In today’s unforgiving market, the need for operational efficiency and distinctive products is a competitive requirement – no sector is immune and the group risk market is no different. Insurers that recognise the importance of ecosystems, as well as harnessing technology to support them, will be best placed to achieve successful future operating models and gain competitive advantage.
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.
Rather than cede value and lose intellectual property, ecosystems
work by accepting the expertise and value of each participant and
seek to combine these for a greater outcome. It’s particularly relevant
in the workplace benefits market because the members act autonomously
but are intrinsically linked to a common purpose.
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.
Stockholm
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111 53 Stockholm, Sweden
Phone: +46 8 4109 4000
Email: info@lumera.com
London
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8 Frederick's Place
London EC2R 8AB, UK
Phone: +44 345 862 3440
Email: info@lumera.com