Insurance ecosystems

Paul Wishman, Vice President, Insurance, CGI

Paul Wishman, Vice President, Insurance, CGI

It was in 1935 that the British ecologist Arthur Tansley coined the term ecosystem: the interactive system established between the biocoenosis (the group of living creatures), and their biotope (the environment in which they live).

"Technology innovation is changing the way in which we can now think about the development of proposition and indeed market ecosystems"

Since then the term has evolved to describe how businesses interoperate, and there are two broad ways in which it is used. Firstly, to describe an area where groups of organisms (read organisations) experience similar conditions and secondly— and most recently—to describe a living system of energy transfer, a whole complex of organisms (organisations) living together, linked by energy transfer.

There are two types of Insurance overlays that can be associated with these definitions of an ecosystem:

Product Markets can be seen as an ecosystem, e.g., Insurtech—Personal Lines—Commercial Lines

• These are being challenged by environmental technology developments such as Internet of Things (IoT), Remote Surveillance applications & Autonomous Vehicles

• Macro-level impacts - These tend to take a long time to be impacted in the long term, but there can be significant marginal impacts and could lead to market consolidation as economies of scale become more and more critical. Are we seeing this today—for example, the consolidation activity being driven by Allianz in the personal lines market?

• Could these lead to an Aral Sea event for the industry with a significantly shrinking risk pool?

Propositions as ecosystems—where there is much current use of this term

• Building customer facing propositions where a combination of organisations collaborate to provide a service or product

• These are not new but have largely been implemented as traditional supply chains with defined hand-offs, such as manufacturer to wholesaler and retailer—these supply chains tend to be complex and costly for establishing, thereby, relatively slow to respond to market conditions and needs

So what is new now?

Technology innovation is changing the way in which we can now think about the development of proposition and indeed market ecosystems, with three principal enablers:

• Cloud computing and the associated ability to access large amounts of data driving the term data lake to data ocean

• API’s as a means of doing business

• 5G and hyper-connectivity

These developments enable the construction of a proposition at the point of consumer interaction—a true product of one.

Some examples of this include Open Banking services such as AISP, PISP opportunity. Ordo another recent partnership we have been involved in with the launch of a request to pay solution that will transform UK payments.

This type of proposition led ecosystem development may start as micro level impact but have the potential to drive changes in consumer behaviour and expectation that can significantly impact the market level ecosystem.

So what? There is a lot of sooth saying about the macro-level threats (and opportunities) that the Insurance market faces and these are undoubtedly issues that need to be addressed by the industry as a whole. But, I think the real threat will come from the development of a proposition ecosystem that will change consumer perception of their needs, and if insurers are not keeping abreast of the micro-level developments, this may present a real short term threat to them.

At CGI, we are developing an emerging technology innovator ecosystem that is providing our clients with the ability to develop and deliver propositions that connect innovators and traditional players—often across different market ecosystems. An example of this is our analysis of satellite images and other data sets to provide the agriculture sector with yield improvement recommendation, coupled with a weather impact insurance policy that has an up to date assessment of the expected crop yield.

So if you are an innovator wanting to bring your API to the market, or an Insurance market ecosystem member wanting to see how you can participate in the ecosystem, we would be more than happy to talk further.

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