This article explores what makes a good ecosystem, where the ecosystem opportunities lie, and how insurers can participate in the rise of ecosystems. It also includes a comparative analysis of ecosystems and introduces a simple framework for assessing an ecosystem from an insurance perspective, which is used here for the first time.
Defining the ecosystem
As boundaries between industries continue to blur, insurers will face-off against companies and organisations they never previously viewed as competitors. The notion of an ‘ecosystem’ has come to symbolise this blurring of industry lines, and building one requires deep engineering talents and extensive resources. Exceptional, strong ecosystems will share these traits:
First, either own or have preferential access to an online platform with a free, or nearly free, service that is the anchor ‘call to action’ for consumers. Examples include mobile payments, doctor consultation, or social networking.
Second, a user interface that serves as a customer acquisition portal and data cache to log traffic flows and customer profiles. This is then paired with a data mining capability to further understand user behavior and preferences. Social media giants have an advantage in this area, as do the established e-Commerce giants.
Finally, most ecosystems move beyond their original ‘call to action’ and into adjacent products and services. Creating scenario-based products that are seamlessly embedded remains the most obvious route for insurers to participate in the rise of ecosystems.
Although many ecosystems share these attributes, ecosystems also come in many shapes and sizes. For insurers, who have traditionally offered a low-interaction experience, the three ecosystem development options worth considering include…
i. Supporting act
The supporting act is the most familiar role of cross-selling insurance through popular internet platforms. Although there is nothing new about this (bancassurance is a form of supporting act) the shifting sands of internet traffic have brought a renewed importance to the role. Though this is the easiest ecosystem role to play, it is also the most vulnerable as insurers are essentially third-party service providers without access to the underlying customer relationship.
Examples of supporting acts include:
Ecosystem | Supporting Act | Â Role |
WeSure | MetLife | MetLife is developing short duration/high limit ‘aviation accident insurance’ for frequent flyers of WeChat’s broker – WeSure. |
Ctrip | Â Zhong An | Zhong An has established partnerships with international hospital networks to provide travel insurance for Ctrip’s 300 million users. Ctrip is also a minority founding shareholder of Zhong An which demonstrates the complexity in modern day ecosystem relationships. |
CNPC (China Natural Petroleum Corporation) | Â Generali | Generali is providing life/health products to CNPC’s employees though its joint venture with China National Petroleum Corporation (CNPC). |
ii. Key partner / Participation
The ‘key partner’ role goes beyond pure cross-selling and actively participates in the operation of an ecosystem. This may include providing O2O, Online To Offline, services, advanced analytics, regulatory requirements such as policy issuance, or sometimes facilitating user growth.
The classic example of a ‘key partner’ is Zhong An, who not only provides insurance products to its partners but also data mining capabilities and implementation expertise that optimises the conversion rate of financial services online.
Additionally, as ownership of the customer relationship is a key stepping-stone in an ecosystem play, insurers with an agency force will be well-positioned to become key partners.
Examples include;
- Zhong An Tech & Grab
- Prudential & Babylon
- Amazon & Travelers
- Apple & Aetna
iii. Orchestrator
Finally, the orchestrator role represents the high risk high return option, which at first glance offers direct distribution, better risk selection/management, end-to-end customer experience, and hence, a higher retention. However, the orchestrator role also brings with it the daunting task of building, maintaining and protecting an online platform that is sometimes described as a ‘leap of faith’ for insurers. For this reason, few have chosen the orchestrator route – and when attempted it is often by buying into a growing ecosystem rather than building one from scratch.
For those that have dared to become orchestrators, the need to define a clear value proposition for the ecosystem, build/maintain a portal that makes access and integrations easy, and identify incentives for other partners to join, are all required.
The classic example of an orchestrator within the insurance industry is Ping An, though the fact that Ping An has built its ecosystems in a variety of ways is less well known. These include internal incubation, public/private partnerships, and acquisition.
Ecosystem | Name | Use Case | Source | Monetization |
---|---|---|---|---|
Health | Good Doctor | Doctor consultation | Internal incubation | Online pharmacy
Minimise in-patients. |
Auto | AutoHome | Online car marketplace | Acquisition | Car insurance |
Wealth management | Lufax | Lending/Wealth management | Public/Private partnerships
Internal incubation |
Interest rate on loans |
Real estate | Haofang | Real estate marketplace | Internal incubation | Mortgages |
Payment | 1Qianbao | Mobile payment | Internal incubation | N/A |
Although the orchestrator role favours those with established online traffic flows and advanced data mining capabilities, recent developments have shown that even niche players can make the economics work with the right approach.
