The Evolution of Insurance Ecosystems: Harnessing Partnerships for Competitive Advantage

Due to all the reasons why insurance is difficult to disrupt, Insurers are a vital component of ecosystems. Building strategic partnerships are a key step in forming insurance-related ecosystems, as this involves identifying potential partners, fostering beneficial relationships, and navigating through legal and regulatory considerations.

Partnerships are not foreign to insurers. As Tatiana Kuchminskaya from Finxtre points out in her article "Why Do Companies Need Insurance Ecosystems?", insurers have long partnered with businesses from diverse industries, but this can’t always be called an ecosystem. McKinsey estimates that 32% of partnerships are in healthcare, 21% in finance, 20% in eCommerce, and so on. These statistics also show which industries insurance companies can cooperate with to implement an ecosystem.

While large insurers prefer starting their ecosystems, SMEs often choose to participate due to lower costs and resources. Once an insurance company identifies its area of interest, prioritizing these solutions based on their value to customers is crucial.

Exploring Ecosystem Approaches in the DACH Insurance Market

Baloise Insurance Group, operational across various EU markets, including Switzerland, Benelux, and Germany, is among the insurers with clear ecosystem strategies. Baloise is developing its own ecosystems, focusing on providing additional value to customers, even when insurance products aren't at the center.

Baloise is developing its own ecosystems and has launched over 50 initiatives in four areas: Home, Mobility, Financial Needs, and Business Services. Their strategy also involves investing in startups and established companies, especially in the living sector. Specifically, Basler is building a digital platform targeting property owners and prospective buyers, focusing on content around major trends such as flexibility, digital transformation, and sustainability. Their approach involves detaching from the traditional insurance business and focusing on solutions outside of their core business, always putting the customer at the center. They collaborate with platform development experts, content creators, and cooperation partners to build a growing network of high-quality ecosystem partners.

The Ingredients for Success: Seven Characteristics of High-Performing Insurance Ecosystems

EY teams have outlined seven characteristics distinguishing successful ecosystems from traditional attempts at expanding customer relationships. These characteristics include a strong tone from the top, customer-centric metrics, trust, a 'killer app', vertically aligned product distribution, an economic model differing from traditional insurance businesses, and a consistent platform mindset.

Participating in an ecosystem poses challenges for insurers, as it entails rethinking business models, adopting new technologies, and forming partnerships with other companies. Nevertheless, the potential benefits make it a worthwhile pursuit for insurers with a forward-thinking approach.

Conceptualizing the Ecosystem

Designing an insurance-related ecosystem starts with a clear vision, aligning the ecosystem strategy with ambitious core business goals. The vision needs to be supported by the CEO and other insurance leaders, backed by a clear funding commitment. Insurers should explore and prioritize specific use cases (build, , select which ecosystem to enter), outlining what value can be delivered to customers and the organization. A Health insurance company might start with health insurance ecosystems, whereas a car insurer could focus first on providing mobility services. 

Design-thinking methods can be employed to understand the customer better and determine worthwhile use cases. Design thinking is natural to ecosystems since its very existence can be traced to an obsession with customer centricity. The process should result in a defined value proposition—an opportunity for the insurer to improve customer experience and generate value for the organization.

Mixing and Collaborating Across Industries

Given the scalability of organizational requirements and technology infrastructure across ecosystems, insurers can be active in multiple ecosystems. The central consideration should be brand perception and the possibility of linking with the insurer’s core value chain to generate benefits.

Some insurers might start by joining ecosystems led by others. Niche insurers or less recognized brands can benefit from engaging with higher-profile ecosystems, whether within or outside the insurance industry. Other players’ ecosystems can offer cost-effective access to new customer segments or markets, especially for firms that can defend their margins through superior products, low-cost operations, or a unique proposition that demands premium pricing.

The Importance of Technology in Ecosystems

Technology plays a crucial role in the development and success of ecosystems in the insurance industry. It not only enables the formation and operation of ecosystems but also drives value for customers and provides insurers with valuable insights. To fully leverage the benefits of technology, insurers need to invest in the necessary technological infrastructure and develop capabilities to manage and effectively utilize data.

Participating in an ecosystem requires a scalable and flexible IT architecture based on APIs, enabling easy distribution and access to new insurance services and products as they become available. The orchestration of an insurance-related ecosystem necessitates a strong technological foundation, ensuring smooth integration of various ecosystem partners and constant updating of ecosystem products and services.

Having a technically prepared organization is crucial. Distributing values among all ecosystem participants can be organizationally challenging, but these challenges can be effectively managed with the correct technological infrastructure.

Adacta EIM: turning vision into reality

At Adacta, we view the move towards ecosystems as a natural evolution of the industry, shifting focus from internal to external value and innovation. Insurers that are more interconnected with their partners and clients will be better positioned to navigate trends, opportunities, and disruptions.

To facilitate ecosystem participation, as a core system provider, we have built the necessary ecosystem capabilities into our core digital insurance platform through out-of-the-box API. Furthermore, we've developed the EIM platform that allows insurers to build and orchestrate their own ecosystems.

The EIM platform is a key digital infrastructure enabling insurers to connect with customers and partners. By integrating partner organizations, insurers can gain critical features such as flexibility, speed, value orientation, and customer insight. These features enable insurers to deliver a superior customer experience and stay competitive.

Conclusion

Ecosystems will undoubtedly play a pivotal role in the insurance industry's future. They represent a strategic shift and a valuable asset that fosters a new way of doing business, emphasizing collaboration, customer-centricity, and data-driven decisions. They allow insurers to extend their reach, diversify their offerings, and gain a competitive edge.

However, building and participating in an ecosystem presents its challenges. Insurers must rethink their conventional business models, invest in novel technologies, and form partnerships. Insurers must invest in the necessary technological infrastructure to fully reap ecosystem benefits. Technology is not just a tool but a critical enabler in the development and success of ecosystems in the insurance industry. It offers a holistic seamless customer journey to consumers, provides insurers with valuable insights, and shapes the industry's future.

In the face of disruption, insurers have the choice to join existing ecosystems or design their own, thus becoming the disruptors rather than the disrupted.