How Cloud Technology is Enabling Stronger Insurance Ecosystems

Highlights

McKinsey reports that ecosystems could encompass $60 trillion in revenue by 2030.

Tweet This
Consegic Business Intelligence states that the mobile phone insurance ecosystem market alone is expected to grow at a compound annual growth rate of 10.5% between 2023 and 2030.

Tweet This

To meet increasing policyholder demands, insurers are embracing ecosystems – interconnected networks of companies and services. The possibilities are game changing. However, for these insurance ecosystems to reach their full potential, partners need a way to share data and communicate in real time. Cloud technology is making this possible.

Insurtechs Are Driving Transformation

In 2021, insurtech funding reached $15.8 billion, according to a report from Gallagher Re¹, one of the largest global reinsurance brokers. Not only was this a record, but it was also more than the total funding in 2019 and 2020 combined. Although insurtech investment cooled in 2022, according to Gallagher Re’s latest report, the global insurtech sector surpassed US$1.1 billion in new funding during the third quarter of 2023. Representing a 19.8% increase, this growth was largely boosted by a 25.5% quarter-on-quarter rise in property and casualty insurtech investment.²

Where does the insurtech trend leave traditional carriers? According to the Drabik Digest³, the rise of insurtechs is an opportunity rather than a threat. Instead of competing with insurtechs, carriers should collaborate with them to better serve the evolving needs of policyholders. Traditional insurers can offer their regulatory expertise, data and reliability, whereas insurtechs can provide innovation. The result is a powerful insurance ecosystem.

What is an Insurance Ecosystem?

An insurance ecosystem is an interconnected network of companies and services. To ensure scalability, it is frequently coordinated by integrating the service offerings of a range of independent companies. Finextra⁴ provides Ping An of China as an example of an insurance ecosystem. In addition to selling insurance, Ping An provides an ecosystem of healthcare and real estate services, addresses mobility needs, and even organizes recreational activities. Through the formation of ecosystems, insurers can create a convenient, one-stop experience for policyholders. This is possible since a customer’s insurance needs often coincide with other needs. For example, a homebuyer requires not only homeowners insurance but they also may need life insurance, appliances and warranties for those appliances, and home maintenance.

The Potential Power of Insurance Ecosystems

Insurers have been embracing ecosystems as a way to provide better streamlined customer experiences. Embedded insurance is a critical part of this strategy. According to Accenture, 51% of insurance executives say their companies have already noticed disruption from competitors that are partnering with companies in other industries.⁵ These ecosystems can pave the way for major changes in how consumers access insurance. In an interview with Digital Insurance, Andrew Palmer, CIO of global retail markets at Liberty Mutual, said his company is using technology to embed insurance into different ecosystems. He described a scenario in which people could buy car insurance through their car’s dashboard and pay for it using their existing account. This advancement, according to Palmer, is the next level of disruption.⁶

And with traditional insurance industry borders disappearing, McKinsey reports that ecosystems could encompass $60 trillion in revenue by 2030.⁷ The ability to connect with these emerging ecosystems in areas such as mobility, healthcare, and the connected home will be a prerequisite for growth for all.

Research reported by Consegic Business Intelligence⁸ shows that the mobile phone insurance ecosystem market alone is expected to grow at a compound annual growth rate of 10.5% between 2023 and 2030, increasing from around $26 billion in 2022 to around $58 billion in 2030. That’s a huge growth opportunity for insurers to seize – and it’s only one of many emerging prospects. Insurers who fail to leverage these ecosystem opportunities will quickly fall behind. Per Accenture, carriers who are slow to respond to these landscape changes could lose $198 billion in market share and $177 billion in lost opportunity to pursue growth over the next five years.⁹

The Importance of Accessing High-Quality Data

Although insurance ecosystems offer tremendous potential, success is not guaranteed. In an article with Insurance Thought Leadership (ITL), Stephen Applebaum, Managing Partner at Insurance Solutions Group, explains that for a connected ecosystem to accelerate decision making and improve outcomes, data must be able to flow easily and quickly.¹⁰ Insurers need to quickly move toward a world where advanced data analytics drives their determinations and spurs innovation across operations and functions. According to McKinsey, insurers engaging modern data and analytics technologies can see loss ratios improve 3% to 5% and premiums rise 10% to 15%.¹¹

And having recognized that data is the key to realizing the value of advanced technologies like AI, insurers know that gaining accessibility to high-quality data is paramount. But to leverage the full potential of data to drive innovation and growth, insurers must invest in technologies that not only enable data extraction, but also turn data into value for customers. Disparate systems make data access and data sharing extremely challenging. According to Josh Petersen, Director of Solutions Consulting at Clearwater Analytics, “You can talk about [the] importance of data cleanliness and completeness, but it’s of no use if you can’t get to it.” He added that early adopters of cloud technologies are “already two steps ahead”.¹²

With cloud-based systems, it’s easier to integrate data for more complete insights. McKinsey research shows that 75% of the cloud’s predicted value comes from its potential for innovation.¹³ Guidewire’s Laura Drabik of the Drabik Digest reiterates that those who are “harnessing a cloud-based platform that enables them to leverage the latest insurtech innovations and data sources will always hold a distinct advantage over less nimble rivals”.¹⁴

Overcoming Barriers to Ecosystem Success

Insurance ecosystems offer tremendous potential, but there is no guarantee that all ecosystems will be successful. To realize the full value of ecosystems, insurers need to overcome barriers. This includes identifying:

Worthwhile goals. To make an ecosystem work, insurers need to know their intended outcomes and ultimate goal. How will the ecosystem improve policyholder experiences? How will it function, and how do individual components support this functionality? How will the insurer benefit from participation in the ecosystem?
The right technology to enable a seamless experience and drive innovation. The objective of an ecosystem is to provide customers with greater value and a seamless experience. Disparate systems make that extremely challenging. Ecosystem participants need to leverage the right technology to make that happen.

Delivering More: The Path to Innovation and Growth

Are you ready to modernize your payment offerings to meet your policyholders’ needs? One Inc provides a cloud-based, scalable payment platform that enables innovation and growth. By leveraging our next-gen technology and ecosystem partnerships, we deliver a simplified, seamless and elegant customer payment experience. With One Inc by your side, continually adding value, cloud-based digital payment success is achievable. Learn more.

Looking for additional insights regarding the components of a strong insurance ecosystem? Click below to learn more about evolving your data strategy and discovering how to get the expected value of cloud technology.

Data Strategy Maturation blog link
https://www.oneinc.com/resources/blog/achieving-next-level-data-strategy-maturation

Cloud Transformation blog link
https://www.oneinc.com/resources/blog/how-insurers-can-realize-the-full-benefits-of-cloud-transformation

Sources: