Heading Off Surprises Paul Carroll, Editor-in-Chief of ITL Who had “giant cargo ship” on their bingo card for possible disasters at the start of 2021? What about “derecho in Iowa” in 2020? “Global pandemic” at the outset of 2020? Few of us foresaw any of those specific disasters. I certainly didn’t. I didn’t even know what a derecho was until the massive wind storm whacked Iowa, causing $7.5 billion of damages and some $5 billion of claims against insurers — more damage than in most hurricanes. But some at least entertained such possibilities. And it’s time that we all broadened our thinking by returning to the too-often-neglected discipline of scenario planning... continue reading > Deloitte and Majesco Podcast   Tune in to industry experts as they discuss how insurers are adapting to the impacts of Covid-19 on business operating models.   Listen Now SIX THINGS Pioneering Use Cases for IoT in Insurance by Matteo Carbone Several early adopters of the IoT have already concretely demonstrated the potential of using this technology in the insurance sector. Read More Insurance Ecosystems: Opportunity Knocks by Marie Carr Insurers must apply unfamiliar skills – customer intelligence, speed and coordination – but can achieve benefits of scale without asset intensity. Read More How to Combat the Surge in Ransomware sponsored by Tokio Marine HCC - Cyber & Professional Lines Group Insurers can help clients protect themselves -- but preventive approaches aren't yet widely implemented. Read More COVID-19 Is NOT an Occupational Disease by Mark Walls If workers’ comp becomes responsible for common conditions that affect millions every year, it is no longer meeting its designed purpose. Read More Unlocking the Power of ‘No-Code’ by Farooq Sheikh We've all seen how complex and costly enterprise software can be. "No-code" tools let non-experts quickly build the systems they need. Read More Key to Better CX: Think Like NTSB by Jon Picoult Airlines are rarely held up as exemplars of customer experience, but in one important respect the industry deserves such recognition. Read More Tip the Sales Scale in Your Favor by Kevin Trokey Yes, relationships matter, but they're only a tiebreaker. The key lies elsewhere. And, no, it shouldn't take two to three years to develop a client. Read More MORE FROM ITL March's Topic: Strategic Innovation   Strategy is what you don’t do. That was the dictum of the late, great Mel Bergstein, who way back in 1994 founded the pioneering digital strategy firm Diamond Management & Technology Consultants. (It became part of PwC in 2010.) I heard Mel’s line a lot, as a partner with Diamond from 1996 through 2003, and I think his are words to live by in the insurance industry these days. Everyone seems to have gotten the memo about the need to digitize insurance and to explore innovative ideas, but the present typically creates a real drag that slows movement toward the future. Take Me There A Conversation on Corporate Strategy with Amy Radin In-depth with ITL's Thought Leaders Join ITL's editor-in-chief Paul Carroll as he sits down to discuss corporate strategy with director, advisor, author and thought leader Amy Radin. Watch Now GET INVOLVED Write for Us Our authors are what set Insurance Thought Leadership apart. Get Started Partner with Us We’d love to talk to you about how we can improve your marketing ROI. Learn More SPREAD THE WORD Share Share Tweet SUBSCRIBE TO SIX THINGS

Some 25 years after the publication of Nicholas Negroponte’s seminal "Being Digital," it feels trite to write about how digital capabilities and the expectations they create among customers have transformed even traditionally sleepy industries like insurance. Yet, the digital transformation of insurance is not a narrative of progressive evolution but rather a story of successive and disruptive waves. And we are on the cusp of a third one. 

The first wave saw insurers learn to exploit digital tools to sell directly to customers. Established players as well as a plethora of tech-first startups proved it was possible to sell insurance online to customers without the benefit of an agent. 

The second wave, still in flight, focuses on customer experience, bringing better and easier ways for insurers to process applications, serve customers and pay claims. These efforts have brought new efficiencies to an industry hyper-focused on cost while at the same time addressing the needs of consumers who expect immersive and contextualized digital interactions with all the businesses they patronize.

The third wave, in its infancy, focuses on ecosystems, that is the embedding of insurance within the value chains of other industries. An online world, dedicated to selling us cars, homes, travel experiences and financial services is now discovering the opportunity to bundle insurance with the goods and services they provide. Such bundling addresses customers at the moment of need, at the life event – a new home or car purchase, for example – which triggers the need for insurance protection. Insurance in such a model is, as the title and summary of this article suggest, like French fries, a digital side dish suggested as an add-on to the main course. In the years ahead, we will increasingly see more and more businesses ask the question, “Do you want insurance with that?”

Whose brand is it anyway?

Big Tech has done the spade work for this third wave of transformation. Well before COVID-19, customers were becoming increasingly receptive to the idea of buying insurance from Big Tech firms. And around 44% of the consumers we interviewed as part of Capgemini’s World Insurtech Report 2020 said they would consider coverage offered by Big Tech.

Policyholder willingness to purchase Big Tech coverage is on the rise

The fact that Big Tech has earned and retained customers' trust during various lifestyle interactions is the catalyst behind their increasing willingness to buy insurance, too. Customers say they can count on tech giants for stellar digital experience, intuitive services and real-time response. 

So far, Big Tech has been making slow, yet deliberate, inroads into the insurance space. Google subsidiary Verily announced plans in August 2020 for its own insurance company (backed by the commercial insurance unit of Swiss Re Group) to provide tech-driven employer health insurance plans. Verily has also made a health-tracking smartwatch for research use. Amazon invested in Acko Insurance to offer auto coverage via the India-based startup’s platform. Big Tech firms are also integrating existing products (Apple Watch or Amazon Alexa) into the insurance value chain or developing convenient and time- and money-saving offerings that appeal to a broad range of policyholders.

