All industries are experiencing some form of disruption, including insurance. Products, services, and customer experiences are all impacted, but thankfully, insurance ecosystems are helping companies transform, modernize, and stay on pace with current trends. With the right ecosystem partners, insurers can take action to get ahead, maximize their efficiency and see a positive return on their investment.
Property & Casualty (P&C) carriers need to deliver more data, services, and capabilities to support and enhance their processing and decision-making, and an ecosystem of connected partners makes this possible in entirely new ways.
What Are Insurance Ecosystems?
To understand insurance ecosystems, you must first understand what constitutes an ecosystem in the broader sense. An ecosystem, according to Accenture, is “a network of players, from either within or outside the industry, who work together to define, build, and execute market-creating customer and consumer solutions.”
This network concept has made its way into insurance. McKinsey & Company refers to insurance ecosystems as interconnected sets of services in a single integrated experience that enable insurers to embed their insurance products into seamless customer journeys.
Many industries predict they will experience disruption due to new innovations enabled by technology, new competitors and regulations, social and cultural shifts, and demographic shifts, according to the Accenture Disruptability Index. Disruption is prevalent across all industries, and insurance is no exception.
Disruption within the P&C industry is being driven largely by the following factors:
- New insurance providers
- New insurance models
- New insurance processes and delivery models
- New insurance products
- New insurance pricing
More and more insurance companies are looking to implement insurance ecosystems, but it’s not always easy to make it a reality. According to Accenture, 97% of insurers who were surveyed believe they have what it takes to be an attractive ecosystem partner, but less than 5% were identified as ecosystem masters.
So what exactly makes an organization an ecosystem master? Accenture defines the term ecosystem master as “[…] companies that aim to disrupt their industry using ecosystems, plan to lead as many ecosystems as possible, and target 5% or more growth through their ecosystem initiatives.”
One term that comes up often is “insurtech,” which refers to “a company using technology to disrupt the insurance industry,” according to Investopedia. An insurtech ecosystem, for example, is specific to technology, whereas an insurance ecosystem encompasses a broader scope of assets.
Why Are Insurance Ecosystems Important?
Insurers need to offer consumers a greater variety of more relevant and attractive experiences and offerings, according to Accenture. Choosing the right partners is essential, because it means bringing the necessary skills and scope “to help secure a more profitable ecosystem opportunity.”
Insurance ecosystems are certainly on the minds of many companies: “More than half of insurance executives say their companies are already starting to experience disruption from competitors that have partners in other industries.” Insurance companies are seeing the largest disruption levels in their products and services offered (60%) and the ways customers receive service (57%).
To combat this disruption, top tier ecosystems consist of all the data sources and services an insurer needs to tap to win today. And many insurance companies are already recognizing the importance of these ecosystems; 84% of insurance executives say ecosystems are important to their strategies, and 54% are actively seeking ecosystems (however, many don’t have what it takes to lead an ecosystem).
How Insurers Can Select the Right Partners
Accenture provides the following tips on how to choose the right insurance ecosystem partner:
- Consider scope, skill, and scale: Insurers should look for partners that offer capabilities that can extend their current offerings but also offer new products and services. Introducing partners with a variety of capabilities, especially those that insurers don’t have on hand, can prove beneficial. It’s also important to consider the size of a potential insurance ecosystem partner and ensure that they are capable of serving the needs of your customers.
- Select partners who can enhance customer experiences: Insurers should make a point of choosing partners that can provide the assets, domain expertise, and technical capabilities required to create a frictionless customer experience.
- Evaluate character, collaboration, customer focus, and incentive: These are all important characteristics that can make — or break — a potential partnership.
3 Steps for Insurers To Get Started
- Consider strategy and priorities. One expert recommends that insurers should consider the following questions: What role do they want to play in customers’ lives? How bold will their aspirations be? What will the market play be? It’s important to determine a clear path forward and distinguish clear, well-defined goals that are also realistic and attainable.
