Hit or hype? Ecosystems in the insurance industry

By Ulrich Kleipaß, Clemens Frey and Carsten Küst

For the past several years, many sectors have seen a number of different ecosystem approaches implemented, including the insurance industry. The advantages of ecosystems for the companies involved in them include greater customer focus, better digitalization of the customer interface, and a broader product and service offering.

That's the theory. But have companies' expectations been met in practice? What are the key success factors for actually benefiting from ecosystems? Our new Ecosystems of Tomorrow study answers these questions. It is based on a survey of more than 70 participants from different business lines and hierarchical levels in insurance companies in Germany, Austria and Switzerland (DACH). To ensure comprehensive consideration of the topic from a B2B perspective, information from partners such as technology providers, startups and insurance brokers was also taken into account.

Ecosystems will be crucial to market survival

The study identified various reasons why ecosystems are becoming increasingly important in the insurance industry. Based on their experiences in other sectors, customers have long expected more from insurers than just a smooth payout in the event of a claim. They want simple yet comprehensive solutions with low premiums. Another driver for the emergence of ecosystems is competition, including players coming in from other sectors. Examples include vehicle manufacturers offering warranty and assistance products, and digital players from the healthcare sector positioning themselves as a hub at the customer interface. Finally, technological progress plays an important role in the emergence and spread of ecosystems, as technology enables large volumes of data to be analyzed faster and in a more targeted manner.

In the coming years, we expect ecosystems to become more important in Europe, too. Study participants share this view: Nine in ten respondents rate ecosystems as extremely significant or even critical to the industry's future. On the current importance of ecosystems, the analysis of the status quo in the insurance industry indicates that almost all study participants have already come into contact with them, the vast majority – around 80% – even very often.

Roles and topics

The study also looks at the possible roles of participants in ecosystems. Three different roles are considered: orchestrator, realizer, and enabler. Orchestrators are the most outwardly visible players. They are responsible for formulating a vision, providing technical platforms and creating structures. Realizers, on the other hand, are players who deliver products and services and thus create an actual ecosystem out of a provider's infrastructure or product. They manage customer relationships. Enablers provide the necessary resources or infrastructure for growth. Their task is to create a favorable environment that fosters the success of all players.

Study participants consider health, mobility and cyber to be the most suitable areas in which to build an ecosystem. The cyber sector has been growing rapidly for many years. Within an ecosystem, partners can realize mutual benefits and pool their expertise. The authors expect the market volume to increase several times over. For Europe and the DACH region, they anticipate a premium growth rate in cyber of more than 30% per year.

In the health sector, ecosystems have already reached a higher level of maturity, at least in selected European markets. Digitalization and technological progress have significantly driven market growth. At the same time, regulation plays a major role. Insurers can use ecosystems to expand their service portfolio and achieve internal efficiency gains. Customer-centric care, cooperation with qualified partners, and the ability to implement innovations quickly are crucial to success.

In mobility ecosystems, the third area identified as attractive for insurers, it is of prime importance for companies to focus on addressing topics that are in some way adjacent to insurance, or offering services that customers think of as related to insuring their vehicle.

Creating a solid foundation on which to build

What is the best way for insurers to approach the topic of ecosystems? We recommend a step-by-step approach. First, a thorough analysis of the status quo in the relevant insurance line and the market should be carried out. It is important to understand which roles and players need to exist in an ecosystem and which of these are suited to insurers. In the second step, how compatible the company is with the idea and philosophy behind an ecosystem needs careful consideration. Finally, insurers must define what role they want to take in the ecosystem and formulate a concrete business plan. Only then can ecosystem implementation begin.

Which roles are attractive for insurers in the three areas identified? What is important to bear in mind when building an ecosystem and how can companies best prepare for ecosystem implementation? You can find answers to these questions in our latest study.

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