June 30, 2022
By Lauren Rock-Perring

When it comes to insurance, consumer needs and expectations have shifted. Not only do consumers want enhanced customer experiences, but they expect them – a demand that can be met by companies leveraging technology to innovate and disrupt the insurance industry.

Enter Insurtech, a name given to companies who utilise technology to innovate within the insurance industry to serve the more digitally savvy consumer. One-way Insurtechs are disrupting the industry is by offering embedded insurance solutions.

What is Embedded Insurance?

Embedded insurance is all about distributing insurance solutions (traditional or innovative) at scale through third-party businesses. It is embedded within the purchasing journey of an underlying product or service it is related to and could be packaged as an add-on, a bundle, or a transaction-triggered offer.

According to Simon Torrance, embedded insurance could account for over $700 Billion in Gross Written Premiums by 2030 in Property and Casualty alone and a $3 Trillion market value when aspects of Life and Health coverage are included.

The embedded insurance opportunity delivers the advantage of lower distribution costs through third-party ecosystem integration, relying on partner distribution capacity and customer relationships. This way, the customer is offered relevant and fully customised coverage at the point of sale, putting them in control and improving their overall experience.

Examples of Embedded Insurance

As part of a larger move toward embedded finance, embedded insurance as a concept is not new but growing in popularity. It is a model which is penetrating a multitude of industries including fintech, mobility, and telecommunications.

  • Adding departure or arrival delay insurance to a flight ticket upon checkout.
  • Opting for flexible cancellation insurance when booking a concert ticket.
  • Choosing purchase protection to cover new electronics purchased online.

Embedded insurance served as an add-on to the customer journey is easy and allows customers to secure coverage of their purchase or experience in just a few clicks. Fast, flexible, and fully customised embedded insurance enhances the customer journey and meets the expectations of today’s digital-savvy customers when it comes to customer experience.

How Does Embedded Insurance Work?

Embedded insurance addresses many of the inconveniences that consumers might face in a more traditional insurance purchasing process. Embedded insurance acts as a cross-sell within the customer journey, bespoke to a related purchase. Depending on the ecosystem, it can also allow customers to turn their insurance on/off, giving them full control of when they wish to be covered and for how long.

Rather than having to bounce between separate providers or experiences, embedded insurance allows customers to activate a policy right from the website or app of the business they are already transacting with.

This goes a long way for all stakeholders involved, third-party distributors enjoy significant revenue streams, increased loyalty, and retention as well as improved customer service. Insurers yield lower customer acquisition costs, greater data availability, and a higher penetration rate. Customers receive more relevant, customised, personalised insurance products and a streamlined customer experience.

Why Embedded Insurance?

Embedded insurance is expected to grow exponentially in the coming years. For both traditional and digitally-enabled businesses, embedded insurance offers new ways to reach customers. By partnering with Insurtechs who have the technical capabilities to design and integrate customer-centric products into ecosystems, at scale, businesses can offer protection to consumers exactly when they need it.

Other drivers and benefits include:

  1. Customers are buying more actively online and enjoy the ease and simplicity of buying insurance packaged as an add-on to related purchases, a bundle, or a transaction-trigged offer. Embedded insurance provides the perfect opportunity to offer relevant coverage exactly when customers are most likely to perceive its value.
  2. The protection gap – the difference between insured losses and uninsured losses — is growing wider every year. Offering insurance at the point of sale can help narrow that gap by making it easier for customers to purchase coverage.
  3. An embedded insurance solution can be integrated into any existing system through an open application program interface (API). APIs can help businesses and Insurtechs analyse data and offer tailor-made policies at the point of sale. Additionally, online activities produce a wealth of data, which can be used to create customised insurance policies based on risk information that is accurate and updated in real-time.

Embedded insurance leads to substantially higher conversion rates, delivering larger ancillary revenue streams to businesses or platforms distributing it. This is the result of easy-to-understand products, relevance, timing, and customer journey integration.

What Lies Ahead?

Ultimately, embedded insurance represents a revolutionary opportunity to re-think traditional industry business models and sources of value by leveraging the full potential of new products that are digitally native by design, allowing real end-to-end digital processing. Furthermore, it offers customers the ability to secure affordable, relevant, and customised protection when they need it.

At Companjon, our mission is to enhance our business partners' customers' lifestyles by offering fast and full-customised embedded insurance solutions. To learn more about how we can offer peace of mind to your customers through our unique insurance solutions, schedule a call with one of our team members.