Ecosystems are changing the insurance industry – but will that change last?
Insurance ecosystems are groups of participants that work together to provide different services and products. For example, insurance carriers, payment processors, and policy administration system providers might create a partnership that is beneficial for all of the companies involved, as well as their customers.
The Potential Is Enormous – And We’re Just Getting Started
Thanks to ecosystems, companies can upgrade their digital tools, pivot in response to market changes and roll out new offerings – without having to develop everything in-house from the ground up. According to PwC, insurance ecosystems are upending the assumption that size is an advantage in the industry by giving smaller companies the chance to close the opportunity gap, and McKinsey says that ecosystems will generate $60 trillion in revenue by 2025.
Given the tremendous potential, it’s no wonder that “ecosystem” is the new buzzword in the insurance industry. Right now, companies are busy making partnerships and forming their own ecosystems. It’s an exciting time, but in the rush to seize this opportunity, there is a risk that the new ecosystems will be built on poor foundations. Careful consideration now may lead to ecosystems that have staying power.
Finding the Right Balance for Sustainable Ecosystems
The business term “ecosystem” is borrowed from the natural sciences, and there might be more that we can learn from the biological counterpart.
An ecosystem is comprised of a physical environment and the plants, animals and other organisms that interact there. They’re all linked, so when one part of the ecosystem suffers, the rest of it may suffer as well. The same may be true for an insurance ecosystem. When selecting the partners for an insurance ecosystem, you need to make sure you’re selecting strong partners.
An ecosystem also needs variety. You can’t have a biological ecosystem that consists solely of apex predators, for example. You need everything – land, water, insects, plants, and so on. Likewise, an insurance ecosystem can’t just consist of carriers. It needs various insurtech companies that provide a wide range of services and meet various needs.
The Customer’s Point of View
Biological ecosystems and insurance ecosystems have a lot in common, but no analogy is perfect. Unlike biological ecosystems, insurance ecosystems exist to serve a purpose. More specifically, they exist to serve a customer.
To build ecosystems that last, think about the environment from the customer’s perspective. Does the ecosystem meet the customer’s needs and make the customer’s life better? Focusing on this question will help companies create ecosystems that provide true value. This, in turn, can lead to ecosystems that have staying power.
So, what do your customers want? Speed and convenience. User-friendly digital tools. The freedom to pick the channels and options they prefer. In short, they want things that make their life easier and their insurance experience hassle free.
The Business Point of View
The insurance customer’s perspective matters, but there’s another viewpoint to consider: the company’s. For an ecosystem to last, it also has to meet the needs of the various partners. In general, this will mean that the ecosystem helps companies seize opportunity and grow – without becoming a drain on resources.
This is a time of substantial transformation in the insurance industry, and major changes require caution. At the same time, this is a period of incredible opportunity. Ecosystems appear to be the way of the future – and the future is arriving at breakneck speed.
Here at Insuresoft, we have carefully curated an ecosystem of strong, stable partners to serve insurers and their policyholders efficiently. Schedule a demo to learn more about how the Insuresoft ecosystem can benefit you.