Other parts of this series:
Partnerships and ecosystems are becoming increasingly important to insurers. Learn why.
In my previous post in this series, I looked at what incumbent insurers can learn from insurtech startups, with their inherent ability to identify and release trapped value in the insurance value chain. I also suggested that insurers examine the back end of the value chain to uncover hidden value in underwriting, pricing and risk. This week we’ll look at how to move forward once potential value has been identified.
The most important place for insurers to begin is to recognize that they can’t do it alone. Finding partners that have complementary capabilities and collaborating within a broader ecosystem have become necessities for gaining a competitive advantage.
Many insurers are already embracing partnerships. According to Accenture’s Technology Vision 2018 survey, 38 percent of insurers report that the number of partners their organization works with has at least doubled during the past two years. Furthermore, in the previous year's survey, 76 percent of insurers agreed that their competitive advantage would come from the strength of the partners and ecosystems they chose.
Home insurers such as USAA, American Family, Liberty Mutual and State Farm arepartnering with connected-home technology companies to personalize premium pricing and to help customers avoid claims in the first place. Other insurers are partnering with Internet of Things (IoT) companies to reduce the number of claims, to improve the customer experience and to help them better assess risk and adjust premiums.
Working with insurtechs can be a powerful catalyst for change, and ecosystems involving multiple startups could accelerate an insurer’s pace of improvement and depth of innovation.
However, forming a successful partnership can be difficult and many insurers are not equipped to develop ecosystems of multiple startups or build a path from the lab to the real world, and at scale. A primary challenge here for incumbents is being saddled with legacy debt and core platforms that must be dealt with. These systems, built to operate within the organization, were not designed for today’s rapid pace of change and they do not have the agility to swap technology-based partnerships in and out on demand.
This is where partnering with an experience partner is valuable—to help identify parts of the legacy value chain that are prime for unlocking trapped value, to help develop a targeted digital decoupling approach to legacy modernization and then assist with building the target architecture piece by piece where it drives value. Our experience tells us that this is a necessary first-step in being able to take advantage of what ecosystems partners have to offer.
In my next post, I’ll look at how combining the capabilities of multiple startups can help insurers solve problems at scale.
In the meantime, if you’d like to learn more, read the report: Fearless Innovation: Insurtech as the Catalyst for Change within Insurance