Examples of orchestrators within the insurance industry in Asia include:
- Ping An
- Grab
- Amazon
- Scaled aggregators such as Policy Bazaar and PasarPolis in Indonesia
Although none of these roles are easy, comparing and contrasting two of the most popular ecosystems in Asia, alongside their efforts within the insurance industry, will highlight the lessons for insurers.
The rest of this article has two side-by-side comparisons – one for WeChat and Line, and one for Gojek and Grab, which have potential but are not yet proven applicable for insurance cases. To allow a side-by-side comparison of ecosystems TDI has designed a simple five metric assessment process and we have applied it to both of the analyses.
Line v WeChat
As two of Asia’s most popular messaging apps, Line and WeChat have become synonymous with messaging in Asia. This is our analysis as an insurance ecosystem.
Metric 1 – Barriers to entry
Network effect – The idea that the only feature that matters is that ‘everyone is there’ has held true since the internet appeared. In this case, both Line in Japan and WeChat in China are the default social network in their home markets and have strong barriers to entry.
Metric 2 – Frequent customer interaction
For this use case we look at three areas of interaction – messaging, mobile payments and third party services.
i. Messaging
Messaging is, of course, the main feature of both WeChat and Line. Several messaging apps have taken inspiration from WeChat’s introduction of official accounts for commerce. Similarly, WeChat has borrowed heavily from Line’s use of in-chat stickers and animations.
Examples of digital insurance within the messenger apps include;
- Providing API compatibility for chatbots, customer service, and claims as Taikang Life has done.
- Developing location-based and scenario-based offers based on WeChat users’ behaviour.
- Partnering with insurers to address societal risks such as Line and Sompo’s provision of earthquake insurance in Japan.
- Enabling lead generation from the WeChat news feed as local InsurTechs Shuidibao and Bihubao have done.
- Leveraging the chat data for targeted marketing.
ii. Mobile payments
The second major use case of messaging or multi-purpose apps (‘super apps’) is mobile payments.
WeChat Pay has amassed 800 million users and processes a billion USD in transactions every day. Line Pay is earlier in its development with just short of 5 million users and just less than US$3 billion in annual transaction volume.
Although the hope of cross-selling insurance at point of sale has not materialised, mobile payments have proven a very effective lead generation channel with AliPay’s community-based life insurance feature, Xianghubao, recently passing the 100 million member mark. Xianghubao will now seek to upsell long term life/health insurance to these users and the opportunity to replicate the concept in other early-stage markets is clear. And, of course, it is the ability to mine user social data and present contextual and appropriate ads that is at the heart of WeChat’s business model in general.
iii. Third party services
Finally, both WeChat and Line have used their chat feature as a conduit to increasingly diverse functions in users’ everyday lives. Both WeChat and Line are known as ‘king makers’ for their ability to drive traffic to chosen partners that span travel, hotel, delivery, and entertainment providers.
For insurers, much can be learned from the WeChat official account of Taikang Life, which has been particularly adept at leveraging WeChat as both a distribution channel and agency management tool. For example, Taikang’s chatbot was the first to demonstrate that inbound customer queries can not only be automated, but automated entirely through a mobile experience. Taikang has also pioneered the use of WeChat to manage its agency force. Additionally, Taikang’s critical illness WeChat campaign still stands as the only viral life insurance campaign globally.
Metric 3 – Favourable Regulatory Environment
Concerns that tech giants holding numerous financial services licenses may pose a risk to the financial system has resulted in a more cautious approach to banking, insurance and micro-lending activities within WeChat and Line.
In Line’s case, it has established Line Financial which holds Line Insurance, Line Smart Invest, and Line’s Kakeibo (a free personal finance management app), among others. Unlike China, Japan’s InsurTechs are not subject to specific regulations, although Japanese regulators are working with their Singaporean counterpart to discuss how regulatory frameworks for InsurTechs and related digital efforts can be imposed.
Metric 4 – Strength of Revenue Model
WeChat and Line share a similar feature set. However, their approach to monetisation differs greatly.
55% of Line revenue comes from advertising, 32% from communication/content/other, and the remaining 13% from ‘strategic business’.
