Platforms are big business in the place where technology companies meet insurance companies. Allianz and Discovery have two different approaches to the platform game. What are the advantages and disadvantages of launching a platform or leveraging somebody else’s? And, if it is possible to do both, is it wise?

We estimate that between 2010 and 2015, platform companies attracted over $20 billion in investment in more than 1,000 deals.

To understand the power of platforms, and which approaches are most beneficial, I want to focus on the financial services industry –in particular, where technology and insurance meet: insurtech.

Insurtech is a vibrant segment of the fintech market. In 2016, the number of insurtech deals increased more than 40% to 170, worth a total of $170 billion.

Insurtech companies – like all companies – have a choice:

  1. Launch a platform and orchestrate an ecosystem of their own.
  2. Participate as an ecosystem partner on an existing platform.
  3. Employ a combination of these strategies.

Examples of companies that have chosen Option 1 and launched their own platforms and orchestrated their own ecosystems include Discovery. The South African health insurer is harnessing its ecosystem of fitness clubs, healthcare providers, cinemas, retailers and travel companies to improve the health and lifestyles of its members.

Another example is the global insurance giant Allianz. For years it sold car insurance through a network of dealers in Germany. It recently created a used-vehicle intermediary platform called abracar. Sellers use the platform to sell their cars, and buyers have the option of getting financing from Santander Bank and, yes, insurance from Allianz. Revenue is generated from vehicle sales commissions as well as cross-selling the insurer’s existing products.

Launching a platform and orchestrating the ecosystem allows companies to compete and differentiate themselves based on their relationship with the customers and the value it adds—not just on price.

But launching platforms is expensive, and it is hard to create the scale and volume necessary to make it a success.

Option 2 is to leverage another company’s platform. Again, Allianz provides an example.

The carrier bought a stake and secured a distribution agreement with a company called simplesurance—it develops software that integrates into online stores’ checkout processes, allowing online shoppers to buy insurance with one click.

The advantage of leveraging an existing platform is that you get rapid access to new customer bases, and you can improve your customer experience.

The danger is you can quickly end up competing on price.

Option 3 is called the hybrid approach. In practice, like Allianz, most insurtech players will use different strategies for different lines of business or market segments.

The key to a successful hybrid strategy is establishing cross-selling and advisory customer journeys that span multiple ecosystems and touchpoints. This allows insurance companies to acquire new customers, engage with them, and develop deeper, longer-term relationships with them.

Three quarters of insurance executives agree that platforms are having a noticeable or transformative effect on the insurance sector, and 70% believe that ecosystems are creating an environment for unlikely partnerships or “strange bedfellows.” Discovery’s ecosystem, which includes cinemas and gyms, is a good example of this.

It may be prudent to follow insurtech’s lead. A whopping 94% of insurance companies say it is critical to adopt a platform-based business model and engage in ecosystems with digital partners.