The way traditional insurance operates is changing. Insurers need to innovate to respond to the changes in consumer behaviors and compete with new actors that are already one step ahead. New actors that offer ingenious value propositions personalized to the needs of increasingly demanding customers and available globally.
To survive and thrive in this new environment, insurers must adapt to a liquid ecosystem where they are available to their customers whenever and however they want.
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Table of contents:
- What is a liquid ecosystem in insurance?
- The rise of liquid insurance ecosystems
- How to become a digital ecosystem player?
- Transform into a digital ecosystem player with the right technology
In this blog post, I’ll discuss what a liquid ecosystem in insurance looks like and why you must become a digital ecosystem player to build a “fit-for-the-future” organization.
What is a liquid ecosystem in insurance?
A liquid ecosystem is an interconnected set of services that allow users to fulfill various needs in a single integrated experience. It’s about delivering multiexperiences.
By design, ecosystems are ambiguous and dynamic, which means they will change with time, and there are competing alternatives to address similar challenges. A prolific ecosystem requires all participants to contribute and benefit from it. Connecting to and exchanging data with multiple vendors (interoperability) is an advantage to competing in ecosystems.
So far, some of the most interesting ecosystems for insurance have been:
- Smart mobility: the use of connected vehicles and how people decide to move between different places.
- Healthy living: related to new ways of living a healthy lifestyle. It may include a 360º vision of personal health aided by technology.
- Business shield: related to businesses and employees’ protection to cope with changing, highly competitive, and sometimes unpredictable operating environments.
- Home (“safe home”): the combination of IoT and other data sources to provide digital smart-home products, security services, and real estate management.
The rise of liquid insurance ecosystems
Extensive use of digital technologies in everyday life has become the new normal. Without a doubt, our connected digital world has become fertile ground for InsurTechs, RegTech companies, and Tech Giants to create, faster than ever, new and disruptive business models.
Today, multiple opportunities exist to increase the number of touchpoints with customers and obtain valuable data about them.
Insurance liquid ecosystems have seen a boost in the last couple of years. As per McKinsey, by 2030, digital ecosystems will account for around €60 trillion in revenue worldwide.
The impact of worldwide market trends like health-first, environmental, social, and governance (ESG) concerns, global rules and standards, and unexpected challenges — caused by climate change, economic crisis, or geopolitical uncertainties — will continue to shape our connected world and make businesses seek and explore new possibilities supported by pioneering and enabling technologies.
More and more, we see new actors leveraging technology such as IoT and AI/ML, collaborating with insurers worldwide in several areas like risk prevention, hyper-automation, and combating fraud.
However, not many insurance companies have deep pockets, and only a few can use only high-end technology and hundreds of elite developers to develop new ecosystems like the Tech Giants do.
But every insurer has people with vast knowledge of their business, customer base, and valuable data.
It is up to insurance executives to constantly improve their strategic partnerships list and continue to invest in transforming their IT landscape to become more flexible and open, supporting data-driven and API-led operating models.
These are the key pillars to connect to digital ecosystems.
Insurance ecosystems allow insurers to innovate and reach beyond conventional insurance products and services. Becoming an ecosystem player represents a huge opportunity for insurers who can react fast.
How to become a digital ecosystem player?
Embracing a digital ecosystem strategy and including it in their transformation journey can be challenging. Still, as previously stated, ecosystems can offer insurers a chance to innovate and create more value.
The good news is that insurers can become involved in ecosystems in various ways, one step at a time, with different levels of investment and risk. In this article, McKinsey suggests applying a mix of three things: partnerships, buying, and building solutions.
Why partnerships and buying solutions aren’t enough
Partnerships and buying niche solutions may allow insurers to leverage external expertise to support the development of ground-breaking products and services.
But this cannot be properly done without gluing all the pieces together — including existing on-prem or cloud solutions, data, and new third-party solutions — in a seamless, integrated user experience.
The key is in “building”. But it also has its challenges.
The “building” challenge
Developing and maintaining a modern enterprise-class solution with traditional approaches is a tough, costly, and lengthy process.
From a technical perspective, it typically involves different coding languages, the usage of development and integration frameworks, testing, and DevOps tools, not to mention a number of non-functional requirements, like security, performance, usability, interoperability, and scalability, that need to be considered.
Is there a simpler and faster way? Yes, there is, but first, let’s decompose the challenge before trying to put everything together.
Why composability is a must
It is common to find organizations with a system integration strategy already in place or under revision to connect and extract data from a diversified app landscape made of legacy, commercial-off-the-shelf, or home-grown solutions, databases, and SaaS applications.
Having everything integrated is nice, however, if something goes wrong in the backend, the user experience becomes a tragedy.
Decoupling from legacy complexity and breaking down data silos is of the utmost importance to lay out the foundations for an open architecture. But one should take a few steps further and also invest in a composable microservices architecture.
Composability is a design principle that brings greater reuse and flexibility through modularity. Software development done through composition means solutions are built by assembling reusable business components — the so-called Packaged Business Capabilities (PBCs) as coined by Gartner, which, in turn, are aggregations of microservices.
According to Gartner1, PBCs, or business components,
“(...)are software components representing a well-defined and isolated business capability, functionally recognizable as such by a business user. A well-implemented PBC is functionally complete to ensure autonomy (no critical external dependencies, no need for direct external access to its data.”
While microservices are a great technical construct for “techies”, business components are created to directly align to a business use case or outcome, and, therefore, they provide tangible value for business teams.
Business components can be built to replace functionality from legacy solutions or to extend the functionality of existing systems which is what insurers need to do when modernizing and transforming their IT architectures for extreme adaptability and speed of delivery.
By reusing business components and microservices like LEGO® pieces, as many times as needed, development teams increase productivity exponentially since new projects will no longer start from a blank page.
Transform into a digital ecosystem player with the right technology
Today, building and deploying innovative solutions can be faster and less complex than many people think. With modern application development platforms, small multidisciplinary teams — fusion teams — can work together to build, deploy and change custom enterprise solutions in record time and on budget.
At NTTDATA, we have partnered with our customers in insurance and beyond to help them simplify their IT. We help them integrate their business with digital ecosystems’ services and accelerate their digital transformation journeys using the above mentioned techniques supported by the OutSystems high-performance low-code platform.
Our experience with OutSystems in transformation projects has confirmed that a composable mindset is crucial to achieving more agility to react and adapt faster to unexpected changes, as happened with the COVID pandemic.
From a software development perspective, OutSystems provides a cloud-native platform with all the required capabilities to build and manage large portfolios of reusable digital assets and to deal with advanced UX/UI patterns, high performance, and security requirements.
To finalize, I just wanted to remind you of a mantra that has never been so true for the businesses of today and tomorrow:
“It is not the strongest organizations that will survive, but the ones most responsive to change.”
1Becoming Composable: A Gartner Trend Insight, Gartner