InsurTech and BigTech companies are playing into the weaknesses of traditional insurance companies. They are delivering the convenience and personalization that customers are craving for. According to a new report by Efma and Capgemini, incumbents in the insurance industry are catching up by building digital ecosystems. IAM solutions like TrustBuilder are key in bringing these ecosystems to market quickly.
Efma and Capgemini recently published their World InsurTech Report 2021, stating that InsurTech and BigTech players are just as disruptive to the insurance industry as FinTechs are in financial services. The innovations they bring, have secured them access to capital allocation from investors. The report points out that between 2018 and 2020, the 5 biggest tech companies and a carmaker which offers insurance services added almost 2.5 times the total market capitalization as the 30 largest insurers globally in 2020. By the end of 2020, the total market cap of listed InsurTech companies surpassed $22 billion.
Customer experience rules in insurance industry
The report finds that InsurTechs are turning up the heat on incumbent insurers by offering greater personalization and emphasis on customer experience. This comes at a time when the COVID-19 pandemic catalyzed customer intentions to purchase insurance (up by 7%) and policyholders are turning to insurers that provide them with CARE – the report’s acronym for Convenience, Advice and Reach. Research shows that no less than 50% of customers today are willing to consider coverage from a new-age player. This bodes well for InsurTechs, who have put customer expectations and convenience at the center of their propositions.
To counter this, traditional insurance companies (who are already strong on the Advice and Reach components of CARE) are buying and partnering with their digitally native competitors and are moving from ‘doing digital’ to ‘being digital’. The report predicts two scenarios emerging. A first scenario consists of embedding insurance as a value add within other organizations’ digital ecosystems, where insurance is sold as an add-on to a product or service. In this scenario, the business model evolves towards a B2B2C proposition, where ecosystem partners control the customer relationship. The second scenario adds the value at the core of complex offerings, where the insurer evolves from selling products to becoming an orchestrator of services. As Efma CEO John Berry says: “As traditional insurers expand their ecosystem to remain competitive, they must increasingly consider the value achievable through trusted partners.”
IAM is at the core of digital ecosystems
The move towards digital ecosystems where companies combine their own offering with third-party services, is not new. The evolution has been going on for some time in retail banking, the travel industry and in HR services. As became clear from a commissioned study conducted by Forrester Consulting on behalf of TrustBuilder, digital ecosystems are the holy grail of financial services. By extending their portfolio of services, financial service companies are becoming a one-stop-shop for their customer, and extending their reach with them.
Rome wasn’t built in a day, and neither are digital ecosystems. To offer third-party services, the offerings of different companies need to be connected securely through APIs. If insurance companies for instance, were to program all these separate connections themselves, it would take them ages to bring the service bundles to market. That’s why TrustBuilder launched a Service Catalog, where connecting to third-party apps is convenient and secure. The Service Catalog gives access to a growing number of applications, but also to many Identity Providers. This allows customers to access the ecosystem platform with their authentication option of choice. As we have experienced at our customer Allianz, being able to offer different authentication options is a must for a modern insurance company. TrustBuilder is constantly expanding the number of applications, thus creating a marketplace where organizations can exchange and monetize their apps. As proof of this strategy, TrustBuilder recently received a grant to further develop the marketplace idea from the Flanders Innovation and Entrepreneurship Agency.
Access orchestration for insurance orchestrators
As TrustBuilder securely connects all the applications together in a single ecosystem, customers can move from one application to the next seamlessly, thus providing a great customer experience. Authenticating for each application happens in the background and is completely transparent to the user. In that way, there is a perfect fit between the insurers that have become orchestrators of services, and TrustBuilder, the orchestrator of access.