In my last company I banned the use of the word "ecosystem". I saw it as another irritating buzzword used exclusively by consultants and those with an MBA, like "holistic" and "paradigm." Now, ten years later it's my favourite word and I use it all the time. I'm in good company - it's all the rage!
Ecosystems was the defining theme at this years DIA Conference in Amsterdam. In summing up the event DIA co-founder Roger Peverelli said "Ecosystems offer new ways to become much more relevant. Solving the real problems customers experience across the value chain requires collaborations with other parties"
“Teaming up with insurtechs while building these ecosystems is essential to accelerate innovation .... the insurance industry is embracing ecosystems as a key to the future”, added Reggy de Feniks, Roger's DIA-co-founder.
The word ecosystem was originally confined to the world of science and referred to a biological community of interacting organisms and their physical environment. It is now in more general use meaning a complex network or interconnected system. It really is the perfect word to describe what is going on in insurance (I have conceded defeat, the consultants got it right).
These "interconnections" are many, varied in nature and multi-dimensional involving incumbents, investors, startups, service providers, technology providers, data sources, regulators, the professions, repairers, payment systems, academia, recruiters, government agencies and many many others.
To continue the theme, and despite my prejudices against management consultancy speak, I was very taken with the latest piece from McKinsey on ecosystems entitled Insurance Beyond Digital - the Rise of Ecosystems and Platforms. In it they examine the rise of ecosystems and the trend’s implications for insurers. "To succeed in ecosystems, insurers will have to take a hard look at their traditional roles and business models and evaluate opportunities to partner with players in other industries. They must also understand how ecosystems will shift value pools and change the nature of risk"
They expect distinct ecosystems for mobility, health, housing/property, professional services, machinery/equipment - 12 in all - accounting for 30 per cent of global revenues by 2025. That's a big call to make, but if they're right (and they've proved me wrong already so I'm not arguing) then there's going to be a rapid and game changing gravitation towards big ecosystems. Insurance will have role to play in them all. It won't be front and central, but it will play the same vital role it has since the concept was invented - oil the wheels of broader commerce by providing ways to mitigate and transfer risk. No ecosystem can survive without it.
At an event last night, which InsTech London put on in conjunction with insurers MS Amlin and lawyers Norton Rose Fulbright, we looked at the maritime ecosystem. It was like a blueprint for our times (I nearly said paradigm) with speakers there from government, Lloyd's, insurers, lawyers, consultants, technology providers, data providers and data analysts. The theme, partly subliminal, was how will insurance work in a world of smart ships, real time data on whereabouts and behaviour of ships and the condition of the cargo all wrapped and, given the availability of a blockchain platform (InsurWave) to power dynamically priced smart contracts providing to marine insurance to customers in near real time delivery. Very collaborative and very cool. So much for those who think InsurTech is a purely consumer based phenomenon.
Now these ecosystems don't just happen, they don't create themselves. The ecosystem members don't magnetically connect and just start doing great stuff together. In practice you need to understand who your potential ecosystem partners are, their roles, their respective abilities and competitive landscape. You need to know how to pick the right partners and comfortably co-exist with in a ecosystem where you have complementary roles (look no further than InsurWave for an example of effective collaboration and good partner choices).
Please excuse the self-promotional nature of this, but these emerging requirement for connections and suitability analysis makes the role of communities like ours, InsTech London, suddenly very important - this is what we do. We help our members find the right partners and I think we do it very well and we certainly do it very cost-effectively.
Many prospective partners will not operate in your space. It will be of vital for insurers to grasp what's happening outside the narrow sphere of insurance where the speed of innovation is no less dramatic. The future of insurance and many of the key partners in the future ecosystems will not originate there, but will have a massive effect on it. There are really exciting things happening in the parallel worlds - in PropTech, LawTech, RegTech, HealthTech etc that are converging on the insurance space and are having a big influence on it. This will be the theme of an InsTech London event in mid September.
There's also a global dimension. Insurance being a global business will necessarily need a global ecosystem to support it. We are already seeing this in InsurTech with the formation of the Global InsurTech Alliance - the first steps towards creating a global InsurTech ecosystem with each national or regional hub informing and helping each other and facilitating introductions. It's all about making connections.
For a broker perspective look no further than Steve White, the CEO of the BIBA said in his conference speech "If you’re a broker looking to embrace InsurTech, where do you start? Simply Googling InsurTech isn’t likely to give you optimal results. Similarly, if you’re an InsurTech firm looking to collaborate, how do you find these firms, and crucially, the right person within them to speak to? That’s where the idea of a dating agency was thought up"
The theme is understood and supported from Government down. At a speech given on behalf of the Minister of Shipping, Nusrat Ghani MP, at our event last night she said " to truly harness their potential the marine insurance industry cannot act alone. Cross-industry collaboration, such as that seen on InsurWave, is critical to exploiting the best technological opportunities for UK marine insurance. Connecting maritime professionals with technology specialists from outside the sector brings fresh perspectives to complicated problems and leverages shared knowledge to help drive the sector forward."
To return to self-serving mode, it's clear that from top to bottom that there is a clear understanding of the importance and value of these many collaborations and I therefore hope by extension, that it's vital to foster and support those like InsTech London who are in the "dating agency" space and helping to make the requisite connections.
There are dozens of InsurTech startups who have found capacity, investment, employees or partners at Instech London, but they just don't have the funding to be able to pay us for the service they benefit from and we don't expect them to until they can. As with best functioning and most evolved communities/societies, it ultimately falls to the rich, those with the deepest pockets, to pay the "tax" that funds such services, that play their part in creating a better society to the benefit of all.
As Franklin Roosevelt put it, "Taxes are, after all, the dues that we pay for the privileges of membership in an organised society." There will, I suggest, also be taxes to pay for the privileges and ultimately benefits of creating, organising and optimising the best ecosystems, be they insurance specific or one in which insurance just plays a small part. In a fair and equitable world, that tax should fall on those with the greatest ability to pay and in many cases that aligns with those who stand to gain the most from this brave new ecosystem driven world. That world appears increasingly self absorbed and insular, so I sincerely hope that's not too much to ask.
"Society’s growing reliance on digital technologies is not only reshaping customer expectations but also redefining boundaries across industries. Insurers cannot avoid this phenomenon: as traditional industry borders fall away, the future of insurance stands to be greatly influenced by platforms and ecosystems".
See figure 1.
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