The great insurance disappearing act: what is the industry’s role in an ecosystem economy?

The sale of goods and services is becoming increasingly part of an ecosystem economy. From vehicle leasing to managed networking services, business models that combine different goods and services are more and more commonplace.

Motor and consumer electrical markets have been adapting to these changes for some time, and they are now becoming ever-more accessible. When I saw the news that IKEA was partnering with Swiss Re’s iptiQ to launch HEMSÄKER, a customisable digital home insurance offering, the first thought that sprung to mind was that this could be one of the early steps towards a similar model in insurance. 

Of course, IKEA is not the only household name that appears to have an interest in the insurance industry. When Amazon partnered with JP Morgan and Berkshire Hathaway to launch Haven, some suggested it could be used as a testing ground for Amazon to develop their own insurance operation. There have been suggestions that Apple is doing something similar with the development of healthcare services for its employees. In the wake of COVID-19, the work of technology companies to help control the pandemic has been fascinating and in some cases has almost frightening consumer appeal – would you not be tempted to use a vaccination passport app to get back to a normal(ish) life?

The challenge for insurers is that they may not like the role they occupy if insurance becomes part of the ecosystem economy. The majority of insurance brands typically adopt passive and very limited customer relationships with little, if not infrequent, interaction between insurer and insured. In fact, aside from making a claim, to complain, renew or cancel a policy, many insurers and their customers seldom communicate with one another.

The problem with passive customer relationships is that they are easily disintermediated. Goods or services can be commoditised readily, allowing disruptors to take ownership of the customer relationship and white label the offerings of service providers. In such an instance, insurers’ products would be offered as an add-on at the checkout, with the brand of the insurance company relegated to the fine print.

Unlikely as it is that insurers will soon compete with IKEA in the same way that the film and TV industry now does with Netflix, big brands with big budgets like Amazon and Apple could make forays into the insurance market and make life trickier for incumbent insurers.

For insurers to safeguard that their products do not become an afterthought they need to build more meaningful relationships with their policyholders by becoming more proactive and relevant in their customers’ lives. Creating more touchpoints and offering more support is crucial. For example, insurers might alert customers about new online security threats that have sprung up around COVID-19 so they do not fall victim to scams.

More advanced digital models for customer contact involving mobile and Internet of Things (IoT) allow insurers the opportunity to take a pre-emptive loss prevention role in their customers’ lives. Whether it is home security assistance delivered through connected cameras or leak prevention through sensors monitoring water pressure, such services would help insurers to add meaningful value on an ongoing basis.

Early adopters such as Hiro and the Hiscox partnership with LeakBot are paving the way here but more insurers need to follow suit. Getting customer buy-in for such services will require clear communication about how data is used and secured to build the utmost trust, but in this regard, insurers may have an advantage over their potential big tech competitors when it comes to consumer trust.

For insurers to survive as brands in a digitally mature ecosystem economy, they need to start building deep and meaningful relationships with their customers, with multiple omnichannel touchpoints. The longer they wait, the greater the chance that insurance brands as we know them today will simply disappear into the Ts & Cs small print.