The consulting giant has turned its hand to the insurance sector to assess the current and potential impact of fintech disruption in their report: “Insurance beyond digital: The rise of ecosystems and platforms“. It highlights the lessons that can be learnt from comparative sectors on revamping their business models and tracks the potential journey from traditional offerings to inclusive ecosystems.
McKinsey notes that the latest emerging economic powerhouses (incl. Facebook, Amazon, Tencent, Alibaba, Google etc.) have harnessed platform and ecosystem business models recently made available by developments in technology (AI, data services and aggregation) as well as culture (mobile and digital adoption). Platforms focus on matching multiple producers and consumers such as AirBnB, whereas ecosystems create an interconnected set of services.
With most financial services facing pressure at every point in the value chain, McKinsey details how the insurance sector can instead embrace developments to recapture their market share, transform their offerings and embrace the fintech era. In transforming from risk aggregators (traditional model) to ecosystem providers, insurers can mimic the successes of comparative models around the world – including Asian ride-hailers Grab and Go-Jek. They emphasise the importance of partnerships, calling for insurers to embrace insurtechs who largely contribute to their value chains, rather than compete with them (as with so many other sectors).
An insurance ecosystem is foreseen to be able to: reduce friction for consumers, who can take advantage of a single interface for a multitude of ancillary services instead of a myriad of portals to manage various policies which are particularly tedious; enjoy network effects, allowing insurers to further aggregate risks to deliver consumer benefits and harness the vast amounts of fragmented data collected by the sector; and integrate that data to provide more holistically tailored services.
View the report here.