Other parts of this series:
To deploy successful living services, insurers need to abandon the traditional “pipeline” economic model and adopt a new “platform” approach to business.
Insurers looking to provide living services to increasingly digital-savvy consumers need to revise their traditional business models. They must shift from many of their conventional methods of attracting and servicing customers and become platform businesses that create value by collaborating with a host of partners and consumers.
This shift, as I mentioned in my previous blog post, is a big challenge for many insurers. It requires carriers to jettison practices that have served them well in the past and adopt new, often very different, approaches to business. At the heart of this transition is a move away from a traditional “pipeline” economic model, which focuses on producing, distributing and selling products, to a “platform” model that emphasizes collaboration among producers and consumers within a digital ecosystem.
The illustration below shows that most of the value generated in a platform economy comes not from profit mark-ups on products but from an on-going flow of digital services between producers and customers. Among the most important of these digital services are “living” services. They provide companies with a constant link to their customers that can quickly adapt to new demands and preferences as well as deliver additional services and experiences.
Selling insurance alongside other products, such as travel packages, motor vehicles and expensive electronics equipment, is not new. But platform businesses, built on open digital platforms that interface with expansive ecosystems, can provide consumers with far more compelling and sophisticated offerings.
To chart their migration from the traditional pipeline economy to the fast-emerging platform environment, insurers should consider these important steps:
- Evaluate key customer-lifecycle selling points, such as buying a home or starting a new job, and assess how these might change in the next five years. Determine what further information is required to better secure and serve customers. Gauge changing risk profiles.
- Identify how current insurance offerings could be clustered with other products to form a suite of living digital services that would better satisfy customer needs. Home and life cover, for example, could be coupled with wedding planning services.
- Devise a platform business strategy and secure ties with key digital partners. The strategy should define the roles, capabilities and goals of each partner and identify significant market barriers faced by competitors.
- Develop business models that support the platform strategy. They should be aligned with the organization’s vision, investment focus and operating practices.
- Create business cases for each of the business models and chart a roadmap for their implementation. Mitigate risk by testing various scenarios and collaborating with several business partners.
The bedrock of any platform business is the digital platform that supports its operations. In my next blog post I’ll discuss whether insurers should rely on another organization’s platform or build their own. Until then, take some time to look at these links.