Big Opportunities in Insurance Ecosystems

Today, insurers succeed by offering products. In the future, insurers will win by providing access to risk prevention and assistance services.


You may have noticed that the word “ecosystem” has crept into the insurance industry vernacular. Consequently, we risk turning an important concept into a cliché, one so overused outside of its original context that its impact and meaning become fuzzy and  eventually lost.

To be clear, I am not suggesting that “ecosystem” does not apply or is not fundamental to the transformation of the insurance industry – quite the opposite, actually. But we should understand its origin, respect its meaning and use it appropriately.

The word "ecosystem" derives from the Greek words oikos, meaning "home," and systema, or "system." It was first used in 1935 in a publication by British ecologist Arthur Tansley to draw attention to the importance of transfers of materials between organisms and their environment. In the early 1990s, James F. Moore originated the strategic planning concept of a business ecosystem, now widely adopted in the high-tech community. The basic definition comes from Moore's book, “The Death of Competition: Leadership and Strategy in the Age of Business Ecosystems.”

Using biological ecology as a metaphor, Moore reveals how today's business environment parallels the natural world and how, just like organisms in nature, companies must coexist and coevolve within their own business ecosystems. He identified radically new cooperative and competitive relationships and provided a comprehensive framework that businesses can use to enhance their own collaborations with their customers, suppliers, investors and communities.

Insurance Platforms and Ecosystems

Powerful and exciting insurance industry ecosystems have emerged – and continue to evolve like living organisms – as connected sets of services in a single integrated experience. Platforms enable and support ecosystems in that they connect offerings from cross-industry and inter-industry players in P&C, life, health and accident.

Platforms and the ecosystems they support will increasingly enable insurers to turn strategic visions into realities. Today, insurers succeed by offering products. In the future, insurers will win by providing access to risk prevention and assistance services — and by offering the right product to the right customer at the right time.

McKinsey research found that ecosystems will generate $60 trillion in revenue by 2025 — which will constitute 30% of global sales in that year. Consequently, many insurance executives are looking beyond industry borders to understand the growing opportunities and threats that come from new partners and competitors in the ecosystems relevant to them, from mobility to healthcare and beyond.

Platform businesses are the most efficient value creators, compared with other types of businesses, because they harness the power of distributed supply and network effects. The network effect is a phenomenon whereby increased numbers of people or participants rapidly improve the value of a product or service.

See also: Ecosystem-Based Business Models

Purpose-Built Insurance Ecosystems

The P&C insurance industry has already developed ecosystems to support specific business functions and continues to do so. Some examples date back to 1980 when information providers built platforms linking auto insurers to collision repair facilities to streamline the repair process. These ecosystems quickly expanded to include independent appraisers and adjusters, auto glass and car rental vendors, salvage pool and towing operators, parts providers and others. Today the ecosystems are beginning to include telematics service providers and auto manufacturers and dealers.

New property claims ecosystems are emerging to include a full suite of contractors, inspection technology, digital payments and other service providers, enabling insurers to resolve claims in hours instead of days or weeks. According to Paul Carroll, editor in chief of Insurance Thought Leadership, "Innovation will focus less on bells and whistles and more on improvements across entire processes and organizations. But incumbents must start preparing."

Future Insurance Ecosystems

Look no further for a brilliant and powerful new ecosystem extension than the recent announcement that Credit Karma, a unit of Intuit, has partnered with Progressive Insurance to offer usage-based auto insurance to Credit Karma’s millions of financial service smartphone app members, using its integration with DMVs to obtain instant driver and vehicle information.

And as if on cue, in her “11 insurtech predictions for 2021,” Martha Notaras, managing partner, Brewer Lane Ventures, predicts that "insurance will be embedded in every financial and retail transaction." 

“It is not a matter of if, but when, the insurance industry will have to adopt an ecosystem approach. The industry is not immune to the changing demands of the market,” says Dr. Geoffrey Parker, professor of engineering at Dartmouth College and a visiting scholar and fellow at the MIT Initiative on the Digital Economy.

Stephen Applebaum

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Stephen Applebaum

Stephen Applebaum, managing partner, Insurance Solutions Group, is a subject matter expert and thought leader providing consulting, advisory, research and strategic M&A services to participants across the entire North American property/casualty insurance ecosystem.


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