These findings with respect to Big Tech are consistent, of course, across industries. The erosion of traditional brands in favor of new digital ones has occurred in every sector.

See also: Pioneering Use Cases for IoT in Insurance

Equally important is the extent to which the willingness to buy from Big Tech extends to a broader ecosystem of digital-first businesses. Disruptive industry-specific players, most notably in automotive, are as big a change agent as Big Tech. Buying car insurance from Carvana, home insurance from Zillow or small business insurance from Quickbooks makes all the sense in the world, particularly when these digital behemoths demonstrate the power to use data to make the right offer at the right time at the right price. 

The challenge to the industry to adapt is profound.

What’s an insurer to do?

As Big Tech and other online powerhouses look to turn insurance into the new French fry, insurers must consider the implications of this digital third wave and choose strategies through which they both embrace and differentiate in the new world of embedded insurance.

Most obvious and relevant is the ability to embrace the new channels. Insurers have always relied on third parties for distribution. A shift in mindset to see e-businesses as the agents of the future requires cultural change and paradigm realignment but is not revolutionary from a business model perspective.

The bigger challenge in many respects is on the technology-side. The constraints of legacy systems and brittle enterprise architectures, which shockingly persist 25 years after Negroponte, limit the ability of insurers to plug and play seamlessly in the new ecosystem. Developing an API framework that enables insurers to connect safely and securely with a broad array of distribution partners – what we at Capgemini call Open Insurance – is a prerequisite to being part of the coming disruption and not a victim of it.

Along with the API-ification of insurance technology comes significant requirements to up the game with respect to data. Succeeding in the new ecosystem, as noted above, requires being there at the right time with the right product at the right price. Doing so requires real-time customer insight, which comes from data mastery. We have been slow to get there. Less than 40% of insurers say they have access to IoT devices and natural language processing (NLP) support systems to enable real-time insights. Producing and leveraging analytics at scale will be the battlefield for this third wave of digital.

Not all French fries are created equal

It will, of course, take more to succeed in the new ecosystem than technological advances. 

Competitive differentiation among insurers will need to come from the insurance product itself. In a world where traditional brands have ever-diminishing salience, product and price are the only bases for competition. The standardized products the industry currently offers will force an inexorable race to the bottom, where the cheapest wins. Look for product innovation to be the true benefit of the third digital wave.

See also: o You Know What You Don’t Know?D

The demand is already there. Only some insurers see it.

Incumbent insurance executives interviewed as part of the World Insurance Report 2020 were behind customer expectations regarding new products. Only half of the executives we talked with said they had rolled out usage-based insurance (UBI), such as pay-as-you-drive (PAYD) offerings. Conversely, customers’ year-over-year interest in UBI climbed from 35% in 2019 to more than 50% in 2020. Less than half of the insurers we interviewed said they effectively target promotions at critical life-phase moments, and fewer than 25% said they use artificial intelligence systems to track external data.

The challenges to insurance product innovation are not trivial. Complex regulatory regimes create significant hurdles, making almost impossible the “fail fast” mindset that drives innovation in other sectors. But the challenge for insurers is indeed existential. As the aficionados of one or another fast-food empire will attest, the fries may be a side dish, but they are often the best part of the meal. Insurance should learn from this example.

Most personal lines insurers were already pursuing digital transformation before the pandemic, but the tumultuous events of last year caused many to reprioritize digital projects and change the shape of their journeys.

Generally, the industry fared well despite the lockdowns, economic volatility and work-from-home imperative. As activity and behavior patterns shifted dramatically in many ways, the industry benefitted – so much so that large rebates were offered by many personal lines carriers. However, insurers also had to deal with the increasing severities in personal auto, an uncertain financial market and reduced demand in some areas due to layoffs and an economic downturn.

From a digital journey standpoint, it was not so much about pausing the effort to become a digital enterprise as it was about reprioritizing projects to address urgent needs revealed as a result of the pandemic.

A new SMA research report, Digital Transformation in Personal Lines: Project Priorities for 2021, identifies specific plans for carriers related to a variety of digital projects. A big theme is the focus on self-service capabilities for policyholders, especially for policy service and claims. While some insurers already had robust solutions in these areas for digital capture and workflows, most found that their capabilities needed upgrades to support remote, virtual operations.

At the same time, the evolution of core systems continued unabated. Modern core systems for policy, billing and claims are the foundation for digital transformation.

The move to simply digitize more assets and automate workflows also accelerated. Although the core, digitization and workflow projects may not, by themselves, drive transformation, they are enablers for a whole range of digital projects. More information must be in digital formats, and the systems of record that manage key transaction flows and data must be built on modern architectures that provide the flexibility and adaptability needed in the digital age.

See also: The Digital Journey in Commercial Lines

Although one would think that all the focus would be on customers, the reality is more complicated. There are certainly digital projects that focus on addressing the digital gaps related to customers, such as self-service portal projects. However, there is just as much or more activity focused on operationally driven transformation. In some ways, this is the typical response to a crisis – focus on operational efficiencies and position the company to weather difficult times. But, in other ways, this focus just reflects the opportunities to reduce complexities, decrease paper and manual handoffs and increase digital data to feed digital workflows and analytics.