Conversely, although Tencent pays subsidies to some merchants to accept WeChat Pay, and WeChat’s strategic businesses including WeSure, WeChat Pay accounts for 75% of WeChat revenue, while 25% comes from the traditional display based advertising on WeChat moments.
Metric 5 – Strength of Insurance Use Cases
Although both Line and WeChat allow users to purchase insurance through Line and WeChat directly, WeChat, in particular, is pursuing scenario-based insurance by combining products, services, and scenario-based presentation for particular segments of WeChat’s user base.
For example, WeChat’s step count function can be linked to WeSure. Users who take over 8,000 steps in a day will receive a ‘hongbao’ (cash gift) from WeSure that can be deposited in their WeChat wallets. The highest selling products on WeSure’s are health insurance.
Meanwhile, Line has partnered with Sompo Japan Nipponkoa Insurance to bring 59Â different scenario-based insurance offerings to its users, these include hike insurance and legal expenses insurance.
Line v WeChat summary
       | ||
---|---|---|
1. Barriers to entry |
User scale + engagement rate sets the stage for cross-selling |
User scale + broker license enables it to design products for new scenarios |
2. Frequent customer interaction |
Chat + payments + 3rd party services | Chat + payments + services |
3. Favourable regulatory environment |
Japanese regulator open to Line involvement in financial services kjbjblnlabcdefgh kjbkhvbk |
Chinese regulators encouraging innovation from internet portals such as WeChat, AliPay and Toutiao. |
4. Strength of revenue model |
Offering short term personal accident and property insurance through Line Pay with one example of integrating earthquake insurance into the user journey
|
Tencent and Alibaba are increasingly focused on technology services and distribution as opposed to being the risk bearer. f
|
5. Strength of insurance use cases |
Providing access to its aggregator and cross-selling kjnhajkn lnlfa hnilfa lknlkhbkhbk
|
Embedding customised insurance and incentivising recommendations to WeChat contacts |
 Total |
Gojek v Grab Â
Gojek and Grab have become synonymous with ride hailing, delivery, mobile payments and other on-demand services. Although Grab boasts more active users, operates in more markets than Gojek and holds e-payment licenses in the region’s six largest markets, Gojek is the leader in Indonesia, a market of 264 million people, and has been bolder in its pursuit of digital insurance.
Metric 1 – Barriers to entry
Both Gojek and Grab have achieved a critical mass of drivers with Grab boasting two million drivers compared to Gojek’s claim of one million drivers. These drivers are vetted and on-boarded by way of background check, face to face verification, and a test. In addition to the cost efficiencies in the on-boarding of new drivers, the process dis-incentivises potential rivals from launching. Additionally, both Grab and Gojek have significant backers. Allianz X invested in Gojek and Softbank in Grab.
Metric 2 – Frequent customer interaction
Gojek has 18+ products from foodtech to fintech to hyper local delivery and massage services.
i. Ride Hailing
The core service is ride hailing however Grab dominates in Singapore, Philippines and most of SEA, whilst Gojek has a stronger presence in its home market of Indonesia.
ii. Food Delivery
Gojek’s GoFood partnered with more than 500,000 restaurants in Vietnam where it now claims to be the market leader, in Indonesia it has a dominant 65% market share, with GrabFood serving most of the remaining market.
GrabFood’s service is complemented however with a new innovation called GrabKitchen which serves users from a ‘hubbed’ delivery-only kitchen that brings together several food and beverage brands in a single central kitchen, aiming to plug cuisine gaps in specific areas identified by Grab as being in high demand but with low supply.
iii. Mobile Payments
Gojek’s GoPay processes $6.3 billion of annualised gross transaction value and has been more proactive in establishing its mobile payment service in six Asian markets. The importance of mobile payments should not be underestimated, mobile payments have proven to be a vital gateway for those unaccustomed or unwilling to buying insurance.
For its part, Grab has taken a multi-faceted approach to mobile payments by acquiring several payment startups, partnering with Mastercard in Singapore, and investing in mobile payment services in certain markets such as in Vietnam, where local payment startup Moca is giving Grab users access to services such as bill payment and money transfers. Because of this, Grab has been less active in integrating mobile payments into insurance.
iv: Other services
In an attempt to become a ‘killer app’, both Gojek and Grab have launched a range of additional services with Gojek in particular branching out with GoMart (grocery shopping), GoClean (housecleaning), GoGlam (hairstyling and makeovers), and GoÂMassage. Additionally, Grab holds e-payment licenses in the six SEA markets while Gojek offers such services only in Indonesia and the Philippines.
