Why Do Companies Need Insurance Ecosystems?

Businesses are gradually beginning to realize that digital ecosystems (DEs) are the right course of development. Companies that cooperate with each other can provide customers with better services. Amazon, Apple, Uber, and other brands are no longer associated solely with sales, smartphones, and taxi services. These corporations have evolved into something greater, and millions of people can't imagine their lives without them. Insurance companies are also interested in increasing customer loyalty, retention, and engagement. However, not all of them know how to build a profitable partnership with other firms and create an insurance ecosystem. In this article, we'll share tips on how insurance software solutions can help you grow your business. 

An ecosystem as a global insurance market trend

A digital ecosystem is a group of interconnected services, apps, and technologies that are available to a user through the same interface. For example, someone needs to rent a car. When filling out a car rental form in a dedicated app, the client may be interested in related services, for example, accident insurance. 

Ping An of China is an example of an insurance ecosystem. It not only sells insurance products, but also provides care services such as Ping An Good Doctor, real estate services such as Pinganfang, and organizes recreation activities (AutoHome). 

Doing business in such a way pursues the aim of increasing the loyalty of existing customers and winning new ones. Therefore, more than 80% of insurance companies are interested in being a part of an ecosystem, and about 60% of surveyed organizations already have API insurance services. Nevertheless, not all insurance companies know how to establish a profitable partnership with other firms and create an ecosystem. 

How can companies create an insurance ecosystem?

Some insurance companies have been partnering with businesses from other industries for years, but this form of cooperation can’t always be called an ecosystem. McKinsey estimates that 32% of partnerships are in healthcare, 21% in finance, 20% in eCommerce, and so on. These statistics also show which industries insurance companies can cooperate with to implement an ecosystem.

For example, Autohome, an online car buying site, daily attracts nearly 30 million visitors who can become potential customers of P&C insurance companies. About four years ago, Tesla started a program called InsureMyTesla to simplify the insurance process for its customers by winning more than 16 million possible customers for Liberty Insurance.

When creating an ecosystem, insurance companies can either start their own ecosystem with the help of their subsidiary enterprises or cooperate with providers of related services. The first option is preferred by large enterprises that can win potential customers on their own. SMEs usually choose the second option as it doesn’t require great costs and resources.  

While an ecosystem can be implemented across industries, insurance firms don’t always know how to become a part of a digital ecosystem. To do so, it’s recommended that companies take the following three steps. 

Stage 1. Ecosystem strategy elaboration.

An insurance company should consider why it needs an ecosystem prior to bringing this idea to life. Does it need to attract potential customers or maybe reduce the number of claims? 

Finding the right partners is an important part of the vision. If you have a health insurance company, you should focus on the health ecosystem. If a company is focused on real estate, it should offer solutions for renting and buying real estate. 

Once an insurance company has determined what its sphere of interest is, it should determine the priority and value of these solutions to customers so that it can focus on services that are most sought-after. For example, a smart home system can be connected to a health tracking app.

An ecosystem developed by Amazon jointly with Realogy, a real estate agency, is an example of such a solution. Amazon offers Realogy’s customers additional services when they are moving to a new place, i. e. cleaning services, furniture assembly, as well as discounts on smart home products such as the Echo Dot.

Stage 2. Ecosystem development and support. 

A company should be technically prepared in order to develop an insurance ecosystem.

Organizationally, it’s quite difficult to distribute values among all the participants of the ecosystem, i. e. customers, insurers, and partner companies. 

How does this work in practice? Organizations can move from insuring risks to preventing them. For example, the Ai4medicine startup leverages Artificial Intelligence and data from a Berlin hospital for stroke risk prediction. The company offers insurance companies and individual clients diagnostic and remote monitoring services. Thus, the ecosystem participants can be united by the following values:

- сlients are interested in not being hospitalized;

- insurers want insurance payments to be made by healthy clients;

- software development companies strive to make a profit on sales.

Ping An, a digital health ecosystem, provides its clients with medical advice and issues prescriptions. In China, these are important features as it’s not always easy for people to make an appointment with a doctor in the context of overcrowded clinics and long waiting times. Users log in to Ping An’s app called The Good Doctor and indicate their symptoms in a dialog box. The system suggests doctors, stating their name, qualifications, years of experience, and so on. The doctor consults for free for the first 15 minutes, then a fee should be paid to extend the conversation. The virtual appointment ends with the issuance of an e-prescription, ordering the person’s tests, and scheduling a follow-up consultation.

Another challenge startups usually face is attracting to the ecosystem and retaining experienced insurance software companies. Therefore, insurance agencies strive to invest in digital solutions, even if they are developed by their partners. 

In the digital world, IT professionals play a very important role as ecosystem products require constant updates and smooth integration with various partners. Therefore, it’s crucial to assemble a cross-functional team that will develop scalable and flexible API-based IT architectures that ensure smooth app integration. 

IT specialists are the core asset of Prudential, an insurance company that is working on an AI-based app called Pulse. The unique solution has brought different startups together under one roof. The service helps customers not only to monitor their health, but to also get health insurance, participate in fitness activities, and so on. The developers relied on AI to include such features as diagnosing health conditions based on a 3D model, and others. 

Stage 3. Platform development.

Technological superiority is the main criterion that drives value for customers. This means developing insurance software solutions that communicate with partners via APIs. This connection should include a minimum set of data to be exchanged and basic authentication and authorization procedures. As new insurance services and products become available, the use cases can be expanded.

Partnering companies within an ecosystem develop platforms to offer various services to customers. Ideally, you should start with the development of a minimum viable product (MVP) for the highest-priority use case so that you know from customer behavior which service to include next. 

By taking these steps and integrating partner organizations with the platform, insurers will gain such business-critical features as flexibility, speed, value orientation, and customer insight. 

Benefits of using ecosystems

Digital insurance ecosystems are efficient business solutions that give to participating organizations the following tangible benefits: 

Improve the customer experience. Digital ecosystems improve customer experience allowing businesses to actively engage with customers and offer them convenient services. To do this, insurers involve open APIs, chatbots, health management apps, smart home solutions, and more. Insurance companies that delay ecosystem development risk losing market share to more innovative competitors.

Increase business agility. Insurers develop scalable and flexible IT architectures based on APIs. These app interfaces support the rapid consolidation of services into a continuous customer interaction loop. Flexibility also resides in being able to replace dysfunctional ecosystem components with new ones at any time, without severe consequences for your business. 

Offer the best benefits. More data is being generated in insurance than ever before. Motor insurers alone receive about four terabytes of data from connected cars every day. Health insurers track thousands of data from apps designed to monitor heart rate, sleep patterns, and so on. To cope with such an amount of information, specialists have to develop and scale Big Data ecosystems: analytics services, data visualization platforms, IoT, AI tools, and so on. 

New technology analyzes data and suggests a valuable plan based on past success factors. Companies learn how to work with Big Data more effectively and ensure a personalized customer experience. This, in turn, will increase customer retention, reduce costs, and make risk predictions more accurate.

The fact that insurance ecosystems have a great economic impact confirms that they should be taken more seriously than just a trend. As the experience of large companies shows, it is another effective way to monetize insurance. Although ecosystems are not easy to develop because of organizational and technological challenges, if successful, they open up new and stable sources of growth and income. Implementing an ecosystem is not a requirement, but the companies that do it can leave behind businesses that put it off for later.