The Future of Insurance: Opportunities in Ecosystems
Denise Garth | July 27, 2020
When we talk about the future of insurance, what we’re really talking about is the future of life. How will people live and how will businesses operate differently in the future and how will those differences affect insurers? If we look at “trending” economics, the world (and life) seem to both be drifting toward business ecosystems, which may have had their beginnings in simple distribution and marketing partnerships.
Marketing synergies seem to have always existed on some level, but over the past few decades, we have seen the rise of the integrated marketing partnership tied to value-added services, discounts and rewards-based loyalty programs. Reward programs are a functional bridge from simple marketing ecosystems into data-driven, micro-service ecosystems, where transactions and digital engagement wrap the customer up in ease and comfort.
Southwest Airlines makes a great example. Southwest had a good brand with an impressive track record for brand experience. They launched Rapid Rewards. They linked hundreds of partners to Rapid Rewards (850+ stores, dozens of hotels, car rental agencies and lifestyle products). They tied the Southwest Airlines Visa Card (in partnership with Chaseâ) into Rapid Rewards. Every purchase and transaction leads the customer right back to additional flights on Southwest. Every airline does this today and many other businesses like Starbucks, grocery stores, retailers, movie theatres, and more, based on the transactions with them, which drives both customer loyalty and company growth.
Imagine a global economy where ecosystems rule the customer relationship. People sort themselves into retail brand groups, much like sororities and fraternities. These brand groups promise to care for all of the concerns of the global customer. They operate by building an ecosystem based upon people’s basic needs: transportation/mobility, food/dining, entertainment/travel, income/financial security/insurance. How many brand groups will the world support? Is there any limit to what these ecosystems can accomplish? Is there any threat for insurers by not considering ecosystem participation?
If you want to know what the future of insurance looks like, it looks like people and businesses connected to powerful brands.
Today we can see a new generation of ecosystems being constructed, far beyond those just mentioned, when we look at Uber and Apple and Amazon and Grab. They are not just staying in their lane of travel, rideshare or retail. They are reaching into other ecosystems to link them together to provide a broader lifestyle value and deeper customer relationship. They want to be the hub of owning the relationship and influencing who else they link to via their ecosystems. These ecosystems are far more powerful and far reaching and will redefine winners based on whose ecosystem you are part of in the future. And these ecosystems are growing! In just a few moments, we’re going to look closely at three brand ecosystems and analyze how and why insurance needs to take ecosystems seriously.
In last week’s blog, we looked at COVID-19’s impact on the nature of customer engagement as it relates to ecosystems. We uncovered indicators that COVID-19 is pushing an already-primed market to adopt ecosystems in order to engage with customers the way in which they wish to be engaged.
In today’s blog, we’re going to look at ecosystems themselves. What do current and burgeoning next generation ecosystems have to teach us about how insurers are going to need to engage?
Three Large Ecosystems That Already Include Insurance
In technology, we see ecosystems from both an internal and an external vantage point. Ecosystems help us to build out the functionality of our platforms through APIs and microservices. They also help us to offer technology solutions that will fit insurers perfectly, because relationships can be customized based upon the functionality needed. Externally, insurance ecosystems will contain those channels and channel enablers that allow insurers to reach further outside of themselves. In these three case studies, we’ll see how successful companies consider both the internal and the external ecosystem as growth enablers. Let’s look at Uber, Grab and SoFi.
Uber and the Mobility Ecosystem
Forget all you thought you knew about Uber. Uber’s connectivity and marketshare and capabilities are moving so rapidly that keeping up is difficult. Let’s hit the highlights.
Uber is a mobility ecosystem. They started as a Rideshare provider, but they have expanded with the goal of owning the entire customer mobility relationship. They have over 100 million monthly active Riders around the around the globe, and 41.8 million active users in the U.S. They offer food delivery with Uber Eats. Uber car-sharing uses its partnerships with Avis, Herz, Getaround and Zipcar to provide rentals to those who wish to drive for Uber. In some/most cases, the rented car comes with insurance, unlimited mileage and basic maintenance. It is now possible for non-car owners to drive for Uber.
If you’re in a big city, you can use Jump, an Uber-owned scooter and bike service or you can use Lime, another scooter and bike service, by ordering service through the Uber app.
Uber is also partnering and investing in public transportation, creating partnerships with Masabi, TransLoc and Moovit to seamlessly integrate Uber into the travel journey, with the idea that mobility solutions will ultimately replace auto ownership. This would be an example of Uber’s internal ecosystem development, sharing the Uber API for logistical and transactional data. Uber is quickly becoming a one-stop digital mobility solution.
Uber has also hit hurdles. Uber’s goal is to use autonomous vehicles in many areas for both deliveries and rides, but a truly autonomous vehicle use is taking longer to implement than most people had anticipated. Still, undaunted, Uber is championing autonomous travel and deliveries. Uber purchased, for example, autonomous trucking venture, Otto, in order to build up Uber Freight. Imagine the impact that Uber Freight could ultimately have upon trucking insurance, both with autonomous trucks and with a trucking network where insurance is supplied as a part of each shipping transaction.
Grab and the Lifestyle Ecosystem
Grab is a Southeast Asian company that is already a full-fledged ecosystem with hundreds of mature services based around its easy-to-use app. With all that it does, you might call it a super-app. What’s interesting about Grab is that they have taken the mobile app experience to its optimal use. They have integrations and API sharing with all kinds of businesses, including insurance, allowing the Grab app to manage people’s logistical, financial and lifestyle decisions.
