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Partner Smarter: The Basics of Building a Life Insurance Ecosystem

 

Life insurers increasingly recognize that partnerships and ecosystems offer exciting potential for product innovation, improved customer experience, and revenue generation. Yet mapping an ecosystem strategy can be confusing. Read on to learn how your company can benefit from ecosystem thinking.

Digital technology is upending processes, customer experiences, and business models in the life insurance industry. Tasks that have been traditionally handled with paper forms, in-person medical exams, and human interaction are now being simplified or eliminated through digital interfaces. Almost every touchpoint — from marketing and enrollment to claims and renewal — will be re-imagined.

Tech startups and insurtechs are leading this industry transformation. Meanwhile, incumbent life insurers who initially viewed these high-tech entrants as threats, have warmed up to the idea of collaboration and partnerships. According to our 2020 research report conducted by Insurtech Insights, 66% of insurance companies are already partnering with non-insurers.

By curating or connecting to a partner ecosystem, life insurers can offer a more compelling portfolio of services, including capabilities from adjacent industries, technology giants, and the emerging insurtech community. In the following Q&A style overview, we’ll offer an introduction to life insurance ecosystems, why we believe they will reshape the future of the industry, and how they can deliver more value to you and your customers.

What is a life insurance ecosystem?

EIS defines an ecosystem as an interconnected network of companies and systems that work together to create more value for a customer than one party could deliver on its own. While some ecosystems can be small, the more elements and capabilities that are added, the greater the value to the customer. Because no single partner needs to build and orchestrate all the components, the ecosystem approach accelerates innovation — with one company’s innovation efforts furthering all others.

How do life insurers map out an ecosystem strategy?

Among the first steps in determining your ecosystem strategy is choosing how you will participate in the ecosystem. Options include joining an ecosystem that already exists, launching an ecosystem platform of your own, or a hybrid approach that combines both strategies.

The goal of plugging into an existing ecosystem is often to create new distribution channels. By embedding your life insurance products into an adjacent industry player’s ecosystem — such as retailers, tech giants, financial institutions, workplace benefits, or health providers — you can gain access to new customer pools. On the downside, it often means losing some control of the customer experience, which is led by the partner brand.

Creating your own ecosystem gives your life insurance company the opportunity to expand into new markets, simplify internal processes, and create differentiated customer experiences. For example, by pulling the capabilities of wellness, lifestyle, healthcare, or financial services firms into your product mix, you can move beyond being a carrier of risk to a champion of total wellness. Controlling and orchestrating the ecosystem will enable you to differentiate your brand but requires significant legwork to scale and attract customers.

In reality, most life insurers likely would pursue a hybrid strategy where they build an ecosystem platform within their workplace benefits, then connect to a wellness platform to enhance the workplace program.

What types of ecosystem partners should life insurers consider?

Three of the most common types of life insurance ecosystem collaborations include:

Partnerships that enhance the customer experience. Customers should always be central to any ecosystem initiative. Customer data is of utmost importance. Gaining a comprehensive understanding of customer behaviors, motivations, life changes, health metrics, and purchase power through third-party data sources will enable you to create hyper-personalized experiences that are becoming the new norm.

Armed with robust, real-time customer profiles, you can further your customer experience proficiency by creating automated recommendations on coverage. By partnering with a “robo-advisor,” for example, it’s possible to track key life events and lifestyle changes and make instant recommendations for policy updates.

Partnerships that expand your revenue opportunities. The life insurance industry has always focused on predicting mortality and using actuarial tables to determine financial risk. An ecosystem approach enables life insurers to rapidly integrate with health, fitness, wellness, and financial players to offer adjacent products to their customers.

Consider the possibilities of connecting life insurance policies to major players like Peloton® or Weight Watchers®, for example, or other complimentary products. Transitioning from the “one-and-done” sale to a more interactive, always-on relationship will create expanded revenue opportunities through long-term relationships and brand loyalty.

Partnerships that accelerate underwriting and reduce risk. Forward-thinking life insurers are striving to achieve an environment in which 70% or more of policies are auto issued, with no human intervention. Achieving this ideal state will require a dramatic reduction in forms, manual underwriting, and invasive medical exams. Data inputs that drive faster, more accurate underwriting will come from ecosystem partners who supply lifestyle data, health and genetic data, environmental data, such as pollution sensors, and medical data collected in nonintrusive ways.

What types of companies are insurers partnering with?

  • Providers of third-party data: 45%

  • Insurtech providing distribution capabilities: 45%

  • Insurtech providing other enabling capabilities: 40%

  • Insurtech providing underwriting/risk assessment capabilities: 37%

  • Insurtech providing claims-management capabilities: 36%

Source: The 2020 Insurer Compass, Insurtech Insights

What are the technology requirements for participating or building an ecosystem?

Although 39% of insurers that Insurtech Insights surveyed have plans to integrate with ecosystem partners in adjacent industries, the reality for the majority of life insurers is their ambitions and capabilities are often incongruent. 

A digital ecosystem requires a highly capable, digitally-enabled insurance platform as its hub. Unfortunately, the legacy mainframe systems and modern legacy policy admin systems many insurers operate were built years before the notions of the cloud, ecosystems, and SaaS became mainstream. They were never meant to support the types of open, API-based connectivity required by a true ecosystem platform. 

Although it’s possible to extract some data from legacy solutions, life insurers who seek to become winning ecosystem players need to be able to achieve unlimited connectivity. That’s only possible with an open, cloud-native core insurance platform.    

How coretech helps insurers manage the demands of the future

EIS provides the insurance industry’s first coretech insurance platform built to enable insurers to create and operate ecosystems. Coretech is a new category of insurance technology that’s built using the same architecture and technology principles insurtechs use. It’s the logical combination of next-generation technologies, methodologies, and insurance core systems that enable any insurer to easily consume data in any form, from any source.

A coretech platform also offers the deep insurance functionality and enterprise scalability you’d expect from a core systems provider, but it’s architected with the microservices, APIs, and event-based workflows necessary to support ecosystems and other emerging business models. 

The post Partner Smarter: The Basics of Building a Life Insurance Ecosystem appeared first on EIS.