SMA predicts that there will be an acceleration of the digital journey as 2021 progresses, continuing into 2022. As we move toward the post-pandemic world, there is an even greater appreciation for the power of digital transformation.

 

Who had "giant cargo ship" on their bingo card for possible disasters at the start of 2021? What about "derecho in Iowa" in 2020? "Global pandemic" at the outset of 2020?

Few of us foresaw any of those specific disasters. I certainly didn't. I didn't even know what a derecho was until the massive wind storm whacked Iowa, causing $7.5 billion of damages and some $5 billion of claims against insurers -- more damage than in most hurricanes.

But some at least entertained such possibilities. And it's time that we all broadened our thinking by returning to the too-often-neglected discipline of scenario planning.

Bill Gates warned us of the possibilities of a pandemic during a TED Talk in 2015, based on thinking akin to scenario planning -- which involves developing stories about possible futures that, while not necessarily probable, are at least plausible and would require drastic action. Gates even got the contours of COVID-19 right, warning of a virus that could be spread through the air and that would have people infecting others before they knew they had contracted the disease. Gates said the world was woefully unprepared and recommended what he called "germ games," the medical equivalent of war games, in which governments would simulate responses to a hypothetical virus and spot their vulnerabilities (in this case, their very many vulnerabilities).

Others have worried about potential disruptions to supply chains as trade has become more global, which makes something like the Suez Canal a choke point. Still others have raised concerns about the effects of climate change, such as may have contributed to the derecho.

But we keep getting caught flat-footed, with serious implications for both clients and insurers.

Now, I'm not suggesting that anyone should have predicted that a ship as long as the Empire State Building is tall would wedge itself athwart the Suez Canal for six days, holding up $10 billion of cargo a day and causing many ships to be rerouted around the Cape of Good Hope, adding weeks to their journeys.

Still, scenario planning has shown itself to be an effective tool for gaming out problems, stemming back to the pioneering work that Royal Dutch/Shell did beginning in the 1970s. According to a 2003 article in Strategy + Business, "Scenario planning alerted Shell’s managing directors (its committee of CEO equivalents) in advance about some of the most confounding events of their times: the 1973 energy crisis, the more severe price shock of 1979, the collapse of the oil market in 1986, the fall of the Soviet Union, the rise of [Islamic extremism] and the increasing pressure on companies to address environmental and social problems."

That's a pretty good set of warnings.

The article adds: "The method has since become widely popular outside Shell, not just in corporations but in some governments. In South Africa, for example, scenario planning played a major role in the peaceful transition from a system of apartheid to a stable multiracial government."

I'm no expert on scenario planning, but I'll try to seed the discussion with some classic articles on the topic.

Here is a Harvard Business Review article from 2013, which explains the history of the work at Royal Dutch/Shell and argues that, even when scenarios don't play out as imagined, "a sustained scenario practice can make leaders comfortable with the ambiguity of an open future. It can counter hubris, expose assumptions that would otherwise remain implicit, contribute to shared and systemic sense-making, and foster quick adaptation in times of crisis." 

Here is a 1995 article from the MIT Sloan Management Review that lays out the methodology in detail. The article says that scenario planning doesn't just lay out lots of data about how the future might play out but "goes one step further. It simplifies the avalanche of data into a limited number of possible states. Each scenario tells a story of how various elements might interact under certain conditions.... A detailed and realistic narrative can direct your attention to aspects you would otherwise overlook. Thus [in a scenario developed for mountain climbers] a vivid snowdrift scenario (with low visibility) may highlight the need for skin protection, goggles, food supplies, radio, shelter, and so on."

It seems that we should at least be laying out scenarios related to the possible effects of climate change -- hurricanes, wildfires, derechos and other wind storms, surprising freezes like the one that shut down the electric grid in Texas, etc. (I encourage you to read this recent article from Francis Bouchard on other ways that we as an industry should respond.) The potential for civil unrest seems to be rising worldwide. Solar storms that could fry the grid? Weapons of mass destruction? A crisis with a natural resource -- perhaps water?

There's a lot to do. I'm hoping that we as an industry can both prepare better ourselves and can help clients at least be ready to adapt when the next bit of craziness happens.

In the meantime, we can celebrate that a whole lot of hard work, plus a "supermoon" full moon and high tide on Monday, freed the 220,000-ton ship blocking the Suez Canal.

Stay safe.

Paul

P.S. Here are the six articles I'd like to highlight from the past week:

Pioneering Use Cases for IoT in Insurance

Several early adopters of the IoT have already concretely demonstrated the potential of using this technology in the insurance sector.

Insurance Ecosystems: Opportunity Knocks

nsurers must apply unfamiliar skills – customer intelligence, speed and coordination – but can achieve benefits of scale without asset intensity.

COVID-19 Is NOT an Occupational Disease

If workers’ comp becomes responsible for common conditions that affect millions every year, it is no longer meeting its designed purpose.

Unlocking the Power of ‘No-Code’

We've all seen how complex and costly enterprise software can be. "No-code" tools let non-experts quickly build the systems they need.

Key to Better CX: Think Like NTSB

Airlines are rarely held up as exemplars of customer experience, but in one important respect the industry deserves such recognition.

Tip the Sales Scale in Your Favor

Yes, relationships matter, but they're only a tiebreaker. The key lies elsewhere. And, no, it shouldn't take two to three years to develop a client.

We are living in a hyperconnected world, and the presence of IoT devices has already been more pervasive than many of us have realized. Mobile phones in our pockets are full of sensors. Their software is updated over the air. And, when we lose them, we can remotely track their position. Meanwhile, restaurants are using simple QR-codes to comply with COVID safety measures, warehouses are employing robots to automate certain manual activities, etc. The spread of the IOT continues.

Although IoT has not yet been systematically addressed by the large majority of insurers, several early adopters have already concretely demonstrated the potential of using this technology. I have had the privilege to directly support many of these players through the activity of the IoT Insurance Observatory, an insurance think tank that has aggregated almost 60 insurers, reinsurers and tech players between North America and Europe.

Today, there are international insurance companies with millions of policies priced with telematics in their auto portfolios, millions of customers using an IoT-enabled wellbeing reward systems in their life insurance portfolios and thousands of workers protected with real-time risk mitigation solutions in their workers’ compensation portfolios. The level of maturity is higher on insurance personal lines; however, a new wave of IoT-based initiatives is occurring in commercial lines.   

These successful player journeys show IoT’s extraordinary potential to generate value for insurers, policyholders and even the entire society. Indeed, IoT allows an insurer to connect with its clients and their risks, providing benefits on four axes:

1. Improving customer experience by enhancing proximity and frequency of interaction with them, therefore moving beyond the traditional risk transfer. Many players are selling additional services for a monthly fee; others have found new ways to sell insurance coverages thanks to IoT; 
2. Enhancing core insurance activities (assessing, managing and transferring risks) by using IoT solutions for continuous underwriting, claims management and risk reduction. Using the insight generated by the analysis of the flow of IoT data has promoted less risky behaviors in real time; 
3. Generating knowledge about policyholders and their risks, to insure them in a different way, to enable up- and cross-selling and to insure new risks;
4. Providing positive externalities to society.

Unfortunately, many players in different markets have not understood the strategic nature of this innovation. They have considered IoT adoption as an IT project or the creation of a product. Instead, best practices show that IoT adoption is a strategic choice that requires a multi-year commitment to develop needed, specialized IoT competencies and leadership competencies. 

Each of the successful pioneers has designed its vision and strategy for IoT usage within its business processes.

A common mistake is to focus on the “thing,” such as a smart device. However, IoT is about data, not things. Even a focus on data is a mistake. What really matters is the usage of the data. The transformation of the business processes – through data usage – has been the secret sauce of any successful IoT insurance program. 

Some international success stories – from auto telematics to property insurance for smart commercial buildings – have already shown robust ROI. However, there is not much low-hanging fruit where a single use case generates enough value to cover all the emerging IoT costs. Typically, IoT insurance programs need deep functional competencies and a multi-functional approach to have multiple use cases that contribute to the return on the technology investment.

The opportunities for using IoT data in the insurance sector are summarized by the following framework, which has been developed within the IoT Insurance Observatory over the last five years.  

See also: 4 Connectivity Trends to Watch in 2021

Each of these use cases has been successfully implemented by tens of pioneers in different international markets and in different insurance business lines. 

These use cases don’t change the nature of the insurance business, but they allow insurers to do their job better. However, this paradigm requires moving beyond the traditional insurance economics (premiums, claim costs, administrative costs) integrating service fees, partners contributions, benefits generated by the usage of IoT data, IoT costs and value-sharing with policyholders (cashback, discounts, etc.). 

Insurance IoT is a new way of thinking about the activity of assessing, managing and transferring risks that fits with a world that is going to be more and more hyperconnected, a trend that insurers can neither stop or ignore.  

This article was originally published by Technology Magazine - IoT Edition

When the coronavirus really started to bite at the start of 2020 and businesses and individuals were forced into lockdown, there was a collective holding of breath in the U.K. as we waited to see if the insurance industry could respond effectively.

On the whole, the industry did a superb job of shifting its call center operations from centralized offices to thousands of homes up and down the U.K. A few early hiccups aside, the industry's tech stood up to the test and proved that we can work differently.

But what we have been doing for a year now is a temporary patch. The systems and business structures weren’t designed to operate like this on a permanent basis.

Negotiating the turn to digitization

Our current reliance on individual internet connections, the ambiance of various home environments and unreliable access to the policy, billing and claims systems mean that consistency and efficiency are a hope rather than a guaranteed deliverable for interactions with customers.

While remote working should result in vastly reduced real estate costs for most businesses, that shift has to be done in a way that doesn’t compromise on the customer experience or quality of conversation.

There is really only one way to provide a personal experience, delivered at scale but in a decentralized way: through the use of conversation process automation or, as it is commonly known, employing expert chatbots.

By using intelligent, effective and responsive chatbots, insurers can deliver the necessary consistency of service to an increasingly digital-first customer base while easing the pressure on remote (or office-based) call handlers. That will allow them to focus on the more complex or higher-value customer interactions that require less immediacy and less efficiency but a high-value human touch.     

Customer-facing process digitization requires automation

Of course, digitally triaging incoming customers is nothing new. It’s why webforms exist. They were designed to capture basic information, which is then fed automatically into the insurance system, creating an event for the call handler to progress.

But webforms lack one key element necessary to support call handlers in recreating the call center experience in a remote working world. They lack the ability to converse in real time with the user, to exchange valuable pieces of information.

Customers still want to have productive conversations, even in a digital-first world, and that is a want insurers will have to provide remotely. They could simply hire more call handlers, but it is logistically complicated while not being viable for the business -- with every addition of a remote call handler, the insurer moves further and further away from the guarantee of a consistent customer experience. And more call handlers, of course, mean more cost.

