“It is not a matter of if, but when the insurance industry will have to adopt an ecosystem approach. The industry is not immune to the changing demands of the market.”
Ecosystems are defined in several ways, but from the perspective of insurance carrier claims organizations and their business and supply chain partners, it is a dynamic universe that includes potentially thousands of participants who support and facilitate all facets of claims adjudication from first report of loss to remediation and closure of claims. This includes information technology and solutions providers, software and technology providers, inspection, estimation and professional repair firms ranging from auto to property to casualty and beyond.
While “analog” paper-based claims ecosystems have actually existed for many years, they were highly inefficient and labor intense, their full potential was not totally understood until the Information/Digital Age emerged in the mid-20th century, characterized by a rapid shift from the traditional industries established in the Industrial Revolution, to an economy primarily based upon information technology which has been proliferating or has proliferated globally, touching virtually every single business, industry and person on the earth.
Besides the digital transformation of all information transactions and communications, the other critical ingredient that has harnessed the power of claims ecosystems is the software platforms. As the name suggests, this software (and now cloud-based) technology infrastructure supports and enables ecosystem participants to communicate electronically with other connected participants and the ecosystem hub. Hubs can be physical or virtual locations where ecosystem transactions are managed, ecosystem “clusters” are industry groupings and ecosystems are the overall environment in which they exist. Amazon and Apple are two of the best and most notable examples of the power of ecosystems and platforms. They have evolved to de facto successful benchmarks for their network effect on their broad-based ecosystems for goods, services and connectivity.
The network effect is a phenomenon whereby increased numbers of participants serving common customers improve the value of associated goods or services. The Internet is an example of the network effect. Initially, there were few users on the Internet since it was of little value to anyone outside of the military and some research scientists. However, as more users gained access to the Internet, they produced more content, information, and services. The development and improvement of websites attracted more users to connect and do business with each other. As the Internet experienced increases in traffic, it offered proportionately increasing value, leading to a network effect. Network effects are similarly created through open industry claims management systems and platforms which support purpose-built ecosystems.
Small Commercial Insurance Market
Even before the pandemic hit, the small commercial insurance market was expanding and attracting attention from U.S. P&C carriers, but the impact of COVID-19, coupled with new digital technologies, supercharged that growth and interest. This market, which serves businesses with up to 100 employees and $100,000 in annual premiums enjoyed growth similar to personal lines auto and a fragmented competitive and geographic landscape. Small commercial – including startups and entrepreneurs – accounted for more than one-third of the U.S. commercial lines market, and was the fastest-growing commercial segment when the economy was expanding. Although almost 40 % of sole proprietorships in the U.S. do not carry small commercial coverage, some may be covered under home-based business owner policies (BOP) or endorsements on their personal lines policies.
As thousands of white- and blue-collar workers were laid off or dismissed by employers hard hit by lock downs and evaporating revenues, many sought alternate income opportunities, including starting small businesses from food and grocery delivery to rideshare driving to food and service franchises. All of these newly minted entrepreneurs had a need for small commercial insurance coverages including General Liability, Workers Compensation, Business Owners Policy (BOP), Commercial Property, Professional Liability, Commercial Auto, Umbrella Insurance, Errors & Omissions (E&O) and many more.
The U.S. small commercial insurance market was one of the bright spots in the U.S. property-casualty insurance (P&C) sector and is thus the focus of intense competition that is likely to ramp up over the next few years. The market is both fragmented and profitable, a scenario that is drawing attention from carriers whose primary business lines are saturated and commoditized, as well as from attackers seeking fields that are open for innovation. Small commercial insurance is also one of the few U.S. P&C markets that has been growing in recent years.
Small Business Insurance Claims
The top 5 most frequent small commercial claims are Burglary and Theft, Fire, Weather Damage, Customer Injury, and Struck by Object. The claims process for all of these involves the need for field inspection, investigation repair and remediation for which the insurance industry relies not only on their own staff but increasingly on the services of tens of thousands of claims services experts who together make up a gigantic claims ecosystem.
Claims management is an ideal use case for leveraging the full potential of platforms and ecosystem clusters in the pursuit of transformation, claims management and customer service excellence. In an age when lower costs, speed and ease of use is table stakes with employees and consumers, and in an industry whose products have been heavily commoditized by a hyper-competitive environment, the claims process has been a prime candidate for transformation. Auto, and more recently property claims have been the focus of this attention.
For insurers, tapping into an ecosystem offers the opportunity to embed their insurance products into seamless customer journeys. In today’s interconnected world, embracing ecosystems is of paramount importance to address the customer in the moment of need, whether it be fostering direct customer relationships or integrating with organizations that own the customer interface. One great example of this new breed of platform is Wilbur (formerly Claims Central Consolidated).
Ecosystems: Not if but When
“It is not a matter of if, but when the insurance industry will have to adopt an ecosystem approach. The industry is not immune to the changing demands of the market” – Dr. Geoffrey Parker, Professor of Engineering at Dartmouth College and a visiting scholar and Fellow at the MIT Initiative on the Digital Economy.
I feel blessed and excited to be a part of it!
Robin Roberson, Managing Director, North America at Wilbur
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