Insurtech Ecosystems – Gateway to Growth and Opportunities

Gartner predicts traditional computing technologies will hit a digital wall by 2025 when new computing paradigms will take over at an overwhelming speed.

According to Novarica, over 65% of insurers have already deployed APIs/microservices, while 84% of insurance executives who participated in a study by Accenture confessed ecosystems are very important for their strategy. Organizations failing to respond to digital disruption are likely to suffer market share erosion worth $198 billion. 

Explains Matthew Josefowicz, President and CEO of Novarica, “In order to create value, emerging technologies should help insurance companies to either sell more, manage risk better, or cost less to operate. Over the past year or so, Novarica has found that insurers are focusing their investments and pilot activity on areas like RPA, Chatbots, and APIs that are directly related to moving one of these three levers.”

Technological advancements and evolving customer expectations have given birth to ecosystems across industries including InsurTech. Ecosystems are causing a wave of disruption and those that are willing to ride this wave can benefit a great deal. Uber set an example for organizations by attaining stupendous growth through an extensive ecosystem of 2,200 microservices. The ecosystem has helped the company reduce complexity and achieve greater flexibility. Forward-thinking InsurTech companies have a lot to gain too by building robust ecosystems that will serve to be the frontiers of growth and success. 

If you think you are ready to join the league of disruptors rather than being the disrupted one, it's time you invest some time and effort in building your ecosystem. It's the fastest way to creating rewarding customer journeys from quote to claim. Ecosystems can make you more efficient and agile as you explore new avenues to boost customer engagement and garner sustainable profitability.

Here's what you need to understand to get started.

Why are ecosystems such a big deal?

The fact that McKinsey expects ecosystems to generate $60 trillion in revenue by 2025, it is obvious that powerful and exciting ecosystems will continue to emerge. Early adopters have already leveraged ecosystems to get closer to their customers and build a culture of customer-centricity. 

By their very nature, ecosystems promote collaboration. InsurTech ecosystems comprise networks of companies that come together to offer greater business value collectively. Ecosystems offer the power and potential that's impossible to achieve individually. They enable consumers to get the services they need while offering insurers incredible benefits like increased operational efficiency, enhanced capabilities, and reduced operating costs.

What you need

While many have understood the importance of being part of an InsurTech ecosystem, their efforts have not landed them where they want to be. To be successful, you need to define your goals taking into account your existing assets and the parts of the value chain you wish to fortify. You may want to expand your service landscape or augment your offerings to weave them seamlessly into customer journeys or simply optimize the customer experience. Being ambitious about what you wish to achieve, you will have to strengthen your capabilities, both on the tech side along the organization side.

From a technology perspective, you need scalable and flexible API-based IT architectures that allow you to seamlessly integrate insurance offerings into customer journeys. You also need data management and analytics to be able to create a satisfactory customer experience across multiple touchpoints. 

On the organization side, you need to have the right legal structures that allow you to link diverse offerings while having the digital edge to support them. You must draw upon your own resources and data to create products that excel and surpass the competition. You must also build partner-management skills in a way that the collaborations lay a solid foundation for offering better service and greater value.

Core actions to consider 

It is easier to transition to ecosystem-based business models with a shift in thought, action, and culture. We recommend the following actions to ensure your new business model helps you overcome longstanding challenges and improve the end-to-end value chain.

Plan to win

Your ecosystem success will come only after prior preparation. You need to ask the right questions to be able to chalk out a plan. What kind of products, services, and experiences do you wish to promote? Where do you stand with respect to customer expectations and how prepared are you to offer them a seamless omnichannel experience? You must understand the customer journey well to ensure that you digitize every touchpoint along the way.

You need to review the many processes to determine the ones that need to be automated and those that you would want to outsource. You should also assess your product lines to have a proper plan of action to optimize your portfolio and subsequently the customer experience. You must critically analyze the InsurTech landscape to evaluate avenues for partnerships, alliances, and collaborations.

Digitize existing business models

With modern tools and technologies readily available, you can now adapt your existing business models to suit new toolsets that can facilitate self-service, straight-through processing, and smarter cross-selling.

Software-as-a-Service (SaaS), Artificial Intelligence (AI), and robotics have been helping insurers manage everything from underwriting to claims processing to help customers get the support and service they deserve.

On the other hand, insurers are also leveraging predictive analytics that uses internal and external data to ensure precise price risk. 

You need to embrace these technologies to ensure higher customer satisfaction and operational efficiency. You should consider moving processes and data to the cloud to be part of a larger ecosystem. Technology will not just give you an edge but also help you maximize your ecosystem investments. 

Build your capabilities with the right workforce

Freeing your company from the constraints of legacy technology architecture is not enough if you wish to build a setup that's lean and asset-light. You need to have the right people and capabilities to manage it. After all, an ecosystem is a pool of resources and strengths that come from diverse players with different capabilities. You may want to revisit your sourcing strategies to ensure that you have the right workforce at the helm of things in your company. 

Offshoring and outsourcing can go a long way in enhancing your operating model. You can choose competencies outside your company to become more efficient, save costs, and allow the core members of the company to focus only on high-value activities. Call centre support, for instance, is often outsourced while day-to-day operations are managed internally. 

You may want to consider hiring the services of third-party administrators (TPAs) that are known for their excellent policy administration systems. Those who wished to transition from a fixed to a unit-based model have had a long and satisfactory association with them.

Adapt your approach 

Ecosystems will vary considerably, which means you will have to adjust your approach accordingly. You need to have a plan to adapt to the ones you choose to be part of. While some may start with a bilateral partnership model that combines value offered by two non-competitive providers, others may choose to be part of a rather extensive ecosystem. 

Depending on the one you choose, you need to decide your level of commitment as well as investment early on to determine how you will relate to other participants. For instance, you may build an ecosystem and have total control over it but there’s a possibility that other players may outdo you eventually. You may also choose to be one of the many adaptive participants who plug into one or several ecosystems maintaining a low-risk approach with a behind-the-scenes role. But in doing so, you may lose contact with the end customers and may have a more restricted role and reach. It’s important that you know your choices well and how they can impact you and your business. 

The way forward

Ecosystems can serve as the cornerstone of future growth provided you choose the right partners and capabilities. TransformHub given its exhaustive experience in the InsurTech domain can empower you on the strategy and technology front to help you drive business innovation and become efficient ecosystem leaders. 

Based on our thorough understanding of the modern business landscape, we can help you pivot economics and experiences towards a more promising future. We will help you weigh your risks to ensure that the ecosystem becomes a solid go-to-market strategy for your business. With a clear vision and well-defined objectives, we will help you develop and scale a digital ecosystem business model that's just right for you.