See also: Lessons on Reaching Customers Remotely

With expert chatbots, the consistency of experience can be delivered on a consistent basis without necessarily recruiting more call handlers.

And rather than replace the human call handler, expert chatbots assist in a way that webforms can’t by creating a natural, unseen bridge between the digital and the human touch. Anything that frees call handlers for productive conversations has to be embraced. Using their time to gather basic, repetitive data is a waste of their expertise and a waste of the customer’s time. Call handlers will always be required to solve complex problems and queries that automation can’t solve.

Often, the leap of faith is a small step in the right direction

What we are talking about here is taking another leap of faith, the same leap of faith that insurers were forced to take in response to the coronavirus. But the opportunity facing insurers now is to take that leap before they are compelled to by market forces or consumer demand.

The industry has taken the first, bold step toward an entirely new way of working and servicing customers, and it deserves a huge amount of credit for that. But we are entering another breath-holding moment as we wait to see if insurance has learned the lessons of lockdown and is willing to take the next, natural step in this digital and automation revolution to secure the productivity that has escaped them for so long.

The past six to 12 months in insurance have seen a historic level of activity for mergers and acquisitions, new investments and public offerings. It seems like every type of entity in the insurance world has been swept up.

The M&A trend in the distribution space accelerates. Insurtech investments were at highs in 2020 and picked up steam throughout the year; that trend continues into 1Q21. Initial public offerings (IPOs) and SPACs (special purpose acquisition companies) are being used as vehicles for investment by incumbents and startups alike.

A few prominent examples:

• Hippo is merging with Reinvent Technology Partners Z via an SPAC that values the company at $5 billion.
• Bold Penguin was acquired by American Family Insurance in a deal with important implications for the small commercial lines space.
• Incumbent tech company CCC Information Services is going public via an SPAC that values the company at nearly $7 billion.
• Chubb offered to buy the Hartford for $23 billion.

And these are just some of the deals in the first quarter of 2021! IPOs of Root Insurance and Lemonade and multiple $100 million-plus investment rounds in tech companies have occurred during the pandemic, not to mention a huge M&A wave in the agency marketplace.

It is easy to document the “what” (i.e., the list of transactions in various categories). However, it may be more useful to explore why this flurry of activity is underway… and why more is likely to come.

Naturally, primary reasons are the ready availability of large capital and the eagerness of investors to deploy their funds to capture growth. The rebound of the markets after the initial pandemic drop has resulted in huge amounts of cash sloshing around the system looking for a home. During these periods, some entities always see an opportunity to cash out, while others see possibilities to pick up strategic assets and, in some cases, immediate revenue streams accretive to earnings.

But there is more going on here than just the financial transaction and ROI parts of the equation. There are two other factors at work that, when combined with the financial climate, create a perfect storm for investment: insurtech maturity and the pandemic.

Insurtech Maturity

In the first days of the insurtech movement (early 2010s), there was much talk of disruption and revolutionizing the industry. Many in the industry dismissed this talk as hyperbole, and the early entrants often had little impact on the industry. But as the movement matured, leading companies gained momentum via partnering and a deep industry experience to address critical industry pain points. Moving into 2020, the insurtech movement had become a real catalyst for industry transformation, and scores of companies were demonstrating their potential, not only to affect the industry but to continue on a fast growth path.

See also: Insurance Outlook for 2021

Pandemic Implications

The second factor was the pandemic. The insurance industry was collectively on the path to digital transformation. Even before the pandemic, many industry veterans thought that insurers were moving faster than ever to inject innovation into their organizations and spread digital activity across the enterprise. Enter the pandemic and the resulting lockdowns, work-from-home mandates and dramatic shifts in everyday life and work patterns. Insurers quickly discovered the digital gaps that needed to be addressed to enable remote digital interactions with policyholders, agents, employees and claimants. In addition, the need to accelerate the digitization of operations, increase the levels of straight-through processing in underwriting and claims and hasten the automation of tasks was underscored.

To address these requirements and compress digital roadmaps into shorter timeframes, insurers and distributors alike took three actions:

• They reprioritized internal projects and refocused resources.
• They sought insurtech solution partners to help them deploy solutions and fill the digital gaps faster.
• They looked for acquisitions that would help them scale faster and bring new capabilities to the enterprise.

All these factors and the actions being taken by insurers are likely to continue through 2021 and beyond. To those who think the investments and M&A activity will slow now that the prospect of getting past the pandemic is pending – think again. If anything, digital transformation and the uber-competitive environment will continue to result in blockbuster headlines as the industry is reshaped.  

Ecosystems have been growing in scale and importance in recent years, but the pandemic has greatly accelerated their evolution. Customers rapidly turned to remote engagement, bolstering their expectations of 24/7 service and easy interactions. Insurers’ legacy limitations now look increasingly out of step with contemporary buying behavior and distribution.

Rather than taking several years to fulfill digitization road maps, insurers will find that participating in a connected supply and demand service model offers something better, faster and cheaper.

Enabling technology is affordable and effective. Cloud-based technology and machine learning have helped insurtech firms grow quickly without the burden of legacy systems and are now helping carriers fill gaps, particularly as many insurers modernize their core systems to make external integration more practical. The same technologies support innovation from competitive sources that offer services or components that are “good enough” at relatively low cost.

Strategic considerations

Now that the building blocks are in place, industry leaders are increasingly engaging in ecosystems that serve broad consumer needs, often where insurance is only one offering among many. Strategic options are multiplying.

