Insurance Liquid Ecosystems
The era of connected companies
The era of connected companies
One of the most observable traits in many companies today is the fact that they are, more than ever, willing to connect technologically with other organizations for multiple reasons: creation of new products, services and business models; improvement of certain processes, cost savings, reduction of time to market, improvement of the customer experience...
Organizations know that agility is essential to compete in markets and that technology is a key accelerator. Furthermore, customers, once they get used to performing actions easily, quickly and intuitively, become more demanding. Two of the key concepts that we introduced in the previous Insurtech Global Outlook, when we launched the Liquid Insurance Ecosystems, continue to be very relevant: companies must be where their customers are (the ecosystems themselves) and must create TechGiant-type experiences (those that have revolutionized the world and reach all countries; for example, Gmail or the Amazon shopping experience).
Companies must be where their customers are and create TechGiant-type experiences
However, and as part of this introduction, we would like to raise some reflections that indicate that ecosystems are not, by themselves, spaces that must function well in all situations, but rather are complex scenarios, in which companies must make appropriate decisions and where, of course, failed cases or changes and adaptations in strategies occur.
In this line, the example of Haven could be included, the insurer that announced that in February 2021 it would disconnect its operations and dissolve the agreement that the founding partners (Amazon, JPMorgan Chase and Berkshire Hathaway) had signed to date. In this case, it was an agreement that seemed to have all the elements to succeed: leading companies in their fields, the capacity for innovation, an idea that solved a great challenge in the United States (reducing medical costs for families, offering quality services and simple doctors; and better manage drug delivery), budget to test new models, a client base large enough to think about expanding the model at a later date...
However, reality shows that ecosystems, despite being based on the connection of different companies to create new products, services and business models, sometimes fail because it is essential to choose stable partners and have long-lasting plans focused on the same goals.
Despite the disappearance of this company from the ecosystem, we must highlight the ability of this organization to bring a model like this to the market in just 18 months, with an end-to-end proposal that offered services from online health care to home delivery of medicines. This experience, although unsuccessful, will also serve to see the steps of two of its founding partners: Amazon (probably more focused on offering a service layer) and Berkshire Hathaway (more oriented to financial operations).
In this case, the difference between the two is that Amazon may consider adding insurance products and services to its offering in the future; and Berkshire Hathaway would have a more difficult time setting up an end-to-end service on its own.
Another of the ideas worth highlighting in the field of insurance is that it is not enough to be a technological player and to create good business models. What works in other areas does not mean it will be useful in the insurance field, where companies must know the business very well and where a clear knowledge of risk management is essential. At the other extreme are insurance companies that have managed to consolidate in areas such as technology, where the case of Ping An stands out, a company that defines itself as a world-leading technology-powered retail financial services group with more than 210 million retail customers and 560 million Internet users.
Finally, we would like to highlight the regulatory aspect surrounding ecosystems, which are impacted by the growing concentration of players and by the actions that some administrations take to avoid monopolistic situations or the misuse of data for commercial actions. Although the European Commission finally accepted the purchase of Fitbit by Google, a series of limits have been imposed, such as not using Fitbit health data to build each person's personalized ad profile. The approval also conditions that Google cannot block access to the APIs of other wearable technology manufacturers need for these smart devices to connect to Google phones (Android).
In another context, but within the regulatory sphere, are decisions such as those adopted by the Chinese government, which has opened an antitrust investigation against the businesses of the Asian giant Alibaba, parent of Ali Health (its pharmaceutical and e-commerce company). This investigation, although still in its early phases and without a definitive resolution, could reconfigure the growth model of the big Chinese technology companies and, therefore, of some of their business models, including the insurer and those related to health.