How Ecosystems Drive Insurance Digitalisation

Insurance digitalisation is transforming the industry as a trend that insurers and MGAs cannot deny. The need for a convenient online experience has increased tremendously as AI and data-driven solutions are reshaping the market. This urges market players to change their mindset and the way they offer insurance products and services. In a saturated market, insurance digitalisation provides a way to gain a competitive edge in an ecosystem environment. 

Platforms and Ecosystems Spur Insurance Digitalisation 

Traditional industry borders have faded away and the future of insurance will greatly be influenced by platforms and ecosystems that will act as catalysts for insurance digitalisation. A platform can be defined as a model that connects several participants, both merchants and consumers, allows them to interact with each other, as well as to create and exchange value. Examples of businesses that were initially built on platform models include AlibabaAmazon, and Facebook. 

An ecosystem is an interconnected set of services that fulfils a variety of users’ needs in an integrated experience. Most popular B2C ecosystems are focusing on covering demands for travel, healthcare, or housing. On the other hand, B2B ecosystems concentrate on certain tasks or functions such as sales and marketing, operations, procurement, or financing. 

Ecosystems develop through network effects. They enable to create products and services that companies wouldn’t be able to offer on their own. Ecosystems create services around the customer, increasing the need for data processing and smart systems, therefore also affecting insurance digitalisation. This enables to launch better and more personalised offerings backed by technology, AI, and machine learning. For insurers and MGAs to get the most out of technology, they need to rethink the full cycle of insurance processes from quote and bind to reporting and consider their key customers who might be either end-users, brokers, or their own employees.  

A customer-centric approach unlocks new opportunities throughout the value chain, creating end-to-end journeys with one single point of entry for the customer. The new normality is using Airbnb for booking accommodation, hailing a ride on Bolt or Uber, or getting insurance from Wefox. Today, Apple is far from being just a phone manufacturer - they even offer smartwatches bundled with personal health monitoring programmes. This shows how companies across the world engage in strategic partnerships to deliver a comprehensive user experience. Insurers and MGAs are no exception and need to think of efficient ways of insurance digitalisation to be able to offer a similar, interconnected journey.  

 

How Is the Value Created in Ecosystems? 

A customer-oriented mindset has enabled companies to unleash new value. The most successful and highly capitalised companies in the world drive their revenues from the B2C and B2B ecosystems they have created. For example, Amazon brings together e-commerce, cloud services, logistics, and consumer electronics, while Tencent covers social media, gaming, finance, and cloud services. In fact, the super apps trend, pointed out by the top insurtech influencer Steve Tunstall in his interview for Insly, has been a true game-changer in Southeast Asia and also falls into the ecosystems’ category.

Top 7 companies by market capitalisation Source: McKinsey, 2020.

 

Ecosystems create value along multiple dimensions and allow their members to merge a wide range of customers across sectors. Ecosystems provide mainly three types of value by:  

  1. acting as gateways for seamlessly switching across services;
  2. applying network effects; 
  3. integrating information across services. 

Let’s take messaging apps as an example. Today, these allow users to perform a variety of activities like shop or check into a hotel, in addition to chatting with a friend. You don’t need to jump between different websites or log in to various environments – necessary actions can be done through one interface.  

Speaking of network effects, smart home products, like Amazon Alexa or Google Nest are a good example. In fact, the latter shares a monthly overview of energy consumption to its customers. This also adds value for utility providers by equipping them with consumption data and allowing to optimise production. 

Regarding data integration, the key is to combine datasets that currently sit in silos within ecosystems, e.g. using healthcare data to encourage people to live a healthy lifestyle or using telematics to offer better rates. 

Ecosystems Will Soon Account for 30% of Worldwide Revenues  

Digital ecosystems will provide companies better opportunities to take advantage of global markets thanks to the new age of borderless industries. By 2025, they are expected to result to a staggering 30% of global revenues. 

estimated total sales 2025 Source: McKinsey, 2018.

 

As in other industries,  digitalisation in insurance cannot be avoided. It’s not about offering vehicle or travel insurance, rather than creating a comprehensive experience around different events of life or business – just as Insly’s CEO Risto Rossar predicted in his interview. The trend is towards value creation across the whole customer journey and combining services from different industries to create a unique and fruitful experience. Insurers and MGAs have the opportunity to unleash new sources of revenue by insurance digitalisation and acceptance of the ecosystem mindset. The most relevant ecosystems to the insurance industry include mobility, housing, health, B2B services, and wealth protection. Speaking of which, you can read about how income protection insurance was launched in Lithuania to insure the customers in the consumer loans industry.

Insurance Digitalisation Is a Precondition for Insurers and MGAs 

How can insurers and MGAs prepare for an ecosystem? Well, a proper system for insurance digitalisation can act as a single platform or gateway for policy administration, claims, accounting, and reporting. This platform - the single source of truth - can also be accessed by brokers. It can generate all kinds of customised reports for in-house purposes or for meeting capacity providers’ requirements. Above all, it is built to easily access data from your own or external sources which can be integrated seamlessly via APIs. All that to support insurers and MGAs in building their own or connecting to existing ecosystems.   

Ushering in the ecosystem mindset gives a chance to embed insurance products into seamless customer journeys. Insurers and MGAs must realise that that value is created differently in ecosystems. They must start creating active relationships with customers and building a strong contact network. Also, reinventing the business model, focusing on insurance digitalisation, and aiming at partnerships with players inside and outside the industry are a must.   

This is how strategic alliances are formed. We see new types of products such as offering insurance as additional value when buying electronics online. Or in the mobility sector – a customer rents a car at a corner of a street and doesn’t have to worry about his 15-minute drive being insured. Interoperability between in-house and external partner systems is crucial, because only by a seamless data flow can insurers and MGAs personalise their offerings. This calls for new solutions in insurance digitalisation. 

In our next blog post, we’ll take a closer look at how insurers and MGAs can achieve success and efficiency in insurance ecosystems. 

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