What an ecosystem is and who should be included?Going back to basics, an ecosystem is based on the acknowledgment that participants of a system must work with each other to keep the system stable for the collective good. In the business context, these are arrangements between two or more business entities that create and share in the collective value from a common set of customers. To be a true ecosystem, every party needs to be involved and collaborate towards a collective goal.
In a traditional value chain, companies focus on optimising individual functions - each entity is in a linear sequence and adds its own isolated value.
An ecosystem, conversely, is a dynamic and interconnected network where multiple entities collaborate to co-create and share value. In ecosystems, the focus is not just on optimising individual functions, but on leveraging shared data, capabilities and customer insights to deliver holistic solutions that are greater than the sum of their parts.
In the context of group risk insurance, ecosystems include group risk insurers, health and wellbeing service providers, employers, employees and intermediaries. Data connectivity between these participants is key, typically through APIs.
Opportunities in the group risk market
Insurers typically rely on distributors (intermediaries) to sell their group risk insurance products to customers (employers), typically as part of workplace benefit packages. The distributors may use workplace benefit technology systems, fed by customer HR and payroll systems which is turned into employee benefit data and then insurance membership data as it flows through the value chain.
To drive innovation and create customer value in group risk, ecosystem models are today widely accepted as the way forward, rather than trying to build internal capabilities. There are many examples of companies trying to do it all themselves, with little success and costly results. But retrenching to disconnected silos is hardly the future either.
Success hinges on the ability to forge meaningful partnerships with market participants, and at the crux of this lies effective technology for key functions such as data connectivity, automation and agile configuration.
Translating this to the group risk insurance market, several immediate benefits emerge – here are a few examples:
- Data connectivity – New business quotes and policy servicing still often require human manipulation of external data. This is a costly and non-scalable practise, leading to bottlenecks and slow responses at busy times. Imagine instead an ecosystem world where APIs seamlessly connect to workplace benefit platforms to transfer employee data, enabling underwriters to focus on assessing risks and dealing with complex cases. Another obvious use case is connecting to third-party well-being and health services, which form an increasingly important part of group insurance products.
- Automation – Many group risk business processes suffer from poor productivity. Imagine a world where all processes are automated and focus can shift to edge cases and exceptions. Automation can enable speed and cost gains of x10 or more for underwriting, claims and scheme accounting, with full visibility of any process for all participants, 24/7.
- Agile configuration – Product development and delivery is currently slow and expensive. Imagine a world where new products and variations of existing products can be configured and rolled out in hours rather than months, and where multiple versions are easily managed for individual customers or for distribution relationships. Advances in configuration will also facilitate supporting previously underserved markets, like the micro and SME sectors.
Overcoming cultural and technical hurdles
We never had better abilities to connect business processes and exchange data. However, we also know that large, disruptive transformation projects can and have failed. Successful planning of a pragmatic pathway to a new operating model should rest on a combination of great technology and experience.
It’s still early days in the UK group risk insurance market. Understandably, hesitancy continues to exist around connecting data to other parties as well as, less understandably, the use of cloud computing. Perhaps even more challenging is the cultural reluctance to form truly strategic partnerships. Most importantly, the market needs an aligned view of what a successful future looks like. Only then will we see trusted partnerships for adopting an ecosystem approach.
These challenges explain why this is an exciting time in group risk insurance, with lots of opportunities. For organisations willing to embrace the ecosystem model, the ability to build sustainable growth and customer value will drive them forward, watched from the sidelines by those who never quite got the point.