The developing world of ecosystems

Disruption typically comes at industries fast. When it came to Open Banking, however, the regulatory-driven initiative had a slow start, with banks taking some time to build the mandated APIs with no real appetite to exploit them. But as barriers to entry were lowered by the APIs, new entrants began to scope out the opportunities, test the art of the possible and prompted incumbents to respond. The result was an innovation boom that has benefited both banks and their customers, who now enjoy more choice, better CX and improved control of their data to help them make better financial decisions.

Might insurance, some years behind in this cycle of digital disruption, learn lessons from the Open Banking journey, whether it’s the incursion of new competition, the opportunity to jettison non-core services or to distribute products and services in a different way?

According to Gonçalo Lages de Carvalho, Chief Technology Officer, Europe, at Hiscox, there are real similarities and parallels between InsurTech and FinTech.

‘They both look at industry through a different lens,’ he said, citing technology, data, speed, innovation and customer focus as the lenses that help InsurTech see new ways of doing business.

‘In Open Banking, FinTech was seen as a threat to the banks at first but then it turned out that through an ecosystem they could work together,’ said de Carvalho. ‘It could be the same with InsurTech, it could bring a lot of opportunities for the incumbents.’

Hiscox is working and engaging with InsurTech players on new business opportunities, such as embedded insurance. ‘We work with an InsurTech in the shipment platform space, and through that platform we provide insurance for the shipment,’ he said. ‘It’s not a threat, it’s an opportunity.’

Gonçalo Lages de Carvalho, Chief Technology Officer, Europe, at Hiscox speakers on partnerships at Insurance Innovators Summit 2024.

Yanna Winter, CIO of Generali, sees one clear difference between the banking and the insurance experience. ‘When Open Banking came out, it happened because the regulator made them,’ she said. ‘I wish someone would do that in insurance.’

Insurers are tentatively exploring ecosystems but it remains early days, at least in Europe. ‘It will be one of our distribution channels going forward,’ said Clemens Dietrich, Head of Product & Process Harmonization – BMP Retail at Allianz Direct. ‘We are still finding out how to put it together and what’s successful, and what is not. You need ecosystems across different markets and you will find out every market is different so you need a toolbox approach rather than one-size-fits-all.’

In Asia, ecosystem plays are already well established, with giant super apps like Ping An and Grab scaling at astonishing speed by orchestrating services across multiple sectors. There are big differences, however, between Asia and Europe when it comes to financial services and customer behaviours.

In Europe, insurers do not orchestrate customer journeys because we only have a yearly touch point. In Asia, it’s high frequency interactions, with low premiums, low profitability whereas we have a higher profit but zero engagement. This is where we struggle most because insurers do not know how to engage.

EVANGELOS AVRAMAKIS
Lead Corporate Foresight, Intelligence & Development, SWISS RE

There are also legacy systems to overcome – and it’s not just the legacy systems that are a roadblock to developing ecosystem plays. ‘The biggest challenge is how do we bring not just the technology side to think about APIs but the business too,’ said Clemens Dietrich at Allianz Direct.

This was a cultural issue that banks had to overcome to seize the opportunities presented by Open Banking. Insurance, a more cautious industry by design, will have to overcome the same hurdle, but without the compulsion of a regulatory mandate, which means progress may be slow. Certainly this is one disruption likely to be discussed again and again as insurers get to grips with InsurTech and ecosystem plays.

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