Metric 3 –Â Favourable regulatory environment
The fact that both Grab and Gojek operate in multiple markets across SEA makes it difficult to assess the impact of regulations. However, Grab’s HQ and presence in Singapore means more oversight of its digital insurance pursuits. Conversely, Gojek’s home market – Indonesia – has yet to issue clear regulations for internet insurers and InsurTechs.
Metric 4 –Â Strength of revenue model
Ride sharing apps typically take between 20% – 30% of the total fare. However, as Gojek and Grab’s markets and business models continue to subsidise fees to attract more users and riders, other segments such as financial services will become main revenue streams. For example, Grab is currently prioritising food delivery whilst Gojek is focusing on mobile payments and financial services.
Metric 5 – Strength of insurance use cases
Though Grab and Gojek are both ride sharing apps, their digital insurance efforts vary wildly.
First, Gojek is pursuing a scenario-based model by establishing partnerships with Allianz, Gigacover and PasarPolis for three of its user segments:
First, for drivers. Gojek has launched GoProteksi, an insurance product for Gojek drivers that guarantees their incomes in the face of unforeseen events.
Second, for consumers. Gojek’s travel insurance product is called GoSure whilst GoRide covers users of its ride hailing service against loss or damage of personal property due to theft, medical expenses, permanent disability, or death by accident. Gojek also offers tickets cancellation insurance for users who buy tickets via GoTix.
Finally, for third party service providers. Gojek is also providing public liability insurance to its merchant partners on GoLife, an app that offers services including GoClean, GoGlam, GoAuto, GoLaundry.
Meanwhile, Grab is working with Chubb and NTUC Income to bring travel and critical illness insurance to its users and drivers respectively. Similarly, Zhong An Tech is allowing Grab to provide personal accident insurance to its drivers, whilst a more recent partnership with Ping An Good Doctor will bring live consultations, drug delivery and appointment bookings to its operation in Indonesia, a market of 240 million consumers who need affordable and convenient access to healthcare.
Grab v Gojek summary
 1. Barrier to entry | Critical mass of drivers           jkbgub    jbhiub | Critical mass of drivers and e-payment licenses |
2. Daily application | Ride sharing, delivery, and mobile payments jbujkbkj ljnlbjjb    jnjbjjbsgasererah | Ride sharing, delivery, but also focused on its services such as (GoLaundry, GoClean, GoAuto, GoMassage, GoGlam) |
3. Favourable regulatory environment | Home market has mature regulations for digital insurance kbkhbkbbhbb;buubob | Indonesia provides both regulatory flexibility and challenges in implementing digital insurance |
4. Strength of revenue model |  % of ride sharing fare + delivery + mobile payment processing jnvgdf jngadngadfgnafoog ngr   uhngreea nionregoiaer
|
 % of ride sharing fare + delivery + mobile payment processing + range of 3rd party services including home cleaning and travel aggregation
|
5. Strength of  insurance use cases | Partnership with Zhong An & Chubb. Also holds several e-payment licenses ljnsfgng lnregb | Partnership with Allianz, Gigacover and PasarPolis to tailor insurance to scenarios within the Gojek ecosystem
|
 Total |
Concluding remarks
The notion of an ecosystem has come to symbolize a final destination for many trying to embrace the digital age. For insurers, the lessons are becoming clearer;
First, a range of scenario based quasi-insurers are emerging in the form of popular apps that span mobile payments, ride hailing services, and messenger apps. Insurers will need to quickly decide if and how they want to participate in such ecosystems.
Second, developments in China have shown that mobile payments are an important precursor in digital insurance offerings. This model and its various forms are worth examining to assess the possibility of regional replications.
Finally, the ubiquity of mobile devices has lifted barriers that previously prevented insurers from moving upstream. To capitalise on this, insurers will need to do more to attract talent that can identify the possibilities emerging from the next wave of on-demand services, social networking and, where relevant, ‘orchestrator’ opportunities.
Further reading, coverage and feedback
In future editions, we plan to take a closer look at orchestrator ecosystems, in particular the ‘natural’ ecosystems available in health and wellness, where we are already seeing extensive activity and the emergence of new business models in Asia.
We welcome feedback and suggestions for improvement of the ecosystem analysis framework we have developed here.