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AI is coming of age as an interface tool in the insurance industry. Firms around the globe are taking promising first steps toward using AI as a digital ambassador to customers, agents, employees and business partners. AI is on its way to making every insurance interface simple and smart.
But AI is not the only trend transforming the future of insurance. As digital technology continues to blur the lines between industries and as businesses integrate their core functions with third parties and their platforms, a powerful new form of partnership is emerging: the ecosystem. Ecosystem power plays are the second trend identified in the 2017 Technology Vision for Insurance.
What is a business ecosystem?
An ecosystem is a new business paradigm in which firms use digital tools to leap over traditional industry boundaries or forge partnerships. For instance, General Motors no longer sees itself exclusively as a car manufacturer. It is also a transportation-on-demand company through its $500 million investment in the ride-sharing platform Lyft. The investment offers short-term tactical benefits, like the Express Drive service which lets Lyft drivers rent cars directly from GM. But the real upside for GM is the chance to develop an entirely new digital transportation ecosystem with leaders in ride-sharing and autonomous vehicles. Similar ecosystems are emerging across the smart office, connected home, healthcare and agriculture industries.
Most insurers grasp that they need to decide what role they will play in this environment. Our research found that most insurers recognize this strategic imperative.
Forward-thinking insurers are already putting together their first powerplays.
For example, the recently announced global strategic partnership between AXA, Alibaba and Ant Financial Services will explore how AXA’s insurance products can be sold through Alibaba’s global e-commerce platform. These include insurance products for e-commerce customers, commercial insurance for small- and medium-sized businesses and travel insurance for some Ant Financial Services customers.
Alibaba, the online Chinese retailer, is involved in another early insurance ecosystem powerplay with Ping An Insurance and Tencent Holdings. The three firms have come together to create Zhong An Online Property and Casualty Insurance, which is the first internet-only insurer in China. Zhong An has a multibillion dollar valuation and offers more than 300 products. It claims to have written 7.6 billion policies for over 535 million customers. Roughly half its business comes from selling shipping return insurance to Alibaba customers.
The power of partnerships
Other insurers are partnering directly with fintech startups to build hubs for emerging digital ecosystems. For instance, Berlin’s simplesurnace has developed software that seamlessly plugs into an online store’s checkout process, allowing customers to purchase product insurance with a single click. The company announced a collaboration with Munich Re last year and this year Allianz bought a minority stake in simplesurance and concluded a distribution agreement.
Making the transition to this new reality will be a challenge for insurers. They must balance tactical short-term decisions with investments in digital ecosystems that encompass long-term growth. This is mitigated by the reality that not every insurer needs to be a platform holder.
For instance, Aviva in the United Kingdom and Liberty Mutual Insurance in the United States have launched “skills,” (the Amazon term for apps and services on Alexa) with Amazon’s Echo. After installing the skill, customers can ask the Echo insurance questions with conversational language. Aviva and Liberty didn’t need to build their own AIs or distribution tools to access this pool of customers. Insurers are likely to expand such capabilities as these ecosystems continue to grow.
The future of ecosystems
After looking over industry trends and interview leading insurance thinkers around the world, we predict that:
- In five years, the majority of customers will be purchasing goods or services through digital intermediaries like messaging platforms, connected devices or smart assistants.
- In five years, 80 percent of the S&P 500 will be engaged in multiple industry ecosystems and most will have made public statements about increasing their reliance on ecosystems for future revenue growth.
- In seven years, an industry leader from today will have transformed into an ecosystem company spanning multiple markets. It will sit at the center of a disruptive ecosystem, with no physical headquarters and few permanent staff. Its most valuable asset will be its digital platform.
Some insurers might worry that these trends point toward a marginalized future for the industry, where it simply provides commoditized white-label products to platform holders. But rather than fighting the movement to platforms and ecosystems, forward-thinking firms are taking action to strengthen their roles in tomorrow’s marketplace. Companies across industries are forging the relationships that will drive their next waves of growth. An explosion of collaborative ventures is on the horizon. Their success will determine who leads the insurance industry and who gets left behind.
The race to find great insurance ecosystem powerplays is on.
Come back next week for a look at how new talent marketplaces are helping the industry deal with the coming workforce crisis. In the meantime, the full Accenture 2017 Technology Vision for Insurance report is available here.