Embedded insurance: The emerging future of insurance
Everyone needs insurance but nobody wants to buy it! So, there’s a rush to sell insurance in the most convenient way possible. That’s how trends are born.
New trends emerge in the industry every day. Consumer behavior and technology spearhead the momentum a trend picks up.
We’re going to pick up on one of these trends and talk about one that’s been picking up momentum recently: embedded insurance. Now that more industries recognize insurance as a profitable and valuable asset, embedded insurance grows as a strategic priority for insurance companies.
Now, with a stronger focus on customer experience and digital purchasing, the insurance industry is slowly transitioning from selling insurance to also helping customers buy insurance that’s best for them. This may also be why embedded insurance is quickly becoming a red-hot topic in the industry. InsTech London forecasted it to grow more than six time larger – to $722bn in GWP by 2030, with North America and China seeing most of the growth.
Here’s everything you need to know about embedded insurance.
What is embedded insurance?
Embedded insurance is any insurance you can buy along with the purchase of a product or service in real-time. Companies can provide a seamless and convenient customer experience by offering insurance coverage as part of their product or service. As a result, consumers don’t have to look for standalone policies, and they may not even know they need it until they’re offered the chance.
Embedded insurance is about meeting consumer expectations and offering affordable, relevant, and customized coverage to consumers when they need it most.
For example:
Getting travel insurance when you book a flight
The chance to add extended protection on a new phone
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Benefits of embedded insurance
Better coverage, enhanced CX
Simply put, it puts the customers in control!
Embedded insurance is fast, convenient and frictionless insurance that gives consumers the customer experience they expect.
For instance, a customer looks to buy a product online, and adds them to cart. At checkout, they’re offered coverage for their new product. It’s an easy option and a straightforward choice. They can get it with just a few clicks, so they choose the coverage. They won’t have to look for insurance elsewhere or make a separate purchase.
Broaden reach for insurers
Acquiring new customers is a costly business. Embedded insurance offers insurers new ways to reach customers online. It presents new opportunities to broaden reach by partnering with digital brands, and offering coverage to consumers when they need it. Insurers can tap into different brands’ customers base to establish new distribution channels and tailor coverage.
For example, car manufacturers can offer auto insurance coverage when customers buy cars. This makes them a one-stop-shop for customers to buy both the car and the insurance coverage. Insurance companies can, in turn, access the manufacturer/dealership’s client base and tailor coverage based on the car’s make, model, and usage.
Helps bridge the protection gap
The protection gap—the difference between insured losses and uninsured losses—continues to grow wider every year. This creates a huge opportunity for insurance companies to pinpoint these gaps and offer insurance policies through different channels. It can help narrow the gap by making it easier for consumers to purchase insurance coverage,
Challenges of embedded insurance
Compliance issues
The insurance industry has strict regulations and compliance requirements that vary by jurisdiction. Embedding insurance without the necessary licenses, insurance products or services that comply with local regulations and disclosure requirements can raise regulatory and compliance challenges.
Data privacy and security concerns
Online shopping brings in a wealth of data, including transaction and browsing history. This creates the opportunity to create a customized insurance policy with accurate risk information and real-time updates. However, using this data can raise data privacy concerns. Both insurers and non-insurers must ensure that the data collected for embedded insurance is protected and used responsibly.
What embedded insurance means for insurers
For insurers, it is both a threat and an opportunity. Positively, embedded insurance is growing into a major sales channel that gives insurers access to a large customer base with high conversion rates. Conversely, it brings the risk of turning insurance into an even more commoditized business. It also risks insurers becoming mere capacity providers to non-insurers.
Insurers need to carefully determine how to engage in the embedded insurance business. For instance, considering which industries, or types of non-insurance companies to engage in. This could include automotive, banking, real-estate, and retail industries. Also consider which products to offer, how to make unique value-added services based on that industry, and how to integrate into the non-insurers’ sales process.
Assess the market opportunity and establish an idea of how to break into the market. Then, design a detailed, end-to-end picture before building and scaling the embedded insurance business.
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Embedded insurance in healthcare
Embedded insurance can make insurance products more accessible and convenient for consumers in the healthcare sector. By embedding insurance products into digital health platforms and wearable technology, consumers can manage their coverage and access healthcare services from their devices.
It simplifies the insurance process and makes it easier for consumers to get the care they need.
Insurers can also gain valuable data into the health and well-being of consumers. This data, like stated previously, gives insurers the opportunity to develop more personalized insurance products that cater to the specific needs of individuals.
Aggregate vs embedded health insurance
Aggregate and embedded health insurance offer two distinct approaches to health insurance.
Aggregate insurance is a more traditional approach to offering health insurance. Insurers offer standalone policies that provide comprehensive coverage for a range of health services, including doctor visits, hospital stays, and medication.
Embedded, on the other hand, integrates health insurance products into other products and platforms, such as digital health platforms, wearable devices and mobile apps. This gives consumers access to their insurance coverage and healthcare services directly from their devices, without navigating a separate insurance website.
What sets them apart? Simply put, the level of convenience and integration. Embedded insurance ensures a convenient consumer experience with both insurance and healthcare services integrated into a single platform. Unlike aggregate health insurance, consumers can easily access and manage their coverage.
The future of embedded insurance
Embedded insurance has a promising outlook. With more consumers aware of the benefits of insurance, more companies will look to offer insurance alongside their products and services. Non-insurers will continue to offer a diverse range of insurance products through embedded insurance, like health insurance, travel insurance, and more.
Technological advancements will play a significant role in the growth of embedded insurance, making it more convenient, accessible, and sought-after. It has an enviable potential of tapping into new markets and industries and challenging the traditional insurance industry. As it continues to grow, companies will look to offer more personalized insurance products and consumers will seek more efficient coverage options. Insurers can also capitalize its momentum to spearhead their reach into newer markets and boost sales.
All in all, embedded insurance could become a gamechanger for the insurance industry by helping insurers reach the right customers at the right time with the right coverage.
Access Agency Height’s resources to read more informational insurance blogs and reviews.
Frequently Asked Questions
What is embedded deductible?
An embedded deductible is a deductible structure generally used in family health insurance plans, where each family member has a distinct deductible amount with the overall family deductible. This means that any healthcare expenses incurred by a family member are applied towards their individual deductible. Once that deductible is fulfilled, their health insurance coverage will kick in and start to cover their healthcare expenses.
What is embedded vs non-embedded in insurance?
Embedded insurance refers to insurance products seamlessly integrated into a customer’s buying experience. Non-embedded insurance are insurance products sold separately from the primary purchase of any product.
For example, being offered travel insurance when booking a flight is embedded insurance. Buying car insurance separately after purchasing a car is non-embedded.
How is embedded insurance different from the traditional approach?
Embedded insurance sets itself apart in several ways. Here are some key differences:
Buying experience: Unlike traditional insurance, embedded insurance is integrated into a product or service. It is offered as an add-on at the point of sale. Traditional insurance is sold separately, which means customers have to seek out coverage.
Customization: Embedded insurance products can be customized to meet the customers’ needs based on their purchase.
Convenience: Embedded insurance reduces the need for separate insurance purchases, delivering a seamless and more convenient insurance process for consumers. It also becomes more accessible to customers who have otherwise not considered buying insurance.
Partnership: Insurance providers get the chance to partner with other business and industries, such as real estate, retailers, travel agencies, or car-sharing services. Traditional insurance is sold to consumers through insurance brokers or agents.