- Take an honest look at yourself. Insurers need to look at their businesses truthfully and without rose-colored glasses. What are the capabilities, culture, and technologies? Are there any gaps or challenges?
- Pick your partners. This is the time to look for insurance ecosystem partners with the assets, domain expertise, and technical capabilities to support your ecosystem strategy. It’s important to look for partners whose goals and visions align with yours.
Insurance Ecosystem FAQs
Q: Why is the insurance industry vulnerable to disruption?
A: The pace of change in insurance continues to speed up with the move to the cloud, smart, connected technologies, and automation. Being able to define new areas and categories of insurance and then rapidly market to global customers makes it easy for new companies to enter markets and disrupt current situations. All insurers, regardless of size or location, need to be thinking about how they can operate in a fast, dynamic world.
Q: Are new technologies a threat or an opportunity?
A: New technologies are an opportunity. Take UBI in the automotive industry, for example. Telematics, IoT, and other technologies make it possible to truly personalize insurance down to specific metrics, including miles driven, driving habits, time of day, etc. This level of information was not available even a few years ago. With a greater connection to habits and behaviors, captured through technology, new types of insurance based on well-defined risk can be offered.
Q: How are insurtech companies disrupting the insurance playing field?
A: Insurtechs are taking advantage of new technologies, digital connections, and growing access to customer information. These areas will only further expand the chance to capture new opportunities and launch new offerings. However, insurtechs often need access to a core platform to orchestrate a complete end-to-end solution. Partnerships between insurtechs and core providers are, therefore, very important. Core platform providers need to do their part and provide an open approach to developing and working on their products. Openness enables insurtechs to deliver disruptive technologies that connect to core systems so carriers can rapidly create an opportunity for differentiation.
Q: How can insurers and insurtechs work harmoniously together?
A: Insurers are committed to delivering end-to-end products for their customers. They want to be able to leverage emerging technologies in a way that complements, improves, and even extends current offerings and processes. To make this possible, an insurer’s core systems must be able to connect and work harmoniously with the latest insurtech offerings.
Q: What is the difference between a partnership and an ecosystem?
A: An ecosystem is a connected network of people, systems, and software organized to deliver a complete solution. A partnership shapes the level and effectiveness of collaboration between different entities in the network. Insurers want to develop a robust ecosystem of vendors and technology to fulfil their strategies. They are looking for core system providers who can deliver solutions that already include partnerships with insurtechs, as well as the ability to expand to more partners in the broader ecosystem as new technologies and new insurtechs emerge.
Q: When it comes to ecosystems, where do insurers fall short?
A: Carriers are leveraging various vendors in the insurance ecosystem, but they are struggling to orchestrate it properly. Robust core systems that enable you to bring all the functionality together are crucial to carriers’ success. And this is where we see a lot of insurers trying to do this through endless coding projects, rather than using low-code tools to configure an integration for their unique needs.
In addition, many insurers typically make a few of the same mistakes, such as:
- Partnerships within the ecosystem selected as stand-alone, singular functionality without considering the specific technology solution and how it assists in a cross-functional, multiple business usage
- Investments made that do not lead to the optimization of current technology and functionality as well as being leveraged for more than an isolated purpose
- Lack of a strategy that brings the tools and technology together around a platform that can be at the core of the wider ecosystem
Q: What questions should I ask when defining my ecosystem?
A: Defining an insurance ecosystem starts with researching what is out there for the types of business you write, where you are, and how you operate. Some important questions to ask are:
- What are the latest innovations in my LOBs?
- What regions/geographies are we looking to grow in?
- Are there tools out there that can help improve my sales and service strategy?
Q: What underpins a successful ecosystem?
A: Success is taking full advantage of the ecosystem to optimize efficiencies across the board. For example, instead of having an underwriter check several different tools, an ecosystem platform gives them the ability to get what they need in one tool. Plus, having rules and workflows set to automate low-level risks frees them up to analyze the more complex tasks in their day-to-day.