Other parts of this series:
- Insurers are grasping the need for ecosystem partners in the new sharing economy
- Insurers must re-examine all their business operations to capitalize on the power of digital ecosystems
- Insurers must move now to secure a presence in digital ecosystems and be ready to seize new opportunities
- Insurers must balance the needs of their traditional businesses with the demands of new digital ecosystems
- Insurers can learn a lot from how Google is balancing the demands of its traditional and emerging businesses
- Insurers need to be alert to the role of the Internet of Things in the rise of digital ecosystems
- Insurers must be ready to compete in markets that will be increasingly disrupted by digital technology
- Insurers must change from being providers of products to digital ecosystem orchestrators
The rapid emergence of digital ecosystems is redefining the distribution of an enormous array of products and services.
Companies throughout the financial services, entertainment, media, engineering and transport industries, as well as insurers, are having to change how they sell their wares. They’re asking some searching questions about how best to build effective relations with suppliers, customers and, particularly, partners.
These challenges, however, go far beyond the need to overhaul distribution and sales activities. They impact the whole business. In my previous blog post I pointed out that insurers must re-examine all their business operations. Product development, marketing, underwriting, claims assessment and actuary services will need to be carefully aligned to support the business in the new sharing economy where partnerships are vital.
As many as 81 percent of insurance executives around the world expect interconnected digital ecosystems to blur the traditional boundaries of the insurance industry. Boundaries within the insurance market will certainly shift but so too will the internal boundaries of insurance providers. All the processes and systems carriers use to develop, manage and enhance their offerings will need to be reviewed, redefined and, often, restructured.
Insurers that fail to recognize the power of digital ecosystems to disrupt both markets and the businesses within them, run the risk of falling far behind their competitors. Early movers will invariably gain significant and long-lasting advantage over their more cautious rivals.
How is it that digital ecosystems will have such a big impact on insurers? To appreciate the scope and scale of this disruption let’s look at where businesses will be affected.
- Value creation – Traditional linear systems that generate value by developing, marketing and selling prominent product lines to multiple customers will fall away. They’ll be replaced by networked systems that create value by linking a wide array of different products and customers.
- Scale – Highly structured and predictable business growth will be superseded by the rapid scaling of key components of the enterprise to capture new markets and opportunities.
- Market definition – Clear, established markets are likely to give way to new, often unknown, markets with blurred boundaries.
- Acquisition and marketing costs – Traditionally high acquisition and marketing costs will be cut significantly, particularly if shared with external partners.
- Value capture – Additional forms of value, such as data, reputation and influence, alongside monetary value, will increase in significance.
- Nature of offerings – Traditional offerings, based on specific product lines and the infrastructure needed to deliver them, will be transformed to enable repeated interactions and engagement with customers.
- Offering development – New products and services will no longer be restricted to closed and proprietary offerings developed in-house. They’ll increasingly include collaborative solutions created with external partners. The development and quality control process will be far more open, democratic and driven by the needs of users.
Insurers need to quickly develop strategies that maximize the distribution benefits of these new digital environments. They must also assess the impact of these strategies on their current business model and determine what changes are needed to ensure long-term success in the new sharing economy.
In my next post I’ll discuss how insurers should begin restructuring their businesses to take advantage of the benefits of digital ecosystems. In the meantime, click on this link for further insights on this issue.