the team at AXA Strategic Ventures?
Agarwal: In the U.S., we have a team of three people, including two in New York. We're actively looking actively to bring on additional people to our investment and management team.
In Europe, there's a team of five, including a strategic committee composed of the chairman and general partners, along with senior executive of the AXA Group.
These individuals and industry experts provide strategic advice, define the overall global investment strategy and review the portfolio's investments. When appropriate, they'll also facilitate connections between the portfolio companies and AXA's ecosystem of companies.
Hersch: Do you have certain expectations as to the return on investment you hope to achieve in, say, one to three years' time?
Agarwal: We are looking to achieve a return on investment commensurate with the risk associated with the asset class —the different start-up companies — that we're investing in.
Hersch: Apart from new solutions that might prove useful to AXA's agents and advisors, can you speak about more general financial benefits potentially resulting from AXA's investments?
Agarwal: Given our fund size, my sense is that, no matter how good a job we do, the investment return we would generate for AXA would be small compared to the company's overall earnings in any given year. So I don't think the financial return will move the needle.
What will move the needle will be the rollout of new services and offerings for our agents and advisors, as well as competitive insights we gain from the companies we invest in. These benefits will be far more valuable than any immediate financial return we achieve for AXA.
Hersch: Can you speak to the broader strategic focus of AXA Strategic Ventures? Do you expect that investments in start-ups will become a growing part of AXA's overall business?
Agarwal: We believe that our insurance and asset management businesses will continue to become much more technology-enabled. We see technology not only as a tool for creating new products and services, but also as a vehicle for efficiently connecting with customers in ways we haven't been able to do through the advisor channel.
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