Similar organizations might make very different choices on roles, investments and partnerships, depending on their risk appetite, organizational culture, technical capabilities and ability to invest.

Here are four things to consider as you determine how to compete in insurance ecosystems:

1. Choose your ecosystem role(s) strategically

You can become involved in an ecosystem in many ways, with different levels of commitment and investment. Your role(s) reflect how you’ll relate to other participants and the degree of your commitment. This may be complicated.

• As an owner, you’ll build and control the ecosystem, but at significant cost and the risk that nimbler players could overtake you.
• An orchestrator creates a foundation, including technical platforms, and captures customer data but may not be able to curate the entire customer experience.
• Adaptive participants plug into one or several ecosystems. This is a lower-risk strategy, but it’s more behind-the-scenes and could cause you to lose contact with end customers.
• Abstainers are entirely responsible for their own offering. This could put them at a significant disadvantage if buyers find an ecosystem’s holistic approach more appealing. Abstainers also may miss the opportunity to provide their capabilities as inputs into other participants’ offerings.

Some insurers may take different roles in several systems at once, depending on resources and focus, but we expect ecosystems to evolve within a particular sector, with both industry and non-industry partners joining forces to develop markets that work for all.

2. Find the right match – and quickly

Companies comfortable with ecosystems have learned to make quick buy-build-borrow decisions. When you’re facing potential tie-ups, you’ll need to decide fast, because the most appealing opportunities won’t last.

Ecosystems benefit from having a variety of partners. Whether you’re the organizer or are providing products as an adaptive participant, look for tie-ups that add complementary and scalable products or services to drive more traffic into the ecosystem. Ideally, partners leverage each others’ capabilities and knowledge to help the ecosystem grow. Whether you’re considering a potential partner or an acquisition target, your due diligence process should include intangibles. Your stakeholders should know what your brand promises: value, service, innovation, trust, stability, etc. If a potential partner or acquisition doesn’t bolster that image or its culture doesn’t fit the ecosystem, then you probably should move on.

See also: The Intersection of IoT and Ecosystems

Complacency is a big risk; you likely can't wait indefinitely to determine the best corporate development strategy. When certain ecosystem positions are taken, or when the insuriech player that can fill a key need has been bought by a competitor, you’ll be out of luck.

3. Adjust your approach to match an ecosystem’s maturity

Ecosystems vary considerably by maturity and focus. You may see partners offering components but, for now, a fragmented user experience. That doesn’t mean you should wait for clarity; rather, you may have an opportunity to significantly shape the outcome. You’ll want to be patient, recognizing that whatever you build may be an interim solution. In other instances, some ecosystems will be further along, which means you’ll need to quickly decide how to integrate, and on what terms, as you catch up.

Ecosystems don’t necessarily come with clear labels or governance. Some may start with a bilateral partnership model, offering additional value for customers by bringing together two non-competitive providers. This may become more like a product marketplace, or vertically integrated, even if some capabilities are white-labeled. Regardless, relationships are developing faster than before, and today’s opportunities are unlikely to exist six months from now.

4. Make deliberate choices with your ecosystem investments

Ecosystems typically require fresh thinking about product design, data and technology. You’ll likely need to expand these capabilities to:

• Provide individualized recommendations that drive engagement and adoption. Few insurers have invested much effort in improving the (internal and external) user experience (UX). Like social media sites, ecosystems depend on keeping users “plugged in” with communication that’s relevant and personal.
• Open systems securely to your employees, employers and partners so you can be more flexible about the products, services and experiences you offer. This means building a well-functioning API framework and enablement process, as well as expanding integration capabilities to support secure connections to external parties. This may require changes to the back end to your data management programs, data storage and exchange platforms, as well as developing analytical capabilities that enable data-driven decision-making and discovery.
• Use data, analytics and business intelligence assets to “sense” market insights and package them to add value to ecosystem offerings.
• Design, develop, source and manage products and services to meet customer needs, while offering value to other ecosystem members and reducing the capital intensity of your own business. This requires prioritization. You can’t do it all, and ecosystems provide a way to meet those needs without “owning” a product. By involving ecosystem participants, you can quickly satisfy customer needs, widen your offerings and improve the customer experience. 

Conclusion: Don’t miss out on the best opportunities

Ecosystems’ appeal is undeniable. They offer carriers a chance to reach beyond conventional insurance products and strengthen their relationships with customers, and are a logical response to a changing, highly networked business environment. Although they require insurers to apply unfamiliar skills – flexibility, customer intelligence, speed and coordination – they can provide the benefits of scale without the asset intensity and command-and-control leadership that historically have characterized the industry.

Many prominent insurers have been watching developing networks with curiosity and interest but often without urgency. This approach typically worked in the past, when the industry changed slowly and competitors were known quantities. Carriers now need to understand where they fit before the appealing opportunities are taken. There is tremendous upside, but not for those who sit on the sidelines.

At least on the surface, benefits and insurance producers are supremely confident individuals. They believe they are just a bit smarter, a little more clever and particularly more likable than their boring, traditional and not-so-smart competitors. This is at least part of the reason they approach the building of their book of business as a popularity contest; it is why they believe this to be a "relationship business." 

Without realizing it, they are building a trap for themselves. Because producers are competing for the title of "most popular," they make relationship development their relentless focus. When they win the occasional deal, their belief is reinforced, and the cycle continues.

