In my last post I discussed the second of three fundamental questions that insurers must answer to successfully compete in the future. Today we’ll take a closer look at final and third question, what role can we play in a larger service ecosystem?
In the traditional insurance world, carriers know their competitors and work hard to keep a leg up on them. They strive to build a stellar reputation and keep all skills within the walls of the organization.
But digital technology is dissolving those walls, or at least making them more permeable. Insurance leaders see great potential to make a difference—and a profit—by operating not just as individual corporate entities, but collaborating within ecosystems.
Being part of an ecosystem means forging partnerships or investing in innovative companies to help master distribution, broaden product and service offerings, gain insights, and be digital.
Carriers recognize the importance of developing partnerships beyond the strictures of the insurance industry. Seventy-two percent of insurers we surveyed plan to form new partnerships in the near future or have already done so. Targets include banks (69 percent), Internet players like Google, Apple and Facebook (44 percent), and aggregators (44 percent).
Insurers that create ecosystems to offer customers a broader and more valued range of products and services are better positioned to secure a leading role for themselves. But sometimes it makes more sense to play a supporting role within a stronger ecosystem. For example, a carrier may benefit more from being added to a popular multi-service mobile app than expecting consumers to download and use its own insurance-dominated app.
One thing that’s beyond dispute is that the more sophisticated the insurer’s digital capabilities, the stronger its position within the ecosystem. Three things reinforce that role:
- Improving distribution capabilities. Forming new distribution partnerships directly addresses customer demand: 49 percent of consumers worldwide who bought a P&C policy in the past six months did so online, and 41 percent used their mobile devices.
- Going beyond insurance. Sixty-one percent of insurers are exploring the possibility of offering non-insurance products and services via ecosystems.
- Introducing new skills. As simpler customer service needs are met digitally, the bar rises for the frontline to address more complex customer needs. To address this, 43 percent of insurers plan to acquire innovators/start-ups to build new digital capabilities, or have already done so.
Leaders involved in ecosystems shift their focus from “the sale” of an insurance product to the end-to-end customer journey, which extends beyond the product to fulfilling a customer’s ultimate need – such as financial security.
A good example of an insurer that understands the need for an ecosystem is AXA Labs. This enables the insurer to connect with leading companies in Silicon Valley to detect emerging trends, achieve excellence in digital distribution, and foster a digital culture within the organization.
Winning insurers know customer insight is critical to developing the personalized experiences that customers crave, and partnering with businesses outside insurance can help them glean those insights. Retailers, utilities and credit card companies, for example, have deep customer knowledge that insurers might find valuable for pricing, product development and personalization.
Our research shows that 61 percent of insurers are already planning to offer non-insurance products and services. This is encouraging and confirms that they see themselves becoming part of a more diversified, relevant customer-lifestyle solution.
We know what it takes to win: it’s about transforming the value chain with a new focus on the customer, a sound digitalization strategy, and an appreciation of the role partnerships will play in future growth and differentiation.
Next time I’ll discuss some of the findings of the 2014 Global Consumer Pulse Research study and how they tie in to the three key issues we examined over the past several weeks. In the meantime please download the report: Capturing the insurance customer of tomorrow: Three key questions to guide success