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The term “embedded insurance” is gaining popularity among those in the insurance industry who are driving innovation. What exactly does it entail and why is it significant?
In simple terms, embedded insurance refers to the practice of combining digital services with insurance, allowing partners in various industries to offer insurance as an additional option during a digital purchase.
The popularity of this type of insurance distribution can be attributed to the desires and needs of consumers. Studies have shown that there is a growing interest among customers for well-executed embedded offers, due to their speed, simplicity, and association with trusted brands. A recent survey in the UK, conducted by Momentive.ai and commissioned by Cover Geniussought, aimed to understand how customers of banks, nonbanks, and transactional apps would respond to embedded insurance offers based on real-time transactional data. The results showed that 71% of British digital bank customers were interested in receiving embedded insurance offers, and over three-fifths of traditional bank customers were open to purchasing them, citing convenience as the main motivation. Demand for these offers appears to be highest among customers who already use mobile-wallet-based investing accounts or similar apps.
According to a survey conducted by Accenture, customers are becoming more open to purchasing insurance while shopping for other items. 40% of customers would potentially buy insurance from a car dealership, 30% from a retailer or supermarket, and 29% from online service providers. This trend applies to all types of insurance, such as auto, home, and life.
The rise in popularity of embedded offers is closely connected to advancements in technology and the emergence of insurance ecosystems. These ecosystems consist of networks of digital providers offering health, financial, or other related services. Instead of complex software integrations, insurance companies can now easily connect to various types of digital platforms through low-cost and low-friction API connections. This approach, known as insurance-as-a-service (IaaS), has become well-established. For instance, retailers often offer warranties for appliances or electronics at the point of online or in-store checkout. This method is increasingly being used in the insurance industry, as well as within financial services and digital health ecosystems. By pooling data and insights from different systems and services, savvy insurers can develop more personal and informed relationships with customers, providing tailored risk assessment and care. Insurers are collaborating with companies and platforms that strategically present digital offers to consumers during 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.
A one-of-a-kind insurance collaboration between Chubb and insurtech Betterfly in Latin America will increase the availability of life insurance in five countries within 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.
The insurtech company Bubble offers a convenient insurance-in-a-box option for mortgage and real estate companies. This model integrates homeowner’s and life insurance into real estate transactions. Through the use of widgets, APIs, and URLs, various companies can easily customize insurance quotes and seamlessly incorporate insurance offers into the process of buying a home or obtaining a loan.
Ping, a Chinese insurance company, has achieved the status of being the biggest and most advanced embedded insurance provider globally. The company has a range of businesses in different industries that are seamlessly connected to its insurance services.
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.
There are numerous advantages to incorporating life insurance. By partnering with new entities, insurers can offer products at minimal distribution costs. These partnerships can also help increase the lifetime value of customers by meeting a crucial need at the perfect moment. The purchaser will feel content with the transaction as they were able to obtain affordable insurance when it was necessary.
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 idea presented challenges the life insurance sector to reconsider their offerings and how they are presented. For those interested in exploring alternative ways of distributing and expanding coverage options, now is the perfect opportunity to take necessary actions. It is time to strive towards becoming an “exponential insurer,” as defined by Deloitte, by going beyond the traditional insurance process and entering new markets through strategic partnerships and involvement in successful ecosystems.
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Stuart Hayman has accumulated more than 25 years of expertise in the life and pensions sector, with a background in manufacturing and outsourcing. Throughout his career, he has held various positions in operational, IT, organizational, process, and solution design, providing services to both internal and external clients. In recent years, his focus has shifted towards sales, business development, negotiating new contracts, and designing solutions.
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