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InsurTechs, Ecosystems, and Consolidation

InsurTech has emerged over the past ten years, with a rapid acceleration in the last three. One feature has been a ‘no holds barred’ approach, where insurers, brokers, InsurTechs and others seek new insights and opportunities. In some cases, there have been collisions of different tools. However, consolidation is taking control under the banners of ‘ecosystems’ and ‘platforms.’

Digital is emerging quickly

A recent paper from McKinsey, titled “Insurance Beyond Digital: The rise of ecosystems and platforms,” provides a road map to the new present and well beyond.

Digital products are being delivered rapidly to consumers and businesses. Without a doubt, this is better than previous approaches. At the same time, with a richer ecosystem approach, the users will find new processes that improve quality and ease of use that go beyond insurance.

Let’s take a look back to get some context.

In the early days of the commercial Internet, individual insurers and agents / brokers developed technology to deliver single and comparison quotes for personal lines coverage. This continues to today.

There are two issues that reduce the value:

  • For the majority of individual carriers, the onus falls on the consumer to compare quotes; and
  • Most insurers supply numeric information (premiums, coverages, etc.). Other value points are in pure text, forcing consumers to keep track ‘on the side’.

Ecosystems are not evolutions….

According to McKinsey,

To succeed in ecosystems, insurers will have to take a hard look at their traditional roles and business models and evaluate opportunities to partner with players in other industries.

In other words, you can’t get away with yesterday’s tools, and you cannot stay in your own business to succeed.

The reward? McKinsey posits that “Ecosystems will account for 30 percent of global revenues by 2025.”

What is an ecosystem, and what do they do?

Definitions are a bit tricky, but there is a surrogate that provides the context.

McKinsey notes: “Putting customers at the center of every digital activity has not only scaled adoption but also allowed companies to capture previously unimagined value.”

At present, large organizations have the majority of ecosystems These include: Alibaba, Alphabet, Amazon, Apple, Facebook, Microsoft, and Tencent.

Insurers are on the path…

To shift from a single-line product provider to an ecosystem perspective, insurers require a significant change in defining their role.

McKinsey notes that most insurers have a “passive and limited relationship with customers. ….If insurers were to lose their distribution and customer relationship, they would be left with few options to reinvent their business models.” This is where expanded offerings can extend functionality.

McKinsey provides an example from Ping An – a huge Chinese insurer. Beyond its insurance products, Ping-An has taken new products, including “healthcare consultations, auto sales, real estate listings, and banking services to more than 350 million online customers through a single customer portal called the One Account.”

Meanwhile,  back in Toronto …

Aviva Canada has been pursuing digital innovation for several years now. Recently, the insurer along with innovation hub, OneEleven, developed the ‘InsurTech Growth Program’.

Cited in Insurance Busienss Canada, startups included 5 distinct, useful applications which align with a variety of insurance and non-insurance programs. Ryan Spinner, head of digital and innovation, noted that the diversity wasn’t a coincidence.

“We picked those five companies because they basically had a different view of the world, which is something that we were really excited about. We felt that they had a way to view insurance in a way that nobody else in Canada or around the world is viewing the insurance world.”

Protecting the Home Front

All is not perfect, however.  Spinner noted that Canada has “an abundance of amazing start-ups in Canada who are actually leaving Canada to start their careers or ventures around the world” (emphasis supplied). Spinner noted that a start-up InsurTech ecosystem was missing. To respond, Spinner is trying to build “a safe place where start ups could incubate and accelerate their insurance-related idea.”

Ecosystems + Platforms = NextGen Enterprise Solution

The last generation of insurance company enterprise technologies came to market right around the turn of the century.  The operational elements were standardized and simplified for end users.  The core systems and data structures were standardized, allowing more sophisticated analysis and data exchange.

However, the scenarios above, driven by ecosystems and platforms, allow internal and external users to have new, powerful functions.  Given the expectations from the new generation of users might put other systems behind.

What do you think?

Do you see insurers requiring the functionality for the larger approaches?  Or can we stay behind, serving less sophisticated products and services?

 

Editor’s Note:  Insurance-Canada is ramping up for the second annual InsurTechTO at the Sheraton Centre in Downtown Tortonto on 7 November 2018.  Platforms and Ecosystems will be a part of the conversation.  Check out the information and get your registration here