Insurance ecosystems: How to build effective, long-term partnership networks

Partnerships are one of the main ways insurers and brokers expand market reach, increase revenue and enhance retention. Though useful in promoting growth, they’re usually narrow in scope, with limited terms and benefits for participants. Some carriers and distributors have attempted to build on partnerships’ potential by entering into ecosystems, digital networks of partners that provide complementary goods and services.

These networks are a promising variation on longstanding practice because they offer multiple ways to reach customers when they’re most likely to make a purchase, whether for the first time or at subsequent moments (for example, during the claims process) when related products and services are likely to appeal to them. But ecosystems are typically much more complicated to create and maintain than bilateral arrangements, and carriers often struggle accordingly. Fortunately, there are clear paths to success. They require forethought and discipline but are eminently practical for insurers who invest the time and attention to getting right the strategic, marketing, technological and operational details.

Bumps in the road

We’ve observed that the carriers who’ve most thoughtfully invested in ecosystems, often by taking the lead establishing and/or managing them, have meaningfully improved top-line growth and client retention. Still, most carriers struggle to effectively participate in ecosystems because:

• Connecting and integrating appropriate products and services requires deep insight into targeted segments, something product-centric organizations like insurers often don’t have.
• Many carriers that manage ecosystems fail to pull together a broad enough group of suppliers even if they adequately define the scope of products and solutions.
• Appropriate infrastructure, processes and partnerships require considerable up-front investment. Moreover, the technologies (APIs, for example) that create seamless user experiences for members and customers are complex, especially in large ecosystems. And there are often related challenges leveraging data from multiple entities to track customer interactions and determine next actions.
• An ecosystem’s success ultimately depends on mutual satisfaction with terms and results, as well as joint promotion of offerings. Maintaining a sustainable monetization strategy and partner relationships can be challenging, as individual motivation and goals can diverge without ongoing and clear communication.

Each of these factors is complicated and exponentially more so in combination. This has led many insurers to avoid taking the lead and instead focus on simpler roles as opportunistic participants — or abstain from ecosystems altogether. But putting yourself in a prime position to grow requires mastering this complexity and making it work for you, your partners and customers.

Here are the basic requirements for success.

1 - Clarify roles at the start

First and foremost, start with a clear strategic vision. This sounds self-evident but many carriers simply don’t have one. Does becoming part of an ecosystem make sense considering your actual and desired market reach and resources? If you do enter an ecosystem, what’s the best role for you? What you choose will determine how you relate to other participants and the degree of your commitment. Do you want to be the creator, who sources participants and “owns” the customer by curating end-to-end experiences across multiple partners? Do you want to take on the often complementary role of manager that owns data to create integrated user experiences?

Here’s a table that provides a high-level overview of an insurer-led ecosystem. Partners and their offerings will vary in real-life examples, but roles and responsibilities typically remain consistent regardless of exact ecosystem composition.

Insurance ecosystem

2 - Promote long-term viability

As we've noted, most carrier ecosystem creators and managers haven’t gone beyond defining a scope of products and solutions and have fallen short attracting suppliers to participate in ecosystems. This is largely because maintaining ecosystem viability is hard work. The manager has to structure mutually beneficial relationships for each partner that address:

• Why each partner should join and remain in the ecosystem.
• How products and services will be available on the platform both at the outset and as the ecosystem matures.
• Financial terms for each member of the partnership, which can change significantly depending on results. Partnerships that extend beyond a single national border, for instance, are likely to benefit from a portfolio-level instead of geographic approach to products and services.

With so many agreements to hammer out in each partnership, many ecosystems never become integrated and therefore never take off. In fact, with these challenges in mind, most carriers elect to take opportunistic roles (often in several different systems simultaneously), rather than manage every facet of an ecosystem.

For many insurers, the higher opportunity/higher cost roles of creator and manager require more resources than they can or want to invest. It's often easier — if typically less lucrative — to act as an opportunistic participant. Despite the limitations we’ve seen some carriers succeed in this role by, for instance, offering embedded auto coverage with an automotive purchase.

Regardless of the role you choose, be proactive. Even if you’re not an ecosystem manager, look for partners that complement what you and the ecosystem offer. You’re supposed to function as a team so partners should understand and contribute to the ecosystem’s brand purpose and promise. If they don’t, they’re probably not the associates you want. Moreover, in an effective network, partners constantly learn from and promote each other’s offerings. If you find you’re on your own because others are ignoring you (or you’re ignoring them), reconsider why you’re in the ecosystem.

3 – Engage partners and customers

To attract and engage partners and customers, ecosystems require ongoing attention to product design, data and technology. Attention to these details falls most heavily on creators and managers, but each partner plays an important role in:

• Creating and maintaining a good user experience (UX). Everyone, from partners to end customers, needs to feel personal engagement with the system to work and shop in it. This is a frequent challenge for insurers because most still struggle to improve UX on their own, independent of partnerships.
• Building an effective API framework that securely integrates internal and external users. Whatever their role, this will be much easier for carriers with modernized cores.
• Maintaining sound data management and exchange. This should produce analytics that result in clear metrics and actionable reporting and facilitate data-driven decision-making. If you and your partners get this right, then you should be responsive to user needs and have useful information to inform future endeavors.

While none of this is easy, affordable and effective cloud-based applications and machine learning are making internal and external integration more practical. By utilizing transaction data from associated entities, digital interfaces can recommend related products and services at “moments of truth,” when customers are most likely to consider purchasing them.