Banner image with words "digital ecosystems in insurance"

Designing a Digital Insurance Ecosystem

Insurance carriers that invest in open ecosystems and best-in-class components will experience improved customer satisfaction, lower costs, and leapfrog the competition.

In 2020, the insurance industry has experienced several years of digital transformation in a few months. The days of monolithic legacy systems, built and maintained in-house for decades, are coming to an end as the market rewards dynamic carriers that leverage APIs, microservices, and web services to build ecosystems that offer the right experience, to the right people, on the right platform.

What is a digital ecosystem?

A digital ecosystem describes a loose network of interconnected applications and technologies that act cohesively to meet business objectives. Inspired by ecosystems found in nature, digital ecosystems are characterized by principles of openness, flexibility, and self-organization. APIs, web services, and microservices often work together to form the framework of a digital ecosystem.

Apps on a smart watch

Uber, for example, maintains an ecosystem of over 2,200 microservices. This architecture enables greater flexibility and autonomy, allowing their teams to innovate rapidly and swap out specific services without compromising the entire system.

Unlike open ecosystems, closed systems (also known as “walled garden” systems) are typically built and maintained in-house. An example of a closed system is Apple’s iOS operating system, where apps can only be downloaded from Apple’s App Store.

The Insurance Industry’s Next Big Frontier

According to research firm Novarica, the trend towards digital ecosystems in insurance is powerful, with more than 65% of insurers having deployed APIs/microservices as of Q4 2019. A couple of years ago, insurtech Lemonade made headlines by launching its public API, allowing anyone to offer Lemonade policies through different apps or websites. According to research from Accenture, 84% of insurance executives say ecosystems are important to their strategy. Ecosystems are the insurance industry’s next big frontier for disruption.

For insurers, a digital ecosystem can encompass the entire customer journey, from quote to claim. This frequently involves touchpoints with several applications such as CRMs, policy administration systems, broker portals, and third-party data service providers. This barely scratches the surface. For insurers, however, there remains an understandable hesitancy toward adopting open ecosystems.

While carriers acknowledge the importance of adopting innovative new technologies, many find themselves tied to closed systems that struggle to “talk” to new applications. This may result in missed opportunities, declining market share, and unhappy customers while rewarding competitors who offer greater flexibility. What monolithic legacy systems do provide, however, is control: governance, security, predictability and change management. These are important concerns in an industry known for its heavy regulation.

For many CIOs, managing a cornucopia of different technologies within a digital ecosystem can seem a tough pill to swallow given security and governance concerns. However, with rapidly evolving customer expectations and a drastic increase in the overall rate of change, greater flexibility is now a must.

A recent survey of European insurers conducted by DXC Technology found that 22% of insurers were already part of an ecosystem providing additional services to their customers, and another 46% had plans of joining an ecosystem soon. The evidence is clear that the industry is shifting towards greater openness and agility, and insurers must be prepared to commit to the new paradigm.

Three Ways Insurance Ecosystems Drive Competitive
Advantage

1. Optimize Customer Experience

Traditionally, customers had greater loyalty to particular brands and there were relatively few touchpoints in advance of sales and renewals. Today, customer relationships are more fluid as pricing and plan comparisons have become more transparent, and the customer journey frequently involves several touchpoints across different channels both before and after a policy is sold.

A happy group of people using their smartphones

Digital ecosystems enable insurers to optimize the customer experience by increasing the number of touchpoints with customers and by providing new services. Lemonade’s open API, mentioned in my previous article, is one example, but there are many other opportunities insurers are seizing to meet modern expectations and seize growth opportunities:

  • Chatbots and conversational marketing technologies
  • Life insurance applications for managing personal health
  • Virtual healthcare delivery
  • Partnerships with other businesses to earn digital loyalty points
  • Connected smart home and vehicle-safety solutions
  • Extensions to manufacturers’ warranties as part of an integrated e-commerce experience
  • Provide advice and estimates to customers using voice technology

Insurers that are late to develop their ecosystems will likely lose market share to competitors and disruptors that deliver engaging new experiences.

2. Componentization of insurance ecosystems boosts agility and innovation

Componentized, open ecosystems enable insurers to reduce costs, improve agility and system reliability while supporting innovation.

Flexibility is enabled by modularity: the ability to continuously swap out components based on evolving business needs. Similarly, if a single service goes down it can be replaced without jeopardizing other components.

Componentization also forces IT planners to clearly define the roles of different components. This clarifies ownership and makes it easier to identify bottlenecks and efficiencies, improving the quality of services and reducing the overall IT spend.

At Global IQX, we built a componentized platform from the ground up. Our platform enables carriers in the group and voluntary benefits business to select specific components that fit within their digital strategies while integrating with their existing CRM, PAS, and other applications. Whether insurers decide to build upon IQX or another platform, the principles of flexibility and componentization must reign supreme.

In the context of digital ecosystems, CIOs and CTOs are curators. Their role is to constantly evaluate and select best-in-class components for each function of the ecosystem within an established governance model. In the digital ecosystem economy, there is also a greater emphasis on maintaining and scaling partnerships with external vendors and data-service providers to remain at the forefront of innovation.

3. Securing Data Dominance

Big data analytics is changing the game in the insurance industry. More data is produced than ever before, providing ample opportunities for insurers. For example, auto insurers are now leveraging the 4 terabytes of data produced by connected cars each day to provide more personalized experiences to their customers. Similarly, life & health insurers are leveraging connected data from wearables that track thousands of data points such as an insured’s heart rate and sleep patterns.

To achieve data dominance, insurers must build up and scale big data ecosystems. These can include analytics platforms, data visualization platforms, business intelligence platforms, artificial intelligence tools, and Internet of Things (IoT) technology such as wearables and smart home devices. Global IQX, for example, includes the option for employees to connect their Fitbits during enrolment to receive applicable discounts.

Neon sign saying "data has a better idea" with city in the background

Most carriers already have vast amounts of data. New technologies can be leveraged to better visualize data sets and to suggest optimal benefits plan design based on past success factors. When data-protection and privacy laws pose challenges to personalization, artificial intelligence tools can be used to produce synthetic data that does not expose customer information.

Carriers that can most effectively leverage big data will be able to deliver more personalized customer experiences, increase customer retention, cut costs, and produce more accurate quotes, faster.

Insurance Ecosystems: Seize the Opportunity for Differentiation

Ecosystems might be the single greatest opportunity for insurers to differentiate themselves in a period of rapid digital transformation. Indeed, according to 2019 research from Accenture, only 5% of insurers can be considered “ecosystem masters”.

While the benefits are clear, it is not always easy to develop and scale a digital ecosystem business model.  There will be organizational, cultural, and technical challenges along the way. Once you establish the foundational platform and define parameters you’ll have the opportunity to improve your service offerings, increase customer loyalty, and drive new growth in a competitive landscape.

One of the first steps of developing any ecosystem is picking the right partners. At, Global IQX, we built a component-based platform for the ecosystem economy that integrates with best-in-class CRMs, policy administration systems, and data service providers to help position group and voluntary benefits providers at the forefront of innovation.


Headshot of Mike de WaalMike de Waal is president and founder of Global IQX (www.globaliqx.com), a leading software provider of AI-driven sales and service solutions to employee benefits insurers. He has deep experience in both software development and business management skills.

Early in his career, he worked as a computer programmer and then went on to become a financial planner and a benefits consultant before becoming a tech entrepreneur.