By now, you may have heard lots of talk about “ecosystems,” and the way they are reshaping the way we collaborate and innovate. Ideas and data flow from one entity or participant to another, enriching all in the process.
This represents the greatest impending change for the insurance industry as well. In a previous post, I discussed the blending of the experience of mainstream insurers with the entrepreneurial energy of insurtechs, leading to new ways to serve customers and design new products.
Taking the concept a step further, Sangeet Paul Choudary, INSEAD entrepreneur-in-residence and founder and CEO of Platformation Labs, recently penned an article that observed how the future of the insurance industry is being shaped within other industries, such as intelligent, electric vehicles. “Tesla announced that it would offer lifetime auto insurance bundled with the cost of the car,” he observed. “The company is betting that its improved machine learning will bring down the risk profile of its entire fleet of connected cars.”
Until recently, Choudary explains, the industry had two primary customer touchpoints: “at the time of sale and at the time of claim.” However, with connected technologies, the relationship between insurers and their customers is evolving into something richer and deeper. The auto and health sectors, he says, now “offer personalized and dynamic insurance premiums to their customers.”
This is only the beginning, he continues, noting that insurers can start focusing on preventing extreme events, versus simply providing compensation after they occur. Technology-driven developments, such as in-car devices that offer feedback and education to drivers, make greater interaction possible. The insurers’ advantage, he states, is they have the data that makes things possible. This opens up partnerships with non-insurance firms, such as auto manufacturers, utilities, services, and other parties. The more data insurers capture about customers, “the more third parties will partner with them,” Choudary adds. “In turn, the more third parties that offer value, the stronger the value proposition will be for the end customer.”
Because they gather and hold data, the insurance industry may ultimately enjoy a supreme advantage. “In digitally driven future ecosystems, the orchestrators -- the operators who own the data and therefore can be the first touchpoint and define what a customer gets and when and how -- they will have disproportionate power over the whole value chain,” says Miklos Dietz, a McKinsey partner.
The customer seeks integrated capabilities as well, Dietz adds. "When people are looking at housing in a digital way, they are looking at one integrated journey through which they can look for places, buy a house, get a mortgage, home insurance, moving services, refurbishing, and then potentially also find somebody to sell to, or go to a reverse-mortgage structure, or sell and lease back, that is, almost everything related to buying and owning a property can be in one ecosystem,”
While insurers may be seeing their businesses disrupted by outside forces, it represents an opportunity to step up and take the lead with these emerging data-driven ecosystems.
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