Four steps to advance on the ecosystem journey
While ecosystems offer value to many different types of insurers, each will need to define a unique strategy, based on its current market position, operational capabilities, technology infrastructure, customer base, long-term objectives and other factors. Choosing the right ecosystem business model may be the most important question to ask. Specifically, insurance leaders must decide whether to build and orchestrate their own ecosystems or participate in those led by others. While orchestrators generally enjoy most of the value, some insurers will be better served providing products and services through platforms led by others.
To be clear, “ecosystem orchestrator” and “product provider” business models are not mutually exclusive. In fact, most insurers are likely to play both roles in different ecosystem contexts as they pursue varying objectives (e.g., opening new revenue streams, solidifying relationships with existing customers). Regardless of strategy, senior leaders should be clear in crafting a compelling and ambitious vision that specifies the organizational goals and aspirations relative to ecosystems.
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Identifying partners that offer tailored services and products to add value for customers is another critical step in ecosystem success. Ecosystem winners excel at identifying and engaging those partners that enrich the overall value proposition and possess complementary skills and capabilities (e.g., financial planners involved in the ecosystems of life insurers, cybersecurity providers working with commercial insurers).
Strong ecosystems often feature specialists that play specific roles (e.g., policy administration, pricing, digital marketing, analytics). In some cases, regulators, industry analysts and even competitors may also be involved. Potential ecosystem collaborators should be evaluated in terms of their ability to fulfill specific business needs and their willingness to contribute fresh thinking and innovative ideas.
Collaborative approaches should focus on enhancing customer satisfaction and exploiting new growth and market expansion opportunities for all partners. Cultural fit is another important variable to assess. Alignment on strategic priorities and operational requirements, as well as a commitment to open communication, can eliminate the risk of potential conflicts of interest and help build trust. The bottom line: the better the partners, the better the ecosystems.
While technology is not the only variable in the formula for success, it plays an essential role. The legacy technology infrastructure in place at most insurers cannot provide a foundation for successful ecosystems. That’s true because they are often built on proprietary technologies and standards and can’t integrate with the platforms employed by ecosystem partners. They also may lack modern security features, increasing their susceptibility to cyber threats and breaches.
Specifically, insurers need open architectures, sophisticated application programming interfaces (APIs) and seamless data sharing, all necessary elements of successful ecosystems. To get it right, insurers should select a platform that facilitates integration with ecosystem partners, including InsurTechs and other non-traditional players. These connections are critical to helping insurers design new products more efficiently, get to market faster and create more agile operations – all common objectives for ecosystem strategies.
EY Nexus for Insurance is a cloud-native platform providing plug-and-play access to many of the most advanced technologies and InsurTechs on the market today, as well as the underlying infrastructure necessary to innovate across the insurance enterprise. Entire processes in key disciplines (e.g., underwriting, pricing) are ready to deploy.
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Most insurers will need new talent and skills as they develop and mature their ecosystems. Agile development, customer experience design, behavioral economics, data analytics and partner relationship management are among the skills they’ll need most urgently.
Management mindsets will also need to evolve as insurers typically need to instill more collaborative and cross-functional work styles, as well as more risk-taking. Testing and learning, and creative experimentation should be encouraged, as insurers begin to build out and operate their first-generation ecosystems. These shifts should not be taken lightly, given the hierarchical structures that define many traditional insurance companies today.
High-profile leadership and advocacy of ecosystem strategies is also essential to success. Leaders must consistently and clearly convey the message that ecosystems are important to future growth – and are the future of the business in many ways. New metrics can reinforce leadership messaging, particularly relative to increased customer centricity. Specifically, performance measures can track how ecosystems deliver value to customers, as well as investors and shareholders. For insurers’ own bottom lines, products-per-customer, share-of-wallet and related numbers can demonstrate how ecosystems are faring.
