How embedded insurance could impact SMB transportation
Today, the barrier to entry for insurance is far too high for many cargo and freight SMBs.
Cargo in transit is often under or uninsured and that is particularly true for SMBs, that historically have not been well served by the insurance market, which has focused on enterprise level businesses and the processes have not suited smaller firms.
In the highly competitive shipping industry, freight and logistics professionals operate on razor-thin margins and must make decisions in seconds. Unfortunately, when they need spike and gap coverage urgently, a game of phone tag with brokers or insurers could cost them a profitable load.
Additionally, as brokers rarely recover their investment in writing transactional insurance, a critical need in the spot freight market, SMBs are instead offered expensive annual policies.
All this is further complicated by the fact that they likely don’t have the benefit of an in-house risk management team and statistical insights. Large enterprises use these to tap the intelligence that helps them navigate a constantly shifting minefield of cargo risks. But SMBs lack the deep pockets to support internal expertise or expensive consultants. Without this guidance, they’re left without a strong understanding of their risk profiles and exposures.
As a result, they’re unable to accurately gauge the risks involved with any particular shipment—or understand exactly what they’re getting from the coverage they do purchase—making them also less sophisticated purchasers of insurance.
At the end of the day, it means they’re likely operating with broad risk exposure—thankfully, embedded insurance can address this issue.
What is embedded insurance, exactly?
It’s a seamless process most people have likely already experienced in their lives.
Consider online shopping, for example. When buying a new piece of electronic equipment online, there will often be an option to add a protection plan right by the “Add to Cart” button. With one click, the premium is added to the purchase price, and insurance is bought.
Embedded insurance for the transportation industry can operate in much the same way.
SMBs have already done the heavy lifting of entering shipment details into their workflow. Embedded insurance simply harnesses this existing data to accurately price the risk at a granular level, and then enables them to instantly transfer that risk on-demand, leveraging API integrations.
A digital approach is vital
AI, automation, and predictive analytics are critical to enable this kind of active risk management. Today, the freight community – and in fact most industries – are awash in high-resolution data. Leveraging embedded insurance and API integrations, it is possible to collect vast amounts of this anonymized data and feed it into an AI learning engine that will power an active risk management solution.
In the case of cargo and freight, granular shipment details can be combined with real-time asset, environment, and behavior data, as well: Vehicle maintenance and driver behavior metrics; weather, road, and traffic conditions; cargo theft patterns; and more—right down to the shipment level.
Using AI, it’s then possible to deliver automated loss prevention recommendations and impact measurements to SMB shippers, empowering them to make prudent decisions about how they move freight and mitigate losses from occurring in the first place, regardless of the size of their organization.
This approach to freight protection simply wasn’t possible before the recent wave of digital innovation. Now, as it breaks over the insurance industry, it will enable the holistic freight protection SMBs have long struggled without.
Equally important, embedded insurance enables the insurance industry to deliver critical insights right at the point of purchase—helping them better understand both their risks and coverage options. For example, a “risks and coverage details” link can highlight their exposure to Acts of God, theft, and General Average-related losses if they rely on carrier liability coverage alone — a concept still misunderstood by many.
When embedded insurance is done right, it should educate and empower customers – giving them more data, insight and control so they can, in turn, make the informed decision to add insurance coverage, or not.
This digital approach, maximising the data that is available, is very different from the way insurance has always worked, creating delays and adding costs through traditional processes, printed forms, and multiple human touches.
Unlike traditional insurance, embedded insurance solutions plug assureds into an entire ecosystem, giving them full visibility into everything they’ve insured. What’s more, these solutions can empower them to slice their data and create customizable, granular reports broken down by carrier, commodity, and limits. Able to now easily understand their insurance costs, claims history, and the value of their coverage, they can better manage their overall risk profile.
The future of transportation
Labor-intensive traditional processes are rife with inefficiencies and unnecessary costs. The result: business-critical risk management is too slow and costly to be accessible to the SMB. Taking a digital approach, by leveraging AI, data and automation, embedded insurance reduces the complexity once involved in delivering coverage to a single click.
It really is a win-win.
