The insurance industry is contending with many disruptors in society and technology. The sharing economy, with people sharing cars, rides and homes, is on the rise. Less individual ownership means less individual insurance – and certainly a decline in long-term contracts that generate steady revenue streams. Reflecting trends in the sharing economy, consumers want the ability to switch cover on and off at short notice to match circumstances. Another challenge for insurers: traditional business such as life insurance no longer delivers the same profits due to sustained low interest rates. Therefore, insurers need to innovate.
Are ecosystems the future?
Ecosystems in insurance – which have already featured on this blog – are undeniably where large parts of the market are heading. German insurance giant Allianz is already working through its ecosystem on the sharing economy to identify opportunities, also by looking at adjacent domains: by identifying a customer need that is outside (but still associated with) the provider’s core business model, and then by fulfilling that need.
Ecosystems tend to be aggregators of products and services from myriad providers, the idea being to give customers greater choice and simplicity. Travel and accommodation portals, for example, routinely offer insurance options. The ecosystem giants do just about everything: Japan’s Rakuten Ichiba offers online banking, credit cards, media streaming, fashion and shopping…and insurance.
Far from being a threat, ecosystems present exciting new business opportunities, with insurers playing the role of either a member (service provider) or orchestrator. Whatever their role, insurers will need to re-examine their technical infrastructure to empower the transition.
- Goodbye to legacy systems
It is important to look at the technical interfaces: Can the company connect easily with other entities to be a part of a digital ecosystem? Insurers should also face the fact that legacy systems – costly to maintain, held together apparently by force of will and countless workarounds – are well past the end of their useful life.
- Be cloud-ready
- The insurance industry is tightly regulated, which is why many insurers choose to keep business-critical IT infrastructure and applications on-premises. Moving more of the business to cloud platforms will enable insurers not just to simplify their IT landscape (following rigorous analysis of which apps to run where), but also to introduce vital standardization. This will make it easier to be part of an ecosystem of many partners.
Traditional insurers can be strong players in the ecosystems of the future. To find out how to harness the power of digital in insurance, visit Cognizant online.