Embedded insurance has recently gained a lot of attention in the industry. This includes growing InsurTechs, insurers, and venture capital companies that see it as a possible high growth and margin revenue generator.
If you still don’t know what is embedded insurance, it is the accumulation of protections or coverage within the purchase of a third-party service or product as part of the consumer journey.
In many countries worldwide, embedded insurance is promising to grow through the development of ecosystems consisting of multiple partners.
The obvious drivers include:
- Evolving customer lifestyle and demands.
- Improving technological capacity.
- The onboarding of potentially technology-savvy distribution partners.
So what will be the future of embedded insurance, and why should you care? Find out everything in this article.
Table of Contents
Meeting the Consumer Demands
In the past few years (especially after the pandemic), customers have largely shifted to online purchases. Moreover, they appreciate the convenience and ease of purchasing insurance without stepping out of the comfort of their homes.
By embedding insurance at various contact points during the customer journey, you can provide appropriate coverage precisely when consumers need it the most.
The customer’s lifestyle has also changed, which has led to the rise in the sharing economy. People do not look to own a car these days because of the operating expenses involved, particularly in the big cities.
They would rather use short-term hire companies such as Zipcar or hiyacar, including insurance as part of the rental. In the same way, short-term rentals of e-scooters have gained popularity. They include embedded insurance, especially in countries that have made it mandatory.
Technology
Many modern digital platforms can be connected easily through APIs with distributors and other external data providers. Insurers can build their own platform, license a platform from Platform-as-a-Service providers such as Salty Insurance or partner with a Managing General Agent (MGA) specializing in embedded insurance. There is a variety of MGAs that insurers can collaborate with.
Distribution
The most powerful tech ecosystems, like Amazon, Apple, Google and Alibaba, combine marketplaces, services and devices to create a trusted experience that can be especially effective for embedded insurance.
When your online company manages the customer and their data, trust, and communications, it is well-positioned to include embedded insurance in the buyer’s journey.
Challenges
Presently, it is not possible to embed insurance in the entire customer journey, especially across varied markets.
The insurance offerings should be easy and transparent, simple to understand, and include a clear claims procedure. There needs to be an equilibrium between providing an easy, low-touch purchase procedure and ensuring that all the legal regulations are being met. For example, the requirement for KYC checks, offering accurate information, fair pricing, and the disclosure of policies.
While these issues hinder certain types of insurance from becoming embedded, they’re not an argument for the insurance industry to sit back and relax or let Big Tech firms do all the work and eventually own the relationship with customers.
In fact, it is a field in which insurers can utilize their knowledge and experience in the industry to predict how they can expand the idea of embedded insurance to more complicated risks.
Final Word
Although not all types of insurance can be embedded in the current time, consumers’ growing interest in making more complex purchases online suggests that the market will expand to cover complex specialty risks in the future.
Insurance companies or MGAs that are ready to put time and resources into embedded insurance today are likely to reap the rewards as the market expands.
About Carson Derrow
