Three Ways Insurance Ecosystems Drive Competitive Advantage

Ecosystems might be the single greatest opportunity for insurers to differentiate themselves in a period of rapid digital transformation, but only 5 percent of insurers can be considered ecosystem masters.

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Editor’s note: This is the second article in a series of two.

My previous article covered the basics of digital ecosystems and why insurers are rapidly moving to adopt them.  Here are three ways they provide competitive advantage.

1. Optimize the Customer Experience

Traditionally, customers had greater loyalty to particular brands and there were relatively few touchpoints in advance of sales and renewals. Today, customer relationships are more fluid as pricing and plan comparisons have become more transparent, and the customer journey frequently involves several touchpoints across different channels both before and after a policy is sold.

Digital ecosystems enable insurers to optimize the customer experience by increasing the number of touchpoints with customers and by providing new services. Lemonade’s open API, mentioned in my previous article, is one example, but there are many other opportunities insurers are seizing to meet modern expectations and seize growth opportunities:

  • Chatbots and conversational marketing technologies
  • Life insurance applications for managing personal health
  • Virtual healthcare delivery
  • Partnerships with other businesses to earn digital loyalty points
  • Connected smart home and vehicle-safety solutions
  • Extensions to manufacturers’ warranties as part of an integrated e-commerce experience
  • Provide advice and estimates to customers using voice technology

Insurers that are late to develop their ecosystems will likely lose market share to competitors and disruptors that deliver engaging new experiences.

2. Componentization boosts agility and innovation

Componentized, open ecosystems enable insurers to reduce costs, improve agility and system reliability while supporting innovation.

Flexibility is enabled by modularity: the ability to continuously swap out components based on evolving business needs. Similarly, if a single service goes down it can be replaced without jeopardizing other components.

Componentization also forces IT planners to clearly define the roles of different components. This clarifies ownership and makes it easier to identify bottlenecks and efficiencies, improving the quality of services and reducing the overall IT spend.

In the context of digital ecosystems, CIOs and CTOs are curators. Their role is to constantly evaluate and select best-in-class components for each function of the ecosystem within an established governance model. In the digital ecosystem economy, there is also a greater emphasis on maintaining and scaling partnerships with external vendors and data-service providers to remain at the forefront of innovation.

3. Securing Data Dominance

Big data analytics is changing the game in the insurance industry. More data is produced than ever before, providing ample opportunities for insurers. For example, auto insurers are now leveraging the 4 terabytes of data produced by connected cars each day to provide more personalized experiences to their customers. Similarly, life & health insurers are leveraging connected data from wearables that track thousands of data points such as an insured’s heart rate and sleep patterns.

To achieve data dominance, insurers must build up and scale big data ecosystems. These can include analytics platforms, data visualization platforms, business intelligence platforms, artificial intelligence tools, and Internet of Things (IoT) technology such as wearables and smart home devices. Global IQX, for example, includes the option for employees to connect their Fitbits during enrollment to receive applicable discounts.

Most carriers already have vast amounts of data. New technologies can be leveraged to better visualize data sets and to suggest optimal benefit plan design based on past success factors. When data-protection and privacy laws pose challenges to personalization, artificial intelligence tools can be used to produce synthetic data that does not expose customer information.

Carriers that can most effectively leverage big data will be able to deliver more personalized customer experiences, increase customer retention, cut costs, and produce more accurate quotes, faster.

Seize the Opportunity for Differentiation

Ecosystems might be the single greatest opportunity for insurers to differentiate themselves in a period of rapid digital transformation. Indeed, according to 2019 research from Accenture, only 5 percent of insurers can be considered “ecosystem masters.”

While the benefits are clear, it is not always easy to develop and scale a digital ecosystem business model.  There will be organizational, cultural, and technical challenges along the way. Once you establish the foundational platform and define parameters you’ll have the opportunity to improve your service offerings, increase customer loyalty, and drive new growth in a competitive landscape.

One of the first steps of developing any ecosystem is picking the right partners. Look for a vendor with a component-based platform for the ecosystem economy that integrates with best-in-class CRMs, policy administration systems, and data service providers to help position group and voluntary benefits providers at the forefront of innovation.

Designing a Digital Insurance Ecosystem

Michael J. de Waal // Mike de Waal is president and founder of Global IQX, an Ottawa-based software provider of web-based sales and service solutions to employee benefits insurers.  He has deep experience in both software development and business management skills. Early in his career, he worked as a computer programmer and then went on to become a financial planner and a benefits consultant with giant Manulife Financial before becoming a tech entrepreneur.  He can be reached at [email protected].

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