A shift is needed in the way insures run their businesses if they are to truly harness the benefits of new technologies, differentiate their businesses and deliver an improved customer experience.
This was the assessment made by Sangeet Paul Choudary, the founder of Platformation Labs, at a recent roundtable hosted by DXC Technology and Fusion Labs in Sydney.
Choudary is considered among the Top 30 emerging thinkers globally by Thinkers50 – a global ranking of management thinkers. He has worked across multiple sectors including pharmaceutical, retail and technology to develop the new 'platform' business model.
Amazon illustrates the platform model effectively. Inviting other retailers into its business, the technology giant enables retailers to connect with consumers. This approach has reshaped how a business can deliver value to its customers.
As author of the books, Platform Revolution and Platform Scale, Choudary said incumbent businesses of today run on a 'pipeline' structure, meaning that company's simply create products to sell to customers. But disruptive challengers are increasingly moving away from selling commodities to monetising data.
A platform strategy allows a business to bring together an ecosystem of partners, infrastructure and data to create a customer-centric experience. The partner services compliment the businesses core offering adding to the overall value for the customer.
Choudary said other industries, such as the retail sector, have had to rethink the way they deliver to their customers and it is time for the insurance industry to do the same.
During the roundtable, DXC Technology's chief technology officer, Brian Wallace, outlined that “for insurers to differentiate their products they need to adopt a higher mission that goes beyond just insuring for an event".
For an insurance organisation the platform strategy allows the business to utilise data and monetise value creation for their customers, as opposed to monetising an event after it has occurred. That is, rather than insuring for a car accident, insurance will be focused on preventing that accident.
Technology and data will be crucial for enabling insurers to adopt these preventative strategies into their insurance offering. Here, Choudary says that insurers need to distinguish between critical and non-critical data.
Critical data is garnered from sources such as the insurance policies while non-critical data is sourced from technology such as wearables or car tacking devices.
“There is lot of discussion about data and the monetisation of data – particularly for insurers and banks who have been in the business of data,” Choudary said. “Understanding how to monetise the use of these data sources will also give insurers a competitive advantage by adding value for their customers.”
To do this, however, Choudary says insurers will have to rethink their existing silo or 'pipeline' business structures and look at adopting a platform framework. As highlighted earlier, a platform brings together key components to deliver for both the consumer and business. This framework also opens up the business to partnerships which will be critical if insurers are to really get benefits from non-critical data.
"If an insurer is monetising data that promotes a healthy lifestyle they will need a partner to do that,” Choudary said.
Scale and flexibility
Similarly, he added that most insurers will need to utilise machine learning to make sense of the data and, again, this will mean further partnerships.
Choudary acknowledged that rethinking 'pipeline' structures can be particularly challenging for incumbents like insurers as businesses may feel “a loss of control” under such a framework where they need to share data with partners.
“These businesses will need to mobilise internal stakeholders in order to apply the platform strategy. It is a whole of company approach that requires buy-in from every level," he added. "It is a long-term strategy which can be challenging as the business model changes over time."
Insurers will need to create a business case, where the first step in moving to a platform will be about reinforcing the business model by selling more of the product. Choudary used the example of a pharmaceutical company that adopted a platform-based loyalty program to further promote its business.
The platform strategy needs to achieve short-term objectives in the journey to the long-term gains. Data integrity and forming the right partnerships is another key consideration. Given that insurers operate in highly regulated markets, these businesses need to be mindful of how they approach data sharing with their respective partners.
Despite these challenges, platforms should deliver for insurers by offering businesses the scale and flexibility to introduce new partners and services to improve the customer experience.
As Choudary noted, the ability to monetise new forms of data sources and secure relevant partners will give insurers new revenue models that go beyond premiums and enable them to differentiate from competitors.