It's time to get real

I recognize the importance of a strong business relationship as much as anyone. But it’s essential to keep the relationship in perspective and realize business relationships and social/personal relationships are two different animals. It's not that they can't co-exist, but they have to stand on their own.

In the book "The Go-Giver," Bob Burg and John David Mann explain, “All things being equal, people will do business with, and refer business to, those people they know, like and trust.”

It would be easy to read that statement, focus on the part about people doing business with those they know, like and trust and feel validated. This seems to support the position producers hold on to, that this is a “relationship business.”

Change the rules, change the balance

Of course, you need people to know, like and trust you. However, the most important words in the statement are actually the first four, “all things being equal.” The relationship is nothing more than a tie-breaker.

Most everyone competes on a level playing field. Producers show up with the same spreadsheet and the same list of value-added services and parrot the same promises of excellent service. From the buyer’s perspective, “all things are equal” with every broker -- all brokers look the same to buyers.

The relationship trap leads directly to another fallacy believed by too many producers. Tell me how many times you have heard a producer say, “It takes two or three years to develop a new client.”

This is actually probably true. But it doesn’t have to be. It’s only true because it takes that long to get to the point that a prospect knows, likes and trusts you more than anyone else.

So, what should you do? 

Don't let things be equal.

In their book, Bob and John also advise readers how to tip the odds dramatically in their favor. Do the following, and you will find the advantage you have been looking for to grow in a healthier, more predictable and meaningful way.  

Deliver more value than anyone else — This doesn’t mean eroding your bottom line. The value doesn't have to, and usually doesn't, come at a financial cost to you. Share ideas and experiences and make introductions that will benefit others. This isn't to be done in some quid-pro-quo fashion; deliver value with no expectations. Also, don't confuse giving away value with working for free.

See also: Do You Know What You Don’t Know?

Deliver value to more people — Delivering value shouldn’t be reserved for active prospects. It also shouldn't be reserved for decision-makers. Deliver value to anyone and everyone as a part of what you do every day. Whether it’s through your blog, social media or any other interaction, make delivering value your primary goal.

Keep others' interests as your primary focus — Stay focused on helping everyone around you be more successful at what they do, and your success is all but guaranteed. 

Be authentic at every step — The only way people will eventually come to know, like and trust you is if they are allowed to know the real you first. Sure, some may not like you. That’s life. But nobody will ever trust you if they sense you aren’t being genuine.

Follow the four principles above, and you take the "all things equal" out of the “doing business” decision. Now, when you add in the know-like-trust, magic happens. This potent combination will result in the most substantial business and personal relationships you can imagine.

Deliver value before you meet

You may wonder, “How can I deliver value to someone I don’t even know?” The answer lies in your marketing strategy. Take the time to understand your target audience's goals and needs and make that the focus of your educational content. Do this, and others will find immense value every time they interact with you, even if it's only consuming the ideas you share.

Stop thinking about marketing as a way for you to get more prospects. Instead, recognize that marketing is an opportunity for you to help educate and deliver value to others.

Build on the value when you meet

How does the value continue once you do meet? Build it into your sales process. Your sales process should deliver so much value that others would actually pay for the privilege of meeting with you.

I know this sounds Pollyannaish, but it's possible. Build your sales process on the following foundation, and you will experience it for yourself:

• Start the sales process by taking time to learn what a specific prospect values.
• Make the primary focus of your sales process about analyzing the prospect’s current situation and identifying what is keeping the prospect from having what they value.
• Demonstrate how you deliver similar value to others and explain how you could do it for them.

Stop thinking about your sales process as a way to get people to buy from you. Instead, start thinking of it as a process you offer to ensure others get the value they need. This becomes the key to slaying the “it takes two to three years to develop a new client” beast. Imagine how quickly you could move a motivated prospect to close if you delivered the following:

• When you help a prospect clearly see the potential of a better reality, how long do you think they want to wait to see if they can have it as their own?
• When you guide a prospect through self-discovery to better understand what is holding them back, how long do you think they want to wait to learn how to address those needs?
• Once a prospect is confident in your ability to deliver better results, how long do you think they want to wait to get started?

I can’t give you specific answers, but I can tell you the entire process will be measured in weeks, not years.

See also: Ecosystem-Based Business Models

It's not you; it's them

Stop teasing prospects with a promise of the value you’ll deliver once they become a client. Stop telling them, “You need to hire me to figure out how much value I can actually deliver.” This is effectively what your spreadsheet, capabilities presentation and promises of better services require. I don’t see you winning many popularity contests with that message.

Instead, deliver value at every step – before a prospect meets you, during the sales conversation and in the detailed plan you provide showing how the value will continue to flow.

The more value you give away, the more you will receive in return.

As the insurance industry begins to emerge from the shadow of COVID-19, International Women’s Day (IWD) is a good time to reflect on the state of gender equality in our leadership ranks and assess the outlook. While much progress has been made, there is still a great deal of work to do.

My experience with equality

Certainly, gender equality has been a big priority for me, personally. In fact, I make it a key pillar of my leadership and champion it directly and purposefully on the ground in the businesses I run, as I believe all leaders should. When I assumed the role of EY EMEIA Financial Services Assurance managing partner in 2013, only 12% of the partners were female. Six years later, when I began my current role as EY global insurance leader, that figure had nearly doubled to 22%.

