Ecosystems in Insurance
What follows is an edited transcript of an interview we conducted with futurologist Michael Carl on the subject of ecosystems in the insurance industry.
Keylane: What is an insurance provider ecosystem and how does it differ from other industry ecosystems?
Michael Carl: An insurance provider ecosystem can best be described as a cooperative learning journey. The provider offers analytics, the customer their data. In a shared process both sides will learn: The provider will learn about this customers individual security-related wants and needs. The customer will experience how the provider is addressing exactly their wants and needs with a growing precision. This whole learning journey is data-driven. Trust turns out to be the most important currency here: the more both sides learn to trust, the more business they will make.
An answer to the challenges of digitalisation
Keylane: In your opinion, what is the future of ecosystems for insurance providers?
Michel Carl: Growing ecosystems which provide any possible customer with a highly individualised experience is the insurance industry’s answer to some of the major challenges of digitisation: The growing amount of data, technologies to cope with these data, artificial intelligence. In the end, it’s the old “Know your customer“, only on digital grounds and to a much higher degree – combined with the ability to offer individualised and flexible products. The provider will therefore modularise its offerings, build collaborations and prepare flexible solutions. These are the ecosystems which will turn out to be predominant in the future.
Make your customers feel at home
Keylane: What value do insurance ecosystems bring to customers?
Michael Carl: The value is best summarised in a simple promise: “We know you, because you want us to. Therefore we can reassure you: Whatever security-related needs arise, we will take care of them.“ The ecosystem in itself is a major source of customer satisfaction – even before it comes to products and offers, prices, terms and conditions. Customers feeling at home in a strong ecosystem do not need to identify new needs and solutions, they do not need to do their research and compare – and they will most likely not look outside their ecosystem for security-related solutions.
An insurer that directs customer trust to the ecosystem rather than the individual product can avoid any price competition and be successful at the same time.
Keylane: Where is the value for insurance providers in providing ecosystems to their customers?
Michael Carl: In an open competition, key indicators like pricing or the effectualness of marketing will probably prevail. Even more so under the conditions of the ongoing digitisation of customer relations. Any search engine will find an insurance with a slightly lower rate. The tremendous value of ecosystems for insurance lies in the decoupling of customer trust and the product. An insurer that directs customer trust to the ecosystem rather than the individual product can avoid any price competition and be successful at the same time.
Build better communities
Keylane: Do insurance provider ecosystems encourage a sense of community?
Michael Carl: Depending on the topic, ecosystems can be emotionally loaded and therefore encourage their participants to develop a sense of community. Think of food or entertainment, e.g. An insurance in itself is a rather unemotional object, as is financial compensation for any damage or loss. A certain sense of community might grow, e.g. in regional security-related ecosystems, but not necessarily and not on big scales.
Keylane: Which is more important for end-users: Superior products or better ecosystems?
Michael Carl: The effect we see in ecosystems throughout various industries and product categories: ecosystems beat products, especially when it comes to quality. A customer trusting an ecosystem will be much more willing to accept average product quality, rather than the other way around. The source of trust is the difference: A single product has to prove being superior to win the customer’s trust. A sustainable ecosystem which relies on communication and interaction will permanently prove to know the customer and their needs and wants. When it comes to products, trust is already established.
Deliver on your promises
Keylane: What are the biggest mistakes insurance providers make in regards to their ecosystems?
Michael Carl: One of the key success factors for ecosystems is the promise: whatever will come, we will find a solution. Whichever insurance provider aims to fulfil this promise with its own products alone, will be limited. The stronger ecosystems offer other providers solutions, rather than leave any customer in its ecosystem unsatisfied. To put it in simple terms: The biggest mistake would be to leave the customer alone – even just once.
Everything is connected
Keylane: What role could telematics play in improving insurance provider ecosystems?
Michael Carl: Telematics is a promising option to enter the future of insurance ecosystems. We can expect to be connected in almost every respect of our private and professional lives within this decade: Always online, a de facto unlimited number of sources for personal data. Every connection between insurance providers and possible customers will add value to the communication. Thus, telematics can serve as a training field today. And this is the discipline we need to train: to listen digitally, and to translate the insights we gained into personalised products and services.
Communication drives product development
Keylane: What role do ecosystems play in designing new insurance products?
Michael Carl: This is a key aspect. Communication comes first. The strength of a strong ecosystem grows with the precision of the provider knowing every participants wants and needs – and the providers ability to develop products, processes and service on these grounds. The deeper the customer experiences individualisation, the more willing they will be to share data. Speaking from the customer’s perspective: Sharing data proves to be a good investment. This is where the trust grows.
Not more, just better
Keylane: What will happen in the insurance ecosystem domain over the next 5 years?
Michael Carl: We expect ecosystems to grow, and we expect them to grow fast. We have seen the digital network effect in different industries: From a user’s perspective, there is hardly any space for a second platform. Therefore we expect insurance providers to follow a double strategy: grow fast and specialise at the same time, thus making it likely to become the number one ecosystem from a customer’s perspective. One of the consequences is that we will see a rather limited number of parallel ecosystems. Rather, they will grow in depth and value.
The promise of ecosystems
Clearly, several advanced technologies and methodologies are converging onto the same road: ecosystems. Coupled with data extracted from telematics, well designed and customer friendly ecosystems will serve as the insurance portals of tomorrow. But, unlike the “one size fits all” approach of time’s past, tomorrow’s ecosystems will be highly personalised and individualised, offering unique and rewarding experiences for every individual customer. More exciting still, is that the promise of a good ecosystem experience may well beat out over superior, stand-alone products, suggesting that the insurance industry must match excellent products and services with an ecosystem customers want to be an active part of.
If you would like to read more insights from Michael, featuring prominent guests from within the insurance industry, be sure to read the transcripts of the Insurance FM podcast series here. And if you speak German, why not tune into the original podcasts?