Designing a Digital Insurance Ecosystem

Designing a Digital Insurance Ecosystem

Insurance carriers that invest in open ecosystems and best-in-class components will experience improved customer satisfaction, lower costs and leapfrog the competition.

In 2020, the insurance industry experienced several years of digital transformation in a few months. The days of monolithic legacy systems, built and maintained in-house for decades, are coming to an end as the market rewards dynamic carriers that leverage application programming interfaces (APIs), microservices and web services to build ecosystems that offer the right experience, to the right people, on the right platform.

What is a digital ecosystem?

A digital ecosystem describes a loose network of connected applications and technologies that act cohesively to meet business objectives. Inspired by ecosystems found in nature, digital ecosystems are characterized by principles of openness, flexibility and self-organization. APIs, web services and microservices often work together to form the framework of a digital ecosystem.

Uber, for example, maintains an ecosystem of over 2,200 microservices. This architecture enables greater flexibility and autonomy, allowing teams to innovate rapidly and swap out specific services without compromising the entire system.

Unlike open ecosystems, closed systems (also known as “walled garden” systems) are typically built and maintained in-house. An example of a closed system is Apple’s iOS operating system, where apps can only be downloaded from Apple’s App Store.

The insurance industry’s next big frontier

According to research firm Novarica, the trend toward digital ecosystems in insurance is powerful, with more than 65% of insurers having deployed APIs/microservices as of Q4 2019. A couple of years ago, insurtech Lemonade made headlines by launching its public API, allowing anyone to offer Lemonade policies through different apps or websites. According to research from Accenture, 84% of insurance executives say ecosystems are important to their strategy. Ecosystems are the insurance industry’s next big frontier for disruption.

For insurers, a digital ecosystem can encompass the entire customer journey, from quote to claim. This frequently involves touchpoints with several applications such as CRMs, policy administration systems, broker portals and third-party data service providers. This barely scratches the surface. For insurers, however, there remains an understandable hesitancy toward adopting open ecosystems.

While carriers acknowledge the importance of adopting innovative new technologies, many find themselves tied to closed systems that struggle to “talk” to new applications. This may result in missed opportunities, declining market share and unhappy customers while rewarding competitors that offer greater flexibility. What monolithic legacy systems do provide, however, is control: governance, security, predictability and change management. These are important concerns in an industry known for its heavy regulation.

For many CIOs, managing a cornucopia of different technologies within a digital ecosystem can seem a tough pill to swallow given security and governance concerns. However, with rapidly evolving customer expectations and a drastic increase in the overall rate of change, greater flexibility is now a must.

A recent survey of European insurers conducted by DXC Technology found that 22% of insurers were already part of an ecosystem providing additional services to their customers, and a further 46% had plans of joining an ecosystem soon. The evidence is clear that the industry is shifting toward greater openness and agility, and insurers must be prepared to commit to the new paradigm.

See also: Big Opportunities in Insurance Ecosystems

Three ways insurance ecosystems drive competitive advantage

1. Optimize 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 is one example, but there are many other opportunities that insurers are seizing to meet modern expectations and grab 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
  • Advice and estimates provided 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” of insurance ecosystems boosts agility and innovation

Open ecosystems that combine discrete components enable insurers to reduce costs and 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 spending.

At Global IQX, we built a componentized platform from the ground up. Our platform enables carriers in the group and voluntary benefits business to select specific components that fit within their digital strategies while integrating with their existing CRM, PAS and other applications. Whether insurers decide to build upon IQX or another platform, the principles of flexibility and componentization must reign supreme.

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 four terabytes of data produced by connected cars each day to provide more personalized experiences to their customers. Similarly, life and 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 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 enrolment 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 benefits 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.

Insurance ecosystems: 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% of insurers can be considered “ecosystem masters.”

See also: Ecosystem-Based Business Models

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 growth in a competitive landscape.

About the Author

Mike de Waal is president and founder of Global IQX (www.globaliqx.com), a leading software provider of web-based sales and service solutions to employee benefits insurers.

Source: https://www.insurancethoughtleadership.com/designing-a-digital-insurance-ecosystem/

How can you „pitch like a startup“, if you aren`t a startup!?

How can you „pitch like a startup“, if you aren`t a startup!?

Can you imagine? You are on stage in Vienna and you win INSURY Talent Award, you get the attention of your colleageus, leaders, friends, family and media partners. But not only the attention, you get the INSURY Talent Trophy as well! How would be the feeling?

If you want to be part of this very special experience on our next Insurance Innovation Day in Vienna on 20th Oktober 2021, you are invited to apply.

Why am I organising this Award?

I`m working for more than 28 years in the insurance industry (ups-ups😊) and I would be happy to support and motivate young insurance manager and broker to show their favorite innovation from their (re)insurance & broker company. In the last 8 years, I`m working in different innovation workshops together with motivated and talented insurance manager & broker and I would be happy to give our #MOI2021 stage to show amazing insurance innovations, they working on. If this is a product or process developing, marketing campaging or a new organisation form, we would be happy to learn more about it.

We invite young professionals (under 35) to apply and show their favorite project in 1 min. pitching video. The first 50 applicants get the possibility to be an actor in our new insurance community song: SING, SING Insurance! https://www.youtube.com/watch?v=5oK3hasOLSI&list=RD5oK3hasOLSI&start_radio=1

Of course, with your application, you attend #MOI2021 in Vienna personaly or digital. And the best is, you can create a video clip with us with our Community Song!

The 10 finalists will be invited to a Live Pitching Session on 20th Oktober in Vienna or Digital to pitch your favorite project. (max. 3 min.)

Are you ready for our WORLD PREMIERE of INSURY Talent Pitching Award? Here you can apply: https://magicofinnovation.eu/talent-pitching/

Do you have any questions? info@insurance-factory.eu

TOP 5 explanations, why the digitalisation is not relevant for the insurance industry

In the last month I had the possibilities to discuss the „insider“ status with insurance managers (CEO`s and leaders from insurance companies). What is their opinion and mindset from the digital transformation?

I have collected for you my experience with the top 5 five explanations or excuses from insurance CEO’s and leaders, why the digital transformation is not relevant for their insurance company. I realised my mindset, my community, you as my Social Media friends are more motivated to understand and create a new way, new possibilities for the next generation. Sorry for my honestly words, but this is the reallity as well.:-)

Here you can find some insights from the „other world“ of insurance, but as real world as well.

  1. 1. „digitalisation is not something else than automatisation“ – in the last 5-6 years, I try to motivate the insurance industry, that this „journey“ is not only to buy a software, not only to install artifical intelligence or chatbot, this are more activities. E.g. to find new business models, to create amazing real time processes, marketing campagne and solutions, transforming the organisation and to understand the „exponentional thinking“.
  2. 2. „we are not interested in digitalisation, because, the IT colleagues -software engineer and data sciences are very expensive, our back office colleagues are cheaper“ – yes, this is true, but as leaders of a company, is this really a vision?
  3. 3. this topic is related to point 2: „unfortunatly IT colleagues is very difficult to find, because if you are talented, they will found own companies as a startup. Because founding a startup is a hype in our country.“ Of course, because some goverment recover the power of startups from the economic side too.
  4. 4. „Mrs. Krizsan, I have 3 years to get retired, why should I innovate? My results, premium, profit are going very well. It`s not necessery to change“. But I would ask, do you have the same situation in 10 years as well? Because the decision from today, can make results only some years later (or earlier:-).
  5. 5. „we don`t want to be „first mover“, because the insurance as a product you can`t protect by patent and we have to check, is the solution good or not. We are in a waiting position“ – yes, this is true as well. But if you want to be in the business tomorrow, you have to be different, you have to do other, creative solutions for your clients.

And, and, and…I could continue the stories, but I don`t want to demotivate you, because you are a future oriented manager with the right mindset about the future of insurance.

Let`s innovate with my personally motto: “the way to create your innovative insurance”  See you again at #MOI2021 /hybrid – Vienna and Digital/  at 29-30.09.2021! www.magicofinnovation.eu