Can insurers compete in the new platform economy?
It’s not just tech and digital-born organizations that can use a platform model to accelerate both growth and profits.
Platform-based business models and strategies are driving the most profound global economic change since the Industrial Revolution. Facebook, Airbnb, Uber and Alibaba were all designed on a platform business model. At its essence, it allows multiple participants (from producers to consumers) to connect to it, and interact with one another to create and exchange value.
So where do insurers fit into this model?
It’s not just tech and digital-born organizations that can use a platform model to accelerate both growth and profits. To stay competitive, insurers must break into the platform economy to develop new value-added services and create new sources of revenue by rethinking their traditional roles. A successful insurance platform should easily connect insurers to new B2B and B2C ecosystems, opening up new channels and marketplaces.
For example, consider the opportunities for insurers in the mobility ecosystem to expand into areas such as vehicle purchase and maintenance management, ride-sharing/carpooling, traffic management, vehicle connectivity, and parking. Or insurers could orchestrate a risk-management ecosystem, made up of cloud providers, cybersecurity experts, and providers of anonymized customer data, to offer prevention and post-breach response services. In each of these cases, insurers need an open business platform to “plug and unplug” ecosystem capabilities.
Insurance platforms change shape
The imperative to prevail in a platform economy is a catalyst for a new generation of insurance platform that combines digital technologies and cloud foundations. It uses mobility, data from Internet of Things (IoT) devices, and artificial intelligence (AI) to accelerate the product development and delivery of rich, valuable digital experiences that today’s customers expect.
It leverages cloud-based infrastructure and services to give insurers affordable, reliable, and scalable support for business applications and access to markets, while providing greater security and business continuity. And its cloud-native design gives insurers differentiating market agility to introduce new products and services rapidly and respond to customers quickly — making the cloud a key enabler of the new digital insurance platform.
Insurer-specific challenges
To play in the digital economy, companies need to provide consistent, engaging customer experiences at each point in the customer journey, from the company website to social media to text and phone interactions. But because most legacy insurance systems weren’t designed for digital connections, it can be hard for insurers to give customers the innovative, real-time digital experiences they expect — such as on-demand service, short-duration insurance coverage, and “photo to quote” or “photo to claims” processing.
New market entrants, such as Lemonade, Trov and Hippo, and tech-savvy incumbents are using AI, machine learning, natural language technologies, and IoT data to improve customer interaction. They’re perfecting bot interfaces to streamline applications and claims. They’re focused on the needs of the customer — a 180-degree shift from the traditional policy-centric view of insurance. To compete, insurers can build digital-first business models that provide more value to customers and establish much higher levels of service.
Those insurers that can supplement their deep industry expertise with the scalable computing power of the modern cloud and a unified and digitalized core of front- and back-office operations will survive, and even thrive in the platform economy. Armed with this combination, they’ll be positioned to create an engaging customer-centric experience to drive both profitability and customer loyalty while operating more efficiently.
Playing in the digital end game
Being able to efficiently participate in the platform economy is the logical end goal of insurers’ digital transformations. A recent Accenture study found that 94% of insurance executives agree that adopting a platform-based business model and engaging in ecosystems with digital partners are critical to their business. It is impossible to visualize insurers succeeding in their end game without two key pieces: a next-gen digital insurance platform that can provide a real-time, insight-driven interactive customer experience across multiple channels; and a cloud environment to provide better security, speed and performance at lower cost and less risk.
Mike Dwyer (MDwyer@eisgroup.com) is CTO and executive vice president, Engineering at insurance core systems and digital solutions supplier EIS Group.
The opinions expressed here are the author’s own.
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