Transforming Insurance: Embracing the Customer-Centric Ecosystem

Insurers often emphasize being "customer first," showcasing touchpoints and innovations that reflect their customer-centric ambitions. While progress is slow and fraught with challenges, even moderate failures provide valuable lessons. However, this raises critical questions about the true meaning of customer-centricity in a fragmented, multi-insured era.

In an era of multi-banked and multi-insured fragmentation, understanding customer-centricity involves knowing your customer, personalizing offerings, and shifting policy paradigms. Maintaining viability while transitioning from policy-centric to customer-centric enterprise design is crucial. Rapidly acting on customer insights, keeping pace with fraudsters, deploying new technologies, adapting to regulatory changes, and managing supply chains are essential to treating customers fairly and delivering on promises.

Few insurance companies have successfully transitioned into ecosystem businesses. Tech giants like Apple and Amazon set high expectations for ecosystem success, influencing consumer demands. Although Amazon’s U.K. Insurance Store closed, it was a high-learning opportunity, demonstrating the potential for ecosystem businesses in insurance. Similarly, Tesla’s integration struggles highlight the ongoing learning and optimization process.

Success stories like Lemonade and wefox showcase the potential of ecosystem models. Lemonade’s rapid growth to one million customers in four years and wefox’s $800 million revenue by 2023 exemplify successful ecosystem strategies. These companies are not burdened by incumbent business models and can quickly adapt to market demands.

The average tenure of old-economy companies on the S&P 500 is declining, and the insurance sector is not immune to this trend. Market forces and regulatory changes, such as the Consumer Duty in the U.K., push insurers to treat customers fairly and adopt new business models. As price-led competition becomes less viable, understanding customer value and focusing on retention is crucial.

Ecosystem business models offer answers to these challenges. Insurers built around policy-centric systems struggle to create effective customer relationships, leading to a legacy trap with complex and expensive changes. Integrating new technology and partners into legacy systems is difficult, requiring a clear vision of customer and business outcomes.

Transformation, driven by MACH-based core technology and a customer-centric mindset, is key to success. This approach enables insurers to mine data for insights, act on them, and create adaptable, competitive businesses. From the customer’s perspective, effective communication through various channels can mitigate risks, lower costs, and enhance engagement.

Legacy systems impede innovation, but ambitious insurers can break free with the right mindset, organizational design, and technologies. By doing so, they can offer excellent customer experiences and create positive, valuable interactions, positioning themselves for future dominance.