Across every industry, the way in which services are consumed is changing, and insurance is no exception. Regardless of whether customers are buying cover for a short trip or filing a substantial claim, the expectation is that these services should be offered digitally. This has been accentuated by Covid-19 lockdowns, which resulted in consumers spending more and more time online. Yet even after the pandemic passes, digital habits and expectations are unlikely to revert to what they were before. As such, even though ‘digital transformation’ has been on the cards for a while for most insurers, this new situation calls for them to take it one step further, and embrace a platform-based approach.
Looking to the future of insurance
Insurers won’t be able to meet these expectations simply by building a faster app or opening new communications channels. There are significant ramifications for the way in which insurance services and products are delivered. For example, rather than interacting with a dealership, bank and insurance provider to buy, finance, and insure a car, customers will expect a unified experience, where products from multiple organisations are delivered as part of a single digital journey. In this model, each organisation ceases to ‘own’ the customer, in favour of becoming part of a wider digital value chain.
Putting this into practice over the long term requires insurers to embrace a fundamental change in mindset away from competition and towards collaboration. In the short term, it also calls for a high level of data agility to ensure that the right customer information is accessible to the right third-party partner at the right time, to enable a seamlessly connected customer journey. However, despite being rich in data, such agility doesn’t come naturally to insurance providers, due to their heavy reliance on sprawling legacy IT estates. According to our research, more than half (56%) of consumers have received a disconnected experience from their insurance provider, which suggests that many aren’t unlocking their data effectively.
Breaking free of the past
The first step insurance providers can take to address this is to rethink the way that IT operates. As it stands, many IT estates in the insurance industry are organised into departmental silos with compartmentalised processes. This limits how quickly they’re able to innovate and crucially, hinders their ability to partner with others. Without an understanding of how services and processes are connected within the four walls of the company, it’s near impossible to integrate these offerings with partners in a wider ecosystem.
Compounding this issue is the mindset that many insurance organisations have, particularly where digital innovation is concerned. Rather than taking their cues from Silicon Valley organisations, which often innovate by getting a concept ‘in the wild’ to grab market share before looking to monetise it, insurers typically focus on the need for services to be profitable first. Such caution isn’t without merit, but it often isn’t conducive to an innovative mindset.
It’s important for insurers to realise that breaking with tradition and taking steps to embrace the digital economy isn’t a ‘shot in the dark’. Partnering with other organisations as part of a joined-up ecosystem offers significant revenue opportunities for those that get it right. We’re already seeing examples of this in the market, with ‘embedded’ insurance offerings.
For example, customers buying an internet-connected home security product from a retailer can sometimes check a box to bundle home and contents insurance together seamlessly. This can be taken even further as the insurer looks to partner with as many different organisations as possible to expand its ecosystem. The bigger its ecosystem, the more opportunities the insurer has to get in front of its customers, regardless of whether it ‘owns’ them in the traditional sense or not.
Reimagining the insurance ecosystem
The most effective way to make this a reality is for insurers to re-imagine their offerings as an ‘Insurance-as-a-Platform’ model, underpinned by Application Programming Interfaces (APIs). This enables insurers to unbundle and re-package all of their customer data and digital assets as a set of capabilities that are exposed for other organisations, such as retailers and banks, to pick up and re-use. By taking this approach, every digital capability becomes a product that can be exposed to third parties via APIs, enabling other companies to incorporate insurance services into their own offerings. The more open insurers become, the more opportunities they have to expand their ecosystem and take advantage of new revenue streams.
As well as enabling insurers to open themselves up to external partners, the API-led approach also helps to accelerate innovation within the organisation itself. When all digital capabilities are exposed as products, anyone within the organisation – not just the IT department – can discover them and use them to work on their own digital projects. For example, Legal & General found that this method helped it to become more agile and able to meet greater digital demands. After implementing an API strategy, its teams were able to build digital products and services 2.5 times faster.
An opportunity for growth
There has never been a better time to experiment with the potential of creating a joined-up, ecosystem-based customer experience. Customers are more digitally-savvy than ever before, and thanks to global lockdowns, have shifted towards online interactions over physical ones. Looking beyond the Covid-19 pandemic, customers will continue to value the standard of digital experiences they’ve now come to expect. All of this underlines how effective an API strategy can be for insurers as they look to grow their market opportunities. Not only does it help them weather the current storm, but it also provides the basis for meeting a new standard of customer expectation. In times of turbulence and crisis, there are always examples of companies that find a way to thrive. Insurers that respond to this moment as a catalyst to transform their businesses into a platform will emerge renewed and stronger from this crisis.
By Jerome Bugnet, senior manager of Solution Engineering at MuleSoft