“Ecosystems” is probably one of the most frequently heard buzzwords in conference rooms, and for good reason. To be successful over the long term, insurers need to properly address ecosystems. McKinsey spoke with Ulrike Deetjen, partner in the Stuttgart office, to learn more about ecosystems for insurers and their benefits.
McKinsey: What are the latest trends you see in ecosystems?
Ulrike Deetjen: Ecosystems have gone from being a buzzword to a real strategic priority for insurers around the world. When I say “ecosystems”, I mean customer-centric networks in which services from all industries are delivered through a seamless user journey. For example, a mobility ecosystem can span from car insurance to car sales, services, financing, gas, and parking. A health ecosystem can span from symptom checking to teleconsultation, e-pharmacy and medication management.
This is an exciting approach for insurers as it opens new horizons, with high risk but also high reward. The answer to ecosystems may look different for each insurer, but ecosystems thrive anyway, and they should have an answer to that.
McKinsey: How do insurers benefit from ecosystems?
Ulrike Deetjen: First, ecosystems contribute to the heart of the insurance value chain. They can generate leads, for example, by selling car insurance at the same time you sell the car. They can increase loyalty because people are more likely to stay with an insurance company if they have access to a range of convenient services. They can also reduce claims; in the healthcare sector, for example, complaints could be reduced by offering services that direct people to the right care setting or encourage them to adopt healthier behaviors.
Ecosystems have gone from being a buzzword to a real strategic priority for insurers around the world.
Second, data is the central currency of ecosystems, and harnessing this power could help establish new data-driven business models. Insurers could combine activity data (from ecosystem services) and outcome data (from insurer claims data) to link payments to what improves outcomes.
Finally, ecosystems can help increase the growth prospects of any player, which translates into higher market capitalization and better financial attractiveness for investors. This is especially true for digital business models, which have seen an increase in investment levels in recent years due to the COVID-19 pandemic.
McKinsey: What should insurers do to get started?
Ulrike Deetjen: They should start by determining what their main strategic goals are, and then align their ecosystem activities accordingly. For large insurers operating in different ecosystems, this can mean building a wide range of partners to cover key journeys; small insurers, on the other hand, can participate in a more targeted way. There is no one-size-fits-all approach.
Customers will only use the services provided by their insurer if they meet the digital sophistication of other industries, and this happens by leveraging talent, capability and a truly customer-centric mindset.
Then insurers can think about what really adds value for the customer and where they can position themselves to have an advantage. Insurance is an industry with a low frequency of touchpoints. But at the same time, in the health ecosystem for example, insurers already collect structured data from many players. This allows insurers to personalize their offers and provide better services by evaluating health outcomes. Don’t think you have nothing to add just because Amazon, Apple, and Google dominate the ecosystem game. This is precisely why insurers need to strengthen their direct interface with customers.
Fortunately, many of the levers for success in the ecosystem are the same ones that will help companies achieve digital transformation success more broadly. For example, platforms and APIs help insurers connect and use generated touchpoints to uncover cross-sell opportunities. Analytics capabilities also help insurance companies target current and potential customers. And customers will only use the services provided by their insurer if they meet the digital sophistication of other industries, and this happens by leveraging talent, capability and a truly customer-centric mindset. .
Ulrike Deetjen is a partner in McKinsey’s Stuttgart office.
To learn more about ecosystems, see:
- Digital ecosystems for insurers: no one size fits all
- Ecosystems and platforms: how insurers can turn their vision into reality
- Digital Health Ecosystems: Voices of Key Health Leaders