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Ecosystems in insurance: what winners do differently

Successful ecosystems are already producing significant value – and teams’ close study of winners reveals how.

In brief

  • Ecosystems are not new, but they are rapidly gaining traction in insurance and other sectors.
  • Today’s top-performing ecosystems exhibit common characteristics that demonstrate just how big a strategic shift they are from conventional business models.
  • Insurers face a choice between orchestrating their own ecosystems or providing products to those led by others, though some firms may try both.

Ecosystems have been steadily rising to the top of the board and C-suite agenda for years now. More than 75% of global insurance executives view digital ecosystems and other partnerships as essential to creating competitive advantage, according to 2019 research from Swiss Re. That number is likely even higher today.

The first generation of successful ecosystems has turned potential into profits, demonstrating how the right business model and value proposition, right partners and strong tech and data capabilities can drive growth and value creation.

But isn’t “ecosystem” just a fancy word for something many players are already doing? After all, there have been various attempts at cross-selling products to existing customers over the years, generally with limited success. A number of major players operate customer portals that offer all of their products in one place. Skeptics may be inclined to ask what’s different this time.

EY teams market experience suggests we have truly entered a new era. We’ve looked closely at a range of successful financial ecosystems around the world and found that they share seven common characteristics that differentiate them from earlier and less successful attempts to broaden and deepen customer relationships.

This article, part of a series, highlights these seven characteristics, which we view as requirements for success in the ecosystem era, and the first steps insurers must take if they are to instill these attributes within their own ecosystems. Other articles explore the competitive risks and urgency to act and six steps to executing successfully.


Chapter 1

Seven attributes of ecosystem system winners

The leading practices established by early adopters provide a template for ecosystem success.

Based on our market research and experience, we’ve developed our ecosystem pyramid. It captures the specific things strong ecosystem players do differently, whether acting as an ecosystem orchestrator, a manufacturer or both. The individual elements may seem to represent only subtle differences from conventional approaches. Collectively, however, they add up to a radical shift in business models.

  1. Successful ecosystems consistently have a very strong tone from the top. The strategy is driven by a consistent commitment at the highest levels in the organization. The group chief executive is commonly involved as a high-profile advocate. Ecosystem players also tend to model themselves on technology businesses, regardless of their heritage.

  2. Ecosystem strategies are translated into execution through the use of genuinely customer-centric metrics and incentives at every level of the organization and across operations. Those metrics reflect that a rigorous - even obsessive - focus on creating tangible value for customers at the heart of everything the ecosystem does. For instance, metrics and incentives encourage business unit and product line leads to broaden the overall customer relationship and satisfy more customer needs ahead of achieving more traditional metrics such as product line profit.

  3. Trust is critical to ecosystems’ growth and sustainability. After all, an ecosystem can only succeed if customers are willing to share more information and place more of their financial lives within it. Thus, customers must trust the brands involved and have confidence that they will be well looked after.

  4. Because customers are often hesitant to embrace new offerings in financial services, insurers need a hook or “killer app” that solves a genuine problem and initiates the customer’s ecosystem journey. For one Asian ecosystem, it was offering an online medical service. For another, it was a payments system that enabled families separated by distance to exchange the hong bao monetary gifts at Chinese New Year securely and digitally. Specific solutions with such clear benefits provide a solid foundation for ecosystems to grow.

  5. Building from that initial hook into a broad and deep customer relationship means involving other product lines, which typically have their own distinct sales or advice channels. Successful players have aligned product distribution, which is vertically siloed in many cases, to the ecosystem, designing propositions, processes and compensation schemes that benefit both distributors and the ecosystem itself. Again, beyond customer value, the top ecosystems are designed to benefit all participants and stakeholders.

  6. The economics of ecosystems are very different from the traditional insurance businesses. Successful players have tended to view manufacturing as fuel for the relationship, with wholesale, commodity-level pricing and margins, within the broader, overarching emphasis on relationship building. One Chinese ecosystem, for instance, takes margin from its investment funds to offset the bank fees that customers pay to load cash into the ecosystem - knowing that the more money customers have in the system, the more money will eventually flow to the funds.

  7. All of these factors are tied together through a consistent platform mindset across all the aspects of the ecosystem. Customer experiences are redesigned to work in the same way across all product lines, so customers are comfortable using the ecosystem to satisfy multiple needs and will embrace it as the default choice. One European bank moved from having a mix of partners to having a single insurance partner in each territory and committed to designing processes that work seamlessly across product lines. Furthermore, they’ve embedded behavioral economics to enhance the user experience and help customers overcome their own biases and make better financial decisions.

