Growth in the insurance industry can be difficult to navigate, and managing this must involve more than a one-size-fits-all approach. As client expectations, client engagement and technological advancement continue to evolve, the insurance industry is embracing the benefits of creating and implementing an ecosystem strategy.
Ecosystems are interconnected sets of services in an integrated experience that connect companies to adjacent offerings, often from multiple players. An insurance ecosystem strategy can be a mixture of investments, partnerships, new businesses, new revenue sources or new technology. Ecosystem strategies not only can open new revenue streams for insurance companies, but also can generate new leads, reduce distribution costs, improve client experience and increase retention. A company ecosystem strategy can become indispensable in a client’s value chain and drive a competitive advantage in the marketplace.
An ecosystem strategy should be part of an organization’s corporate development or strategic planning life cycle. Ecosystem strategies should not be entirely planned and designed in a vacuum — they should emerge from how a company already operates. This adaptability is one of this strategy’s major strengths.
There are some key design choices a company should get right in order to increase an ecosystem strategy’s odds of success. First, company leaders need to consider how the business touches clients’ lives — regardless of whether they are health, personal line or commercial line clients. Determining what is important to clients is another step. Touching a wider aspect of their clients’ lives ensures that your business becomes essential to them and increases new revenue streams for the company. There are two primary ways insurance companies do this: by launching a new business, service, or product, or by partnering with or investing in/acquiring another business. While some companies employ one approach or the other, some pursue a mixture of both.
Here are three ways insurance companies can design and manage an ecosystem strategy that can help boost growth.
1. Launch adjacent services
– The first option involves launching an adjacent service or a new product that is not a typical insurance product but is attached to or adjacent to the products that a company currently offers, enabling additional revenue streams. When considering core products, services, and revenue, it is best to have clarity about what it is that a company sells to its insurance clients and what services and products are adjacent those. Then, the company needs to consider whether it is best suited to build it themselves or pursue an acquisition to acquire the capability.
For example, in the commercial insurance space, insurers have instituted risk management services fees to assess business risks, thereby helping to better underwrite them. This is an adjacent service that has been routinely provided to insurance clients. Another example is a health insurer providing ride-sharing transportation services to ensure clients make their appointments.
2. Invest in a strategic partnership
– Entering into a strategic partnership with another company is a viable means to create an ecosystem. However, this option is not just about ensuring that a company has access to the other business’s clients. An insurer must take care to identify a partner that has a similar approach to an ecosystem strategy. Also important is recognizing that managing a partnership takes a sizable investment of time and requires skill and experience. A company needs to consider the impact of sharing its proprietary data and trade secrets with a new partner. If approached in the right manner, a partnership can build value for both companies.
Take, for example, the partnership of Walmart and Nationwide Insurance. Together they link prescription services together with pet insurance and create a critical point of client contact. The ecosystem created enables clients to fill their pets’ prescriptions and purchase pet insurance at Walmart, as well as shop for their groceries -- adding value for both companies’ clients.
3. Embrace the role of data and technology
– Proper data use is at the center of the ecosystem approach as the enabler of interconnected services. Through the use of technology, organizations with distinct capabilities can work together with a shared vision and achieve growth in new ways. Digitization allows organizations to expand and explore other channels — like direct-to-consumer ¬sales — and leverage agent/broker relationships.
The rise of price- and feature-comparison websites have created more transparency for gauging price and value for a company and its competitors. To combat this, insurance companies need to shift the attention away from price to value. One way to do this is to engage broker sales channels effectively, tailoring benefits packages, products, and services to present an offering that better aligns with the customers’ needs. The need to be technology-centric and customer-driven are both creating incentives for companies to take an ecosystem approach.
Insurance companies that leverage an ecosystem strategy best suited for their company will be well-positioned to achieve sustained growth from the resulting new revenue streams -- growth demonstrated by increased revenue, new customers, digital connections, a shift to value and strengthened loyalty.
For more information on this topic, please watch Grant Thornton’s webcast replay, “How to achieve growth in the insurance ecosystem
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