I have been motivated to address gender equality not only out of a sense of fairness but also because I believe that diversity is directly tied to business performance. I have seen firsthand throughout my career what ample research has shown: Organizations with more diverse leadership teams outperform their peers. Many research studies have shown that diversity and inclusion yield a wider range of skills and perspectives, improve decision-making, boost productivity and foster empowerment. Diversity and inclusion also enhance corporate brands and reputations, especially among younger generations who want to do business with and work for companies that share their values.

Gender equality: easy to define, difficult to achieve

When talking about sensitive issues, it can be useful to define our terms clearly. To me, gender equality means that everyone, regardless of gender identity, has the same opportunities for professional success and the same compensation and rewards for their performance. It’s a simple and clear definition, but there are multiple reasons why true gender equality has yet to become the norm.

Cultural factors have certainly played a role, even at companies that make a formal commitment to equality. In some cases, perception biases can hold people back. Maybe the perception is that talented female executives don’t go “all in” on their roles. Maybe women are reluctant to assert themselves or put forth too many fresh ideas for fear of how they will be perceived. Maybe the emphasis on team building and collaboration prevents women leaders from receiving the credit they deserve for producing results. Perhaps women don’t complain when they feel mistreated or overlooked. In all of these cases, the result is that promotions go to those who make their feelings known and demand recognition.

For example, few female university students major in actuarial science, a discipline that historically produces many senior executives in insurance. The future pipeline of senior leaders is only as strong as the next generation of workers who are recruited into the field and into the right functions. 

See also: 3 Keys for Building Women Leaders

Let’s look more closely at the state of women in the insurance industry. According to research from ACORD, women drive the insurance industry, composing more than 60% of the workforce. Leadership is where we find inequality. Women hold only:

• 19% of board seats
• 11% of named officer positions
• 12% of C-level positions

These numbers reflect the reality that gender equality remains a distant goal. But there are reasons for optimism. Though women are still underrepresented at the level of the executive committee and board, the last decade has seen significant progress at the level just below. I see a strong generation of women leaders who are well-positioned to achieve great things at the top of the organization in the years to come, even if the numbers won’t be equalized any time soon. Internal mentoring programs, like EY teams, are also critical to balancing out boards and C-suites. Indeed, more companies – including EY – are elevating diversity and placing it at the core of their values and mission statements.

Personal commitments are critical. I make it a point to engage other women at EY to talk about their career paths, the challenges they face and their ambitions for the future. I have often promoted women into leadership roles even when they were considered “not ready.” This is a common misconception. While females are regularly included in succession plans, they are often passed over because they are “not ready,” while male candidates are almost always perceived to be ready. Of all the supposedly “not ready” candidates I’ve promoted, not one has fallen short in her new role.

Networking groups are a useful resource for overcoming such subtle barriers. The Insurance Supper Club and the Association of Professional Insurance Women (APIW) are two support communities for women in the insurance industry I have engaged with. I support these groups because they promote strong networks among female leaders, a critical component for success at the highest levels. They also create opportunities to share experiences, to find role models and be inspired by other industry leaders and to seek help or different views on tackling specific business issues.

Moving forward with gender equality

My experience has taught me valuable lessons that I would recommend to other female leaders. To advance gender equality, successful female leaders should:

• Identify strong performers early in their careers. I always encourage high-potential candidates to think big and strategically about their careers and not be shy about their ambitions. We must look beyond self-doubt about our ability to lead, which is common in many women. The key is to project ourselves into the leadership roles we want and gain the courage to raise our hand and ask for them.
• Make themselves visible. This is a critical step because it strengthens networks, demonstrates what can be accomplished and helps boost confidence, which is often necessary for women to make the most of their leadership potential. Women must also overcome reluctance to assert themselves and find sponsors who can help them increase their visibility.
• Serve as champions of inclusiveness and diversity. We must engage our male colleagues to ensure they understand existing biases and how they can help eliminate them by advocating for gender equality. Male and female leaders alike must live that advocacy in the teams they build and the decisions they make. Women can’t do it alone.
• Encourage their daughters, nieces and other young women. We must teach the rising generations to be fearless in choosing their fields of study, including largely male domains such as math, science and engineering. If they want a career in financial services, we shouldn’t be shy in pointing them toward cybersecurity, artificial intelligence, analytics and data science, while also coaching them about what to expect in these traditionally male-dominated domains.

See also: Insurers Can Lead on Addressing Inequality

Ultimately, I see gender equality as a matter of performance and leadership. The insurance industry needs more than ever to attract and more than ever to retain the best talent, regardless of gender, ethnicity, race or sexual orientation. The success of our firms demands it. Thus, it’s a primary responsibility of all executives in financial services. It is both the right thing to do and an imperative for business.

As we celebrate IWD, I'm reminded of and grateful for all the female staff, leaders and partners I work with at EY. On the insurance team specifically, our strong performance would not be possible without them. I am particularly proud to mention the EY insurance female leadership team below.

• In the Americas: Tara M Alex; Brenda Betts; Nancy Conturso; Janice Deganis; Dorree Ebner; Laura Ford; Katy Gardiner; Christine Holmes; Nicole Michaels; Sophia Yen; Carly Warren
• In EMEIA: Sabine Betz; Jenny Coletta; Maribel de la Vega; Cornea De Villiers; Zeynep Deldag; Penney Frohling; Hedvall Sunel Jacobs; Vicky Lampitt; Lauren Mounier; Anne Nahkala; Martina Neary; Gabriella Selvander; Anastasia M Vinogradova
• In APAC: Sun Young (Anita) Bong; Janine Donnelly; Liza Drew; Hong Gu; Hiroko Kakiuchi; Vanessa Lou