This list of characteristics may seem a bit daunting. Certainly it points to a need for fundamental transformation, not just of technology, but also of the business model, culture and skill sets. You may wonder if it’s even possible for an organization to go from being a traditional, vertically aligned insurer to a digitally enabled, customer-centric ecosystem player. Though the change journey is neither quick nor easy, we believe that the experiences of first movers and early adopters suggest that an effective strategy and strong execution are well worth the effort and investment.


Chapter 2

Building the foundation for ecosystem success

To win with ecosystems, insurers must consider four key variables.

Given the growth of ecosystems, more senior insurers leaders are trying to define best approach for their organizations. The right answer depends on a range of factors, from overall business strategy and operational footprint, to existing product portfolios and customer segments, to innovation capabilities and technological sophistication. Finding the right path forward won’t be easy but it’s looks essential to defining and executing a credible ecosystem strategy.

The positive news is that the journey can be taken in stages. As insurers begin to develop their own ecosystems or participate in those led by others, they are finding that many of the components create value in their own right, even as they preserve future flexibility. That’s important because ecosystem business models will evolve over time.

The following are four critical considerations for boards and executives to consider as they shape their ecosystem plans:

Orchestrating your own ecosystem versus providing products to those orchestrated by others

The question of choosing the right ecosystem business model may be the one most frequently asked about ecosystems – and it’s easily the most important one. Typically, ecosystems are convened by a single leader or orchestrator who provides a platform, core capabilities and products, with other participants offering complementary products, services and add-on features.

The mix can vary. Some large players can provide a full range of products themselves and use third parties only for add-ons. Others invite partners that can provide solutions they don’t offer themselves. But one thing is clear: the orchestrators of ecosystems call the shots and control the lion’s share of the revenue. Indeed, EY teams’ experience suggests that as much as 75% of the value from established ecosystems is in the customer relationship, with the underlying products typically priced at wholesale margins. In other words, the upside is greatest for the firms that are bold enough to lead.

The “ecosystem orchestrator” and “product provider” business models are not mutually exclusive, and we expect most insurers will end up operating a mix of both. But there will be some hard choices along the way. Pressure on product margins will make it harder than ever to sustain uncompetitive products or inefficient operations. And players reliant on third-party distribution today will need to decide how best to reach customers in the future. However, there’s also little point being an orchestrator unless you can access and attract a large enough pool of customers to make the ecosystem sustainable.

Identifying and reaching customers

The first task for insurers considering their response to ecosystems is to take a hard, honest look at who their customers are and how they can reach them. That means asking:

  • Is there a large enough pool of customers to respond to and engage with an ecosystem?
  • Are they our customers, or do they have a closer relationship with the distributor or advisor who brought them to us?
  • Do we have the right permissions in place to contact them?
Assessing and managing the impact on distribution networks

The customer questions are further complicated for insurers that use third-party distribution. Launching an ecosystem is an act of channel shifting and runs a high risk of being seen by third-party distributors as a unilateral declaration of hostilities. Making a move into ecosystems at the wrong time or sending the wrong signals risks being blacklisted by distributors who are key to the current business model.

Of course, those same distributors may well be planning ecosystem moves of their own that will turn them from valued partners into competitors. Insurers will need to examine which relationships can be sustained, which might assume new forms of “co-opetition” (i.e., competing and collaborating at the same time), and which will ultimately be lost. Insurers must also consider the right moment to trigger those shifts. Timing is everything.

Getting started

Faced with these tough choices, some insurers might make their initial move by participating in ecosystems led by other organizations. Niche insurers or those with less brand recognition can certainly benefit from engaging with higher profile ecosystems, whether in insurance or outside the industry. And other players’ ecosystems can offer cost-efficient access to new customer segments or new markets.

This is a valid strategy, especially for firms that can defend their margins through superior products, low-cost operations or a distinctive proposition that commands premium pricing. And playing on an existing ecosystem is not mutually exclusive with developing and operating your own; several Southeast Asian insurers do both.

Devising and executing the strategy for success

Because much more value is accessible to ecosystem orchestrators, we expect most large carriers to aim to play that role. For those with limited access to customers today, ecosystem strategies will need to improve that access, and manage around the resulting implications. For example, some players might conclude that succeeding with ecosystems means taking a bigger position in distribution or advice, triggering a wholesale rethink of their risk appetite and business model.

Whichever ecosystem strategy insurers adopt, ecosystems can help them navigate through a number of critical trends, including rising customer expectations, deep technology disruption and widening talent gaps. As these forces continue reshaping the industry, ecosystems will only become more important.


In the fast-moving, post-pandemic insurance industry, we believe ecosystem success will be increasingly correlated with overall market leadership. Ecosystems are not a “me, too” competitive matter, but will become the dominant way for all types of financial services players to connect with their customers over the course of the next decade.

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