In January this year I posted a blog, If 2017 Was the Year of Insurtech, Will 2018 be the Year of the Insurance Platform?
The blog pointed out that many platforms start out as a limited purpose website (e.g. searching the web, selling books, letting friends keep track of one another, or making it easier for a salesperson to keep track of leads and contacts). If it achieves that purpose in a very engaging and effective way (aka fast, fun, and easy), then that website starts drawing a lot of visitors or customers (creating network effects), and allowing the site sponsor to expand the site’s functionality, collect lots of data about those visitors and customers, and monetize that traffic and data. The blog concluded that platforms will have a major impact in the world of insurance technology.
The blog drew a very high level of interest. I’ve revisited and developed this topic in a just published report, The Year of the Insurance Platform.
- An insurance platform is defined as a group of sites which provide insurers and other organizations access via APIs to a broad set of services, data, capabilities, and organizations, which are: typically cloud-based, designed to achieve scale through network effects, and monetized by the platform sponsor in various ways.
Designed to Scale platforms focus on growth, innovation, and leveraging network effects.
- They have the potential to accelerate the growth of the core system providers and other tech firms on these platforms -- and to hobble the growth of those tech providers which are not on them
- Their growth is fueled by network effects – as the number of participants increase, the value of the platform increases more than proportionately.
- These platforms can also facilitate the inevitable transition of the insurance industry from simply providing indemnification (a loss occurs, and the insurer pays it) to supplying a broader set of valued services to both personal and commercial customers. These can include protection (preventing losses), minimizing losses which do occur, and adjacent enrichment.
- Adjacent Enrichment refers to services or information valuable to a policyholder, but which are not directly related to the terms of the insurance policy. Examples include providing information to a homeowners policyholder about how neighborhood real estate values are changing; or creating opportunities for BOP policyholders to meet owners of similar small businesses in their city.
- In contrast, Core System Based platforms assemble a range of offerings and services primarily to expand and support the value of the core systems. They have limited potential to change the general ecosystem.
The race is on. Ten out of ten core system vendors, responding to a Celent survey, have a platform. Many other core system vendors and leading SI firms have their own platform ambitions.