EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
How EY can Help
-
A transformative solution that helps insurers launch innovative new products, brands and marketplaces at speed. Learn more.
Read more
4. Understand why ecosystems fail
A shift of this scale presents significant risks, ranging from the strategic (e.g., poorly aligned incentives among partners or incentives that diverge as the ecosystem grows) through execution (e.g., failure to engage target customers successfully) and financial (e.g., under-investing or cost overruns) to tactical (e.g., sub-par project management). Failure to execute against the plan is a particularly common, and dangerous, risk.
Lack of – or loss of – a clear vision or strategy is another significant threat. Vision and strategy are important in that they create the guardrails and corporate governance framework that allows not just a single team, but teams of teams, to drive change inside large organizations. Such vision needs clear articulation and extensive communication to customers, distribution partners and your own staff. And it needs to be refreshed and sustained in the face of a constantly evolving market, particularly where well-established practices or cultural norms need to change.
Clarity of strategic vision should not preclude market realities or course corrections. One European insurer set out to create a mobility platform for the second-hand car market. It quickly learned that, rather than going direct, it was better to engage customers through existing channels for automotive servicing and assessments. It continues to add services aligned to the entire life cycle of car ownership. That level of flexibility is essential for insurers to diversify their offerings and capture more share of wallet via ecosystems.
5. Get good at partnerships
While competitive pressures create urgency for insurers to engage with ecosystems, they must be thoughtful in finding the right partners. Potential ecosystem collaborators should be evaluated in terms of their ability to fulfill specific business needs and their willingness to contribute fresh thinking and innovative ideas. When it comes to choosing partners, cultural fit may be as important as complementary offerings and attractive commercial terms.
Beyond complementary service providers (e.g., financial planners involved in the ecosystems of life insurers), suppliers and customers, strong ecosystems typically feature a number of other specialists playing specific roles. Those can range from cyber security firms protecting the integrity of the ecosystem through InsurTechs with targeted solutions for specific functions (e.g., policy administration, pricing), to digital marketers, analytics and cloud computing platforms. In some cases, regulators, industry analysts and even competitors may also be involved.
Cultural fit is critical for success. Without alignment on the strategic priorities and operational requirements, it becomes much more difficult to eliminate potential conflicts of interest. Clearly defined roles and responsibilities coupled with open communication can help build trust and minimize the risk of working at cross purposes. The bottom line: the better the partners, the better the ecosystems.
One European bank consolidated from having a range of insurance providers for different product lines to having a single provider covering each jurisdiction in which it operates. The key was finding a partner that bought into the vision of creating value for customers and a consistent customer experience for all product lines.
6. Design for the speed of change
While technology is not the only variable in the formula for success, it plays an essential role. Specifically, open architectures, sophisticated use of application programming interfaces (APIs) and seamless data sharing are necessary elements of successful ecosystems.
To get it right, insurers should select a platform that facilitates integration with ecosystem partners, including InsurTechs and other non-traditional players. The legacy technology infrastructure in place at most insurers is simply not up to the task.