Innovative Coopetition Between Aggregators and Traditional Insurance Players
Imagine you are a seller in a fruit market, who relies on walk-ins, returning customers who already know how to find you, and maybe even agents who go out to tell people around that ‘_insert business name_ has great fruits that are good for your health’. Perhaps they even insist that yours are the very best in the market, based on quality or price, or both. Your shot at getting customers isn’t so bad with these different paths to sales, especially when you consider that no customer will go through the whole market to taste every stall’s fruits or ask for prices. They just need to stumble on you or your evangelist and be convinced.
Now one day, someone shows up at the market with a list of fruit sellers, their prices and the value of their fruits. He tells you that you can get your stall listed too, and when customers check the list and decide to buy from you, he can either direct them to your stall or deliver the goods to them for a fee. He uses the growing number of people who huddle around his list daily to get fruit stall recommendations as proof that he is worth doing business with. They include even those who already buy regularly from a particular stall, and they all start their day there instead of wandering about the market.
What do you do?
- Avoid the list man at all cost
- Register with list man
- Try to buy list man’s business
- Set up your own list business while maintaining your stall
Whichever of the options you pick represents one of a number of ways traditional insurance players (TIPs) have reacted to the rise of aggregators.
The aggregator origin story
Aggregators are the digital age answer to a demand for insurance that offers the best value for customers. Traditionally, insurance has always been sold by firms directly, or through agents who signed up customers for firms and received a commission in exchange. However, limitations like only having access to the products offered by specific agents/firms, a lack of personalization, and the reach that both firms and agents on the ground have pointed to an opportunity. An online marketplace where people can select insurance offerings from a listing, based on what is offered by firms, as well as the information they (people) provide on the site. That is the insurance aggregator, and its model is rising in popularity across the world, with different kinds of reception.
Aside: in Africa and the Middle East, aggregators include P2Vest, eZamara, Hub2, Paddy2cover, Yallacompare, Aqeed, Policy Bazaar.
Aggregators have joined TIPs as key players in the industry, and each side is faced with determining how they operate in relation to each other. While this relationship has often been defined as competitive, it doesn’t exactly capture the dynamics, because the key difference between both is in what they have to offer.
Making it work
-What each side brings to the table
TIPs have the insurance packages, and aggregators have the distribution channel. That is the main thing each brings to the table. Aggregators by reason of their model bring insurance options to people wherever they are, and either direct them to the TIP they want to purchase from, or include the purchase process on their website in order to maintain more control over the customer experience. Understanding this should guide each side in determining a path forward.
Amongst the options available in the fruit-selling scenaria, b-d represent the most sensible, and even innovative ways that aggregators and TIPs can relate in order to ensure mutual benefits.
-Here comes Coopetition
Coopetition refers to the process whereby competitors in a market work together.
For now and probably some time to come, TIPs and aggregators are not going anywhere. Instead of shunning the other, or throwing resources trying to replicate what the other is doing, they are better off working with their points of convergence in order to realize potential gains. These include revenue (sales and commissions) and non-revenue gains (better customer experience, personalization, availability of customer data, creation of new products and offerings etc.), which themselves feed back into revenue.
Coopetition for an aggregator and a traditional insurance player therefore looks like working with each other to create added value for the consumer, as well as the company. This includes;
-(Collaborating on) building personalized products
- Embedded insurance; building better customer experiences across different touchpoints
- Data sharing agreements that improve insurance offerings as well as the site they are listed on
The fact is aggregators cannot work without cooperation from insurance providers, at least for now. This is why traditional players seem to have the upper hand. However, these aggregators are building networks and experiences that are increasingly popular with customers. While the TIP’s existence might not be dependent on the aggregator, it can find utility in working with one.
Also, it is not completely unlikely for aggregators to begin considering building products of their own, in the face of being shunned by traditional insurance, which would pose a bigger threat than they are perceived to be currently.
-Framework(s) to try
b) Register with list man
The TIP can view the aggregator as an extra distribution channel to tap into. While TIPs increasingly have their own websites for selling insurance, that strategy does not have to be mutually exclusive of registering on aggregator platforms. What is important to note is to find the aggregators whose users and visitors match their ideal customer segments. It can also go further to explore customer segments it has not traditionally dealt with, as this could reveal an opportunity it could not have seen within the limited scope of its own network/existing client base. Working together, the right ‘partners’ can create offerings exclusive to platform+provider.
c) Try to buy list man’s business
If you can’t beat them, maybe buy them.
Big TIPs in different parts of the world have moved to shun aggregators, by building their own platforms, especially in response to some of their issues with aggregator platforms (price-based comparison models, the quality of customers, lack of control over CX). In India for example, insurers like HDFC Life and Max Life are leveraging digital offerings and AI in order to create their own digital sales channels/customer experiences that are better suited to company goals. TIPs absolutely need unique digital strategies for a digital economy, that is a fact. The argument here is that buying an aggregator platform should not be out of the question when developing that strategy.
Why should you buy your competition? Because they might be doing a better job than you and have already found a solution that works, which you can build on. Being acquired does not have to mean obliteration for the aggregator. Here’s an example, different industry but let’s go with it.
After Google tried and tried and tried (and failed) to break into video, it decided to look outside itself to see who was getting it right. That who, or what, was a small online video site/company that was pulling in ridiculous numbers that the IT giant wasn’t. It acquired Youtube, but allowed it to stay somewhat separate from the parent business in order to ensure whatever Google brought to it would only amplify the core, and get it to profitability.
‘Well, if a TIP acquires an aggregator, wouldn’t it give itself an unfair advantage, and maybe even bungle it as a result?’
If it views it as an opportunity to create a strong subsidiary that diversifies its revenue stream, it would focus on strengthening the platform and making it attractive to other insurers. If it instead saw it as a way to perpetrate an online insurance monopoly, that’s what it would be left with at the end of day, a website where it is the only insurer willing to list its offerings. Back to square one.
For the aggregator, joining up with an established firm could help with some of the legitimacy/credibility issues that cause other established TIPs to be wary of it.
d) Set up your own list business while maintaining your stall
This is like c, but instead of acquiring an existing aggregator, the TIP would focus on building its own from scratch.
This of course means competing with other aggregators in the market, starting off with the credibility an existing customer base gives, as well as inexperience running a platform like this. The former will not be enough, but it’s a start, and the latter can always be remedied by bringing in the right talent, and learning from existing aggregators.
Competitors don’t always have to be at each other’s necks, or pretending the other doesn’t exist. By identifying areas of cooperation based on each other’s unique strengths and position in the market, they can find themselves on the path to mutually beneficial gains.
Also, just good old competition between aggregators and insurance companies can produce innovation as both work to find better ways of doing business; improved product offerings, customer experience etc. This is (usually) ultimately good for the industry.
Moving Forward… Issues to Solve
Traditional insurance is already a hard sell in developing economies for a number of reasons that include religious beliefs, poverty/competing goods, and it being seen as a game of chance that one has to pay for where the prize is attached to disaster. When you combine that with issues around e-commerce, major ones being trust and digital penetration/literacy, one faces a difficult equation. Getting customers on platforms, willing to pay for insurance probably without interacting with a human face is a big part of the battle. Therefore, it must be a focus, if it is not already. In fact, this is a major area where aggregators and insurers could work together, because improving insurance literacy benefits both players.
With this being solved, insurance players, traditional et al will find a large market whose demand is capable of surpassing available supply. That is another problem it should be happy to solve.
