- Where Insurance & Technology Meet

Platforms, Ecosystems, and the Metamorphosis of Insurance


Platforms and ecosystems are hot topics these days.  At first blush, these could appear to be the next generation of expansive over-enthusiasm. However, when we look at the constructs and the players using the tools, this appears as critical components for the next generation of insurance.

First things first: 

Let’s put definitions in place.  I have found myself and others blurring the lines between “platforms” and “ecosystems”. I like Celent’s description, courtesy of Donald Light, posted in the IIR Reporter:

Many platforms start out as a limited purpose website… If it achieves that purpose in a very engaging and effective way …  then that website starts drawing a lot of visitors … and allowing the site sponsor to expand the site’s functionality, collect lots of data about visitors, and monetize that traffic and data.

Platform providers want to create a rich ecosystem(facilitated by API libraries front-ending microservices) that attracts insurers, and providers of a broad array of services, data, and analytics. As the ecosystem gets broader and deeper, network effects become stronger.

So, what are the concrete effects for the insurers and supporters? 

A January 2018 posting – Insurance beyond Digital:  The Rise of Ecosystems and Platforms by McKinsey & Company (McKinsey) principals and analysts (Tanguy Catlin, Johannes-Tobias Lorenz, Jahnavi Nandan, Shirish Sharma, and Andreas Waschto)  goes deep and wide.

The McKinsey team doesn’t sugar-coat the requirements:

“Adopting an ecosystem mind-set will be an arduous journey for many insurers, butthose that understand this evolving landscape can take the first steps to creating new revenue sources.”

But some of the big hitters are betting on the results.  According to the McKinsey team:

“Seven of the ten largest companies by market capitalization are ecosystem players—Alibaba, Alphabet, Amazon, Apple, Facebook, Microsoft, and Tencent—and that only hints at the power of digital.”

How will this impact insurance?

The majority of insurers are primarily risk aggregators.  According to the McKinsey authors, “If insurers were to lose their distribution and customer relationships, they would be left with few options to reinvent their business models.”

Given that disruption continues to invade insurance, reliance on traditional constructs alone is risky.  The McKinsey team notes that some leading insurers worldwide are looking to new models. These include Ping An, Manulife, Liberty Mutual, and Munich Re.

And, the common denominator is the development of ecosystems based on platforms.

From the supplier side, Donald Light is tracking insurance tech suppliers. He finds leading organizations are moving towards platforms:

  • “Guidewire announced its goal to be a platform for the insurance industry. Key elements included unifying core systems, a digital front-end, and a data and analytics back-end;
  • “In October 2017, IBM announced an insurance Industry Platform, built in collaboration with MetLife’s benefits group, and Majesco.
  • “Majesco announced Digital1st Insurance, which it “designed to be a digital engagement and microservices Platform as a Service for the entire insurance industry.”

Ecosystems: New Risks, New Markets

McKinsey notes that ecosystems are driving changes to existing insured-covered risks. Predictive technology and tracking will improve. As a result, premiums, and attendant revenue streams, could come under pressure.

This drives organizations to seek alternatives to insurance-only revenue streams. Ecosystems provide three types of value:

  1. They act as gateways, reducing friction as customers switch across related services.
  2. They harness network effects.
  3. They integrate data across a series of services.

Based on these value points, the McKinsey team notes:

“The ecosystems most relevant to the insurance industry—and that thus represent the most salient entry points—include mobility, housing, health, wealth protection, and B2B services.”

Do we know where Platforms and Ecosystems will take us?

These are early days. McKinsey notes that by 2025, 30% of global revenues will be supported by ecosystems.  That said, McKinsey’s research finds that while ecosystems and platforms will drive winners, others may find depletion of corporate earnings.

What do you think?

Have you encountered ecosystems and platforms?  Are you using or considering them in your business?  What is your biggest driver?

Have you evaluated these and put them away or on hold?  What is putting you off?

Drop a note below.  We will be coving more about ecosystems and platforms in this space.