Are you an ecosystem insurer?

Analysts say that the rewards for working in a digital ecosystem are worth the effort.

When Discovery insurance developed its Vitality programme two decades it ago, it began as an incentive-based wellness programme. But since then it has steadily grown into a global platform with a vast digital ecosystem of services, partners, and rewards that enables it to scale more rapidly than competitors. Analysts reckon digital ecosystems are becoming increasingly critical for life insurers that want to flourish in a world where traditional geographical and sectoral barriers are being broken down by technology and global markets.

“Discovery has set the gold standard for insurers in the wellness ecosystem with its Vitality platform,” said Tanguy Catlin, a senior partner in McKinsey’s Boston office. He reckoned the insurer can not only track the health of millions of users through its Vitality platform, but also tap into rich data to generate key insights and build partnerships.

When Discovery analysed three years’ worth of platform data, it found that performance tracking reduced health risks by 22%, noted Catlin. The platform also enabled the insurer to penetrate international markets by partnering with AIA across all of Asia, Generali across continental Europe, and in several local markets such as with Manulife in Canada, Ping An in China, and Sumitomo in Japan, resulting in a 31% annual growth in international markets.

Beyond digital
“To succeed in ecosystems, insurers will have to take a hard look at their traditional roles and business models and evaluate opportunities to partner with players in other industries,” said Catlin, noting that seven of the world’s 10 largest companies by market capitalisation—Alibaba, Alphabet, Amazon, Apple, Facebook, Microsoft, and Tencent—are ecosystem players. “Through digital ecosystems, companies are betting big on opportunities that have the potential to realign global markets, thus ushering in an era of ‘sectors without borders,’” he added.

But becoming an ecosystem player involves so much more than going digital, which acts as a barrier for some insurers that do not have—or are not willing—to invest in this strategy. “Life insurers looking to capitalise on the huge potential of connected wellness need to do much more than simply encourage their customers to hook up to digital devices,” said Jean-Francois Gasc, managing director at Accenture Insurance. “They have to put digital ecosystems at the heart of their businesses. This requires big changes to how carriers structure their organisations and to how they engage with customers and deliver products.”

94% of carriers Accenture Insurance surveyed globally believe adopting a platform-based business model and engaging in ecosystems with digital partners is critical to their success, said Gasc. Meanwhile, 74% view digital ecosystems as changing how their industry delivers value.

The challenge of change
Despite recognising the vital potential of digital ecosystems, Gasc reckoned many life insurers have been slow to jump on the opportunities they offer. Insurers face the daunting challenges of implementing substantial strategic and structural changes, and picking suitable partners in a sea of digital ecosystems that have sprung up in connected wellness market in the form of goal-setting and activitytracking mobile apps.

But for Gasc, the rewards will be well worth the effort, as ecosystem insurers transform their value proposition and begin achieving substantial scale with relatively lowercosts. “Digital platforms enable carriers to reach customers and deliver their offerings far more effectively than in the past. They can embed products and services across a host of interlinked digital environments, said Gasc.

“This allows life insurers to take advantage of the ‘multiplier effect’ of such technology. They can scale up connected wellness programs without making investments outside their core businesses.”