The platform economy is becoming a driving force of innovation and growth in theworld.

Companies in this category create digital platforms to enableinteractions between individuals or businesses that need somethingand individuals or business that provide something. The "something"may be a product, service, money, labor or other asset ofvalue.

Related: Embrace the shift! Transforming the insuranceindustry from the outside-in

The distinguishing characteristic of platform economy companiesis that they generally have high market value while owning noassets and having few employees. The world's largest movie houseowns no cinemas (Netflix). One of the largest and most valuableretailers in the world owns no inventory (Alibaba). Thelargest personal transportation company owns no vehicles (Uber). Andthe list of examples could go on.

Amazon, of course, has been the quintessentialplatform company, although their acquisition of Whole Foods nowextends their capabilities beyond digital.

But, there's a new kid on the block of platform economycompanies, and that entrant is Brandless.What is their model? And what does the whole notion of the platformeconomy have to do with the insurance industry?

The Brandless brand

Brandless is a new online grocery retailer with a simple valueproposition. Every item for sale is three dollars ($3). The companyprovides healthy, socially conscious options such as organic,gluten-free, vegan, and environmentally friendly products, obtainedby fair trade principles. Although they are not selling name branditems, like Amazon and other online retailers, they are nonethelessconnecting suppliers that create the products to buyers that arelooking for items with these characteristics.

It could be just another of many online-only retailers that arebased on a digital platform. Or, it could grow to become a dominantforce in grocery. The irony is that the biggest challenge they mayface is building the Brandless brand, something that is alreadyunderway despite the company name.  

Insurance industry implications

There are three implications for the insurance industry from theplatform economy, overall. First, and perhaps foremost, is howcustomers and their risks are evolving. The companies mentioned andmany more are reshaping industries, becoming companies with majorinsurance needs in their own rights, while causing incumbents inthe industry to rethink their businesses or venture into thebuilding of their own digital platforms. In addition, the riskprofile is different for these platform-based businesses, as theyare likely to have huge cyber-risk exposure, but limited needs for workers' compensation andproperty coverages.

The second implication for insurers is that other emerging"economies" such as the sharing economy and the gig economy are based on digital platforms.They are "instances" of a platform economy. For example, the gigeconomy enables independent individuals to offer their labor andskills to a company or another individual that needs it, with theplatform operator taking a fee for making the connection. Thesharing economy, in particular, is already important for insurers,as it influences the ownership and use of assets by individuals,such as cars, homes, and bikes.

Finally, insurers must consider the rise of the platform economymodels in the insurance industry. The early models tend to bedigital agents and brokers, performing a similar function to liveagents today, but doing it via modern digital platforms that may beeasier, faster and lower cost than traditional distributionchannels.

Related: Why the human touch matters when buyinginsurance

It's generally understood that digital agents will have a bigimpact on certain segments of the insurance industry. It remains tobe seen if the platform economy model will be successful in otherparts of insurance, such as for peer-to-peer insurers, claim repair networks,or subsets of the gig economy for insurance industry professionalslike adjusters and loss control engineers.

Platforms and the future

One thing is certain. Insurers should investigate and understandthe developments in the platform economy. As many insurers striveto become more digital, the creation of digital platforms andcapabilities within the enterprise will position insurers toparticipate in other dimensions of the platform economy.

Brandless may or may not become a big brand, but the momentumfor the platform economy is unmistakable and something in whichinsurers should be actively engaged. Will there be a futureplatform-based company in the insurance industry that becomes thelargest force in insurance without holding any risk or employingany underwriters and adjusters?

Mark Breading is a partner atBoston-based SMA. Emailhim at  [email protected].This article first appeared on StrategyMeetsAction.com and isreprinted here with their permission. Opinions expressed in thisarticle are the author's own.