The future of the insurance industry lies in mutually beneficial business ecosystems with the customer at the centre.
Business ecosystems have gained popularity in various regions, industries, and sectors. Many large companies have recently turned to ecosystem strategies to fuel their expansion. Once you know these strategies, you will see them popping up everywhere!
Business ecosystems explained
A business ecosystem is a network of organisations – suppliers, distributors, customers, competitors, regulatory authorities, industry institutions, and others – that deliver a specific product or service through competition and cooperation. Each entity in the ecosystem affects and is affected by the others, creating a constantly evolving relationship where they collectively provide and deliver goods or services to the end customer.
Several thriving ecosystems have emerged over the past 10 years, including in the insurance industry, attracting significant interest. The success of these ecosystems is due to their well-thought-out design and successful implementation, which provide a smooth path for business growth and enhance the overall experience for both the businesses and their customers.
Getting it right
To embark on a successful ecosystem strategy, consider the following:
Define clear goals: Clearly articulate the objectives you aim to achieve through collaboration within the ecosystem. Align these goals with your overall business strategy to ensure compatibility and coherence.
Identify key partners: Select partners whose strengths and capabilities complement your own, promoting constructive collaboration and the ability to co-create value. Establish mutually beneficial relationships based on trust and shared vision.
Build openness and trust: Encourage open communication and transparency within the ecosystem. This enables efficient information-sharing, facilitates collaborative decision-making, and builds trust among ecosystem participants.
Nurture innovation and experimentation: Create an environment that inspires experimentation and continuous learning. Encourage innovative ideas and support their rapid prototyping and testing.
Measure and optimise: Define relevant metrics to track ecosystem performance and success. Continuously evaluate performance, identify areas for improvement, and adjust strategies accordingly.
Building resilient ecosystems
Resilient ecosystems have a higher chance of surviving macroeconomic turbulence. Even if external conditions affect certain aspects of the customer experience, a well-designed ecosystem that enables the entire customer journey provides more opportunities for customers to remain engaged with your company. By expanding the range of offerings available, ecosystems can become self-sustaining and break down industry boundaries.
This encourages customers to keep returning, as it becomes more convenient for them to fulfil their needs in one place. As new products are added, the ecosystem adapts to address needs that cut across multiple industries, enhancing the fluidity customers expect from their service providers. Ecosystem expansion is inherently flexible, driven by a focus on solving customer needs. Loyal customers are more likely to embrace products and services that may seem unrelated to the original business model.
A customer-centric mindset
When building an ecosystem, it is essential to adopt a customer-centric mindset. Many insurers make the mistake of solely focusing on expanding customer engagement by adding insurance products, such as bundling home and auto coverage, rather than considering the total customer experience journey. To develop an effective ecosystem strategy, it is crucial to identify the broader journey customers go through when interacting with your company and understand the context for potential ecosystem opportunities.
For brokers, insurance risk mitigation strategies can offer opportunities to create the “ultimate” customer service ecosystem.
Customers want insurance brokers to assist them, advise them, protect them from loss, and help prevent and detect incidents through digital tools and services, ultimately avoiding stressful situations. They seek understanding and supportive brokers who can assist them in various aspects of their lives. A modern, customer-focused broker should prioritise user-friendly applications, touchpoints, and processes to redefine the overall customer experience, collaborating with ecosystem partners to enhance the value they provide policyholders.
Accommodating younger generations
Millennials and Gen Zs now anticipate smooth, integrated, real-time interactions across multiple digital channels, aligning with the platforms they commonly use. Insurance brokers must balance meeting the needs of this tech-savvy younger generation with still catering to the preferences of older demographics like Gen X and baby boomers, who may not be as skillful with digital interfaces.
Notably, the demographic landscape will shift significantly by 2030, when digital natives are expected to represent half of the adult population.
Power of loss prevention and protection
Through various partnerships and digital ecosystems, insurance brokers can benefit their customers by assisting them in avoiding the need to file claims. When facing the choice of raising policy prices to offset inflation or focusing on developing methods to reduce claim frequency, insurers have a strategic decision to make. The rising claims costs due to inflation are a significant concern for insurance providers. A slow but steady transition is happening from prioritising risk management to emphasising risk prevention. This shift aims to transform the dynamic between insurance brokers and policyholders into a mutually beneficial relationship where both parties rely on each other and receive positive reinforcement.
Reimagine the insurance brokers’ role
By reimagining the role of insurance brokers with the help of AI and digital tools, they can increase their capacity, allowing them to focus more on claim prevention. This shift in focus will transform the relationship between brokers and policyholders, moving from reacting to risk events to proactively working together to prevent losses.
This change also enables brokers to move from a model focused on transferring risk to one that includes mitigating risks and claims.
In the future, telematics and connected devices will play a crucial role in risk prevention, with sensor-equipped devices in homes, water meters, geysers, and vehicles providing valuable data. By incorporating information from third parties, such as traffic cameras and weather forecasts, brokers can alert customers to potential risks before losses occur. With this abundance of data, brokers can implement strategies like predictive maintenance and behaviour incentivisation to promote risk-reducing behaviours.
Creating value
To create value and adapt to the evolving digital landscape, insurance brokers must integrate innovative technologies into the insurance value chain, forming new partnerships in data science, loss prevention, machine learning, and artificial intelligence (AI). This convergence with the broader digital ecosystem will enable brokers to fill crucial gaps and stay competitive.
All of this is possible today, which makes it reasonable to imagine these scenarios by 2030 – if insurance brokers can drive customer adoption to create economies of scale to make it viable for themselves and their customers. Innovation can accelerate throughout the insurance ecosystem where insurers, insurtechs, OEMs (original equipment manufacturers like geysers, smoke detectors, security components, tracking companies, etc.), information providers (like weather, traffic, security, etc.), law firms, AI, IoT (internet of things) solutions providers, and data aggregators push the boundaries.
In this new age of the insurance ecosystem, third-party infrastructure – street cameras, telematics, sensors built into cars, wearable devices, and machines – will give insurers automated access to uncomplicated loss facts. Their customers can also provide, from their mobile phones, live videos streaming communication and photos that can be recorded to assist insurers with vital visual information from risk events. Insurers can quickly determine liability with the right analytics tools and make more accurate appraisals and damage assessments. This will allow insurers and brokers to move claims from submission to settlement faster.
Expanding the insurance ecosystem will enable insurance brokers to move beyond traditional insurance activities into adjacent and aligned businesses to access customers earlier and deepen customer relationships.
Insurance brokers can unlock a bigger noble purpose and value in the industry – and therefore create new value for their own companies – by reimagining and expanding their role beyond merely placing risk to becoming an integrator of measurement and control applications that gather data and insights from countless third-party providers and technologies. Achieving this new integrator role will be challenging as it requires a targeted strategy and the cooperation of other qualified ecosystem participants, such as claims providers and data hosting/management systems. Successful brokers will attain a competitive advantage by owning access to highly sought-after risk data and information.
To achieve this risk mitigation and integrator ecosystem vision, insurers must invest in innovative technologies and commit to a proactive and human-centred customer service experience.
