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Embedded insurance is fast becoming a favourite term among insurance innovators. What does it mean, and why does it matter?
Put simply, embedded insurance is a form of digital bundling, enabling partners from virtually any industry to offer insurance policies as an add-on or feature, generally as part of a digital sale.
The appeal of this form of insurance distribution can be traced back to consumer wants and needs. Research surveys suggest increasing customer appetite for embedded offers executed well, due to speed, simplicity and association with trusted brands. A recent survey in the UK conducted by Momentive.ai and commissioned by Cover Geniussought to find out how customers of banks, nonbanks and transactional apps would react to embedded insurance offers based on real-time transactional data: 71 per cent of British digital bank customers expressed interest in receiving embedded insurance offers, and more than three-fifths of traditional bank customers were open to such purchases, with convenience being the primary driver. Demand appears to be highest among customers who already use mobile-wallet-based investing accounts or similar apps.
Customers are ready. A survey by Accenture found that “customers are increasingly willing to consider insurance purchases while shopping for other needs. Some 40 per cent would consider buying insurance from a car dealer, for instance, while 30 per cent might choose a retailer or supermarket, and 29 per cent would consider online service providers.” This applies across all insurance products, including auto, home and life.
The growing popularity of embedded offers is tightly linked to advances in technology and the emergence of insurance ecosystems, or networks of digital providers of health, financial or related services. Rather than engage in elaborate software integrations, insurers can now offer seamless connections to digital platforms of almost any type of business through low-cost, low-friction API connections. Customers can then add coverage to non-insurance-related purchases with a click. This insurance-as-a-service (IaaS) approach is already well-established. For example, retailers often present appliance or electronics warranty offers just prior to online or in-store checkout. Increasingly, this approach is being applied to insurance and within ecosystems of financial services and digital health providers. Savvy insurers can pool data and insights from across systems and services to establish more personal, informed and valued relationships with consumers and provide more customised and co-ordinated risk assessment and care. Insurers are partnering with companies and platforms that can present a digital offer strategically when consumers are motivated by relevant life events, such as applying for a mortgage, preparing for a new baby, enrolling in a university savings plan or entering a student loan agreement.
Examples include:
- A unique business-to-business-to-consumer insurance partnership between Chubb and insurtech Betterfly in Latin America will expand life insurance in five countries in the region.
- China’s Ant Group controls an interconnected financial ecosystem through its digital payment super-app Alipay. Via the insurance platform built in to the Alipay app, the Ant group sells thousands of life and non-life insurance products from dozens of carriers.
- An insurance-in-a-box model offered by insurtech Bubble enables mortgage and real estate companies to embed homeowner’s and life insurance into real estate transactions. The model allows a range of companies to embed widgets, APIs and URLs, tailor quotes in real time and fit insurance offers seamlessly into existing home and loan purchase customer journeys.
- Ping, an Insurance Group in China, has become the largest and most sophisticated embedded insurance provider in the world. The group operates a collection of ventures from various non-insurance sectors, which seamlessly integrates its own insurance offerings.
Embedded insurance is proving to be a powerful way to reach new audiences and to bridge the protection gap. To be effective, the product must be integrated into the online purchasing experience, remain affordable and easy to access via a seamless customer journey and add value but not distract from the customers’ main purchase.
The benefits of embedding life insurance are many. Insurers will be able to offer products for little additional distribution expense through new partners. The partners will be able to extend customer lifetime value by meeting a critical need at exactly the right time. The buyer will walk away from a transaction feeling satisfied because they were covered by insurance provided simply, affordably and when it was needed.
Embedded insurance is a massive opportunity because it’s not just offering an existing product online or via a mobile app. It’s offering the right insurance product based on contextual data at the right moment, in the customer journey on their favourite platforms.
The concept itself challenges the life insurance industry to rethink what is offered, and how it is offered. But for those seeking new distribution methods and more advanced possibilities for offering coverage, the time is right to start taking some important steps. It is time to look toward becoming what Deloitte calls an exponential insurer – a company “moving beyond the insurance value chain to conquer new markets by leveraging efficient external partnerships and being part of winning ecosystems.”
To discover more about Sapiens visit sapiens.com.
Stuart Hayman, Director, Sapiens Insurance Practice— (Courtesy of Sapiens)
Stuart Hayman gained over 25 years of experience in the life and pensions industry from a manufacturing and outsourcing background. Previous roles have covered operational, IT, organisational, process and solution design and delivery to both internal and external customers. Recent roles have focused on sales and business development, new contract negotiation and solution design.
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