A Grab user can order transportation and pay for it. They can book hotels and pay for them, order their groceries, make fund transfers (similar to Venmo), and make and receive deliveries. They can order tickets and gifts. But what makes them unique is that they don’t just offer up singular options, but like Uber, they have taken the customer experience to the next level by offering up a wide breadth of options within each sphere. For example, Grab offers these 11 different traveling options, just within its vehicular transport.
- JustGrab: the closest car or taxi for fast travel.
- GrabShare: split the cost with people going the same direction.
- GrabCoach: book a mini-van or a bus.
- GrabAssist: for transportation that caters to your accessibility needs
- GrabHitch: carpool and save 40% on everyday fares.
- GrabCar: private ride.
- Plus, or Premium, for different levels of luxury cars.
- GrabFamily: car seat equipped etc.
- GrabPet: for furry friends
- GrabHire: receive a personal driver, book by the hour and make unlimited stops
Grab offers insurance for people on the move, much in the way we discussed in our recent mobility blogs. Not only do they offer travel coverage (underwritten by Chubb), they also offer ride insurance (also underwritten by Chubb) with $100,000 of coverage for accident and free vouchers if your ride arrives late. And on top of all of this, if you use Grab, you are accumulating GrabRewards points that will pay off in vouchers and discounts. Grab currently boasts 187 million users.
SoFi and the Financial Ecosystem
One of the reasons that insurers should be paying attention to ecosystems is that on some level, all of these ecosystems are about improving the user’s financial health and wellbeing.
In this regard, SoFi is a model for marketing and networking genius. They meet their market at the point of financial need. SoFi started out as a provider for consolidating student loans, able to offer better interest rates for students than their standard student loans. They were very focused on Millennials, and now they have shifted some focus to Gen Z and eventually they will shift into Generation Alpha. As they have grown, they have expanded their relationships and partnerships so that they now offer a near-complete financial experience.
Over the course of the last year, they set up relationships with Root insurance for auto, Lemonade for homeowners or renters insurance, and Ladder Life for life insurance.
They also have their own SoFi investment service with an “all-in-one” trading app, 401(k) rollover services, no fees and fractional shares because they want to make investment accessible to those who may have just retired their student loan debt. They have a relationship with Samsung Pay for money management. They even offer cryptocurrency investment.
SoFi’s recent partnership with Korn Ferry is an example of the ecosystem that holistically contributes to the well-being of the member. SoFi helps members get better jobs by giving them access to Korn Ferry Advance assessments, resume reviews, career coaching and more.
In light of these short case studies, what can insurers take away as food for transformation? First, insurers should consider the shifting sands of customer trust and loyalty. For decades, insurance has been the home of trust and loyalty (low churn), but the younger generation is finding trust in large tech companies and hip corporate brands that cater to them with the engagement methods that they find are easy to use and make their lives easy.
This younger generation will soon be the primary buyers of insurance. They will be seeking ways to buy it at the point where they have motivation and a prompt. (See last week’s blog on the Fogg Behavior Model.) Customer behavior and the streamlined digital experience are going to be the marketer’s best friends. Consumers will quickly trust those companies that seem to meet their immediate needs without placing hurdles in their way.
Where do insurers fit within the new realm of a younger demographic and connected ecosystems?
The short answer is, “Everywhere!”
Insurance will fit into new platforms and new ecosystems in new ways using new channels. It may be offered on-demand or embedded in another brand’s ecosystem. It may fit as a core brand, surrounded by value-added services that the insurer has built with partners and networks. Insurance will fit anywhere there is a risk product needed to enhance the customer experience.
Insurance will still fit within bricks and mortar agencies, but it will also fit into 100% virtual operations. It will fit into places it has never been before, using newly available data to perform real-time underwriting and issuance.
PwC has identified a host of different ecosystems already in play, including hospitality, education, housing, digital content, etc. When we look at these ecosystems, we realize that insurance has a place within all of them. There is a role for insurers within mobility ecosystems, financial ecosystems, entertainment networks and even rewards-based airline networks. With that in mind, we need to recognize that there is no single role for any insurer, but there are a host of new opportunities, all of which may be viable. The short-term goal must be for the insurer to prepare to fit the role it chooses.
The Faster You Move, the Better the Fit
If ecosystems are the future, where do they fit into your company’s strategic priorities? How quickly can your organization respond when it recognizes an opportunity to build or participate in an ecosystem?
The longer your organization waits, the more difficult and more expensive it will be to try to make that leap. In the past, it may have worked to be a fast follower, but with today’s pace of change, insurers should work their way closer to the leading edge of the pack. Early responders seem to be making the right business and financial choices to create a different kind of future. Capturing the opportunities is enabled (or limited) based upon the insurer’s ability to transform, integrate and launch new initiatives and products. At Majesco, we have designed and constructed platforms, such as Majesco CloudInsurerâ Core Insurance Solutions and Majesco Digital1st® Insurance that support ecosystem participation, no matter what your chosen role. For an in-depth look at how platforms will be utilized by insurers to capture growth, be sure to download Insurance Platforms: A Burning Platform for Market Leadership in the Digital Era of Insurance.
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