The Pacific Insurance Conference in Hong Kong is one of the most important events in the Asian insurance industry calendar, and the 29th edition saw more than 300 insurance executives gather to debate, discuss, and explore the industry’s future.
One of the hottest topics was the rise of ecosystems. This trend is driven by changing customer expectations and technology innovations, and it is impacting many industries. Insurance is no exception (Exhibit 1).
To understand the importance of a successful ecosystem strategy, you might look to Jack Ma, cofounder of Alibaba Group, who famously said during an interview with the South China Morning Post: “I always believe we shouldn’t build an ‘empire,’ instead, we should build an ‘ecosystem.’ Every empire will be toppled someday, but an ecosystem is sustainable.”1 These words summarize why every company needs an ecosystem strategy, particularly insurers.
At the conference, I moderated a panel on ecosystems that included representatives from Swiss Re, WeSure, Generali Asia, and DBS. They shared, in their experience, what makes a good insurance ecosystem.
In short, an ecosystem allows insurers to better engage with current and potential customers—and do more for them. Building a network of partners means they can expand their customer base and diversify their revenue streams. It can also encourage innovation and improve customer loyalty and overall satisfaction.
There are numerous types of ecosystems, but McKinsey has identified B2B commercial services, health, housing, mobility, and wealth & protection as the most relevant for insurers, with the value for all five estimated to hit $21.4 trillion by 2025.2
To engage and tap into the value created by these ecosystems, and to create new ones, insurers can become either an ecosystem builder, orchestrator, or participant. Each role has a unique set of characteristics:
- Builder: Constructing a completely new ecosystem designed to create a diverse suite of products and services
- Orchestrator: Connecting with different partners across an ecosystem in new strategic partnerships and alliances
- Participator: Providing products and services to an ecosystem via a single link in the value chain
The panelists agreed that insurers should consider four key factors to be successful in any of these roles:
Mutual opportunity creation: It is impossible to do everything yourself, and an ecosystem allows insurers to expand both their thinking and their activities. By nurturing a range of partners, they not only add new products and services for their customers but also change the way they think about what they offer them.
Entrepreneurial drive: Having the courage to try new things is critical to future success, and ecosystems, by their very nature, encourage experimentation. While insurers should remain practical and focus on specific initiatives, instilling an entrepreneurial culture means they get off to a good start on all their projects.
Authentic partnerships: For an ecosystem to function effectively, it needs to be built from authentic partnerships. Incentives should be meaningful for all parties, and accountabilities should be defined up front. Trickier aspects like customer control and sustainability must be addressed. Everyone’s interests need to be aligned.
All in on data and tech: Engaging ecosystem partners and customers digitally is critical. Ecosystems produce a vast amount of data, which successful insurers will capture and turn into actionable insight. This requires prudent management of data privacy—a complex task central to all ecosystems.
Overall, the panelists agreed that we are seeing the rise of ecosystems in the insurance industry because they have the potential to make insurance relevant to people’s lives. And the firms that win will be those firms that use them to become a part of their customers’ own everyday ecosystems.
1 Liu Yi, “‘I made cruel decisions,’ said Jack Ma of his illustrious career,” South China Morning Post, July 13, 2013, scmp.com.
2 Estimates based on corporate sales data, GDP industry breakdowns, and expert assumptions.