Embedded insurance is a growing trend in the insurance industry that has the potential to revolutionize the way insurance products are distributed and consumed. This innovative approach to insurance involves integrating insurance products into other products and services, making them seamlessly available to customers at the point of sale.
To gain more insights about this emerging trend, we interviewed Yuri Poletto, Founder and Director of the Open and Embedded Insurance Observatory, a leading research and advisory organization focused on the global applications of open and embedded insurance. In this interview, we explore the benefits and challenges of embedded insurance, as well as Yuri’s insights on how this trend is likely to evolve in the coming years.
Embedded insurance is seen as the biggest growth opportunity for insurance. What’s your view? Will it deliver on the promise?
According to our surveys a big majority of insurers have recognized the embedded opportunity with over 50% of them already having embedded insurance as a strategic priority. Nevertheless, there is still work to do. Three factors are key:
- Demand. The insurance industry as a whole still needs to continue educating customers about the relevance of being protected. It is a lot about raising awareness for insurance products and simplifying the purchase process by creating delightful user experience.
- Supply. Insurers have to invest in tech, human and research capabilities. Innovative technology to integrate and digitize the processes, new HR-profiles to have access to the best data and insights to take the best embedded insurance decisions, work with brands and companies from other industries, and data analytics to take best decisions.
- Distribution. Apart from offering insurance at the check-out of digital sales funnels, insurance should be embedded in other moments of the user experience, and by building new embedded insurance use cases and value propositions.
Which current and future customer needs are driving embedded insurance?
Embedded insurance is perfect for customer demand for convenience and simplicity. It meets the customer’s wish to get financial and insurance services from preferred brands, and not necessarily a from traditional affinity groups. Brands like health and fitness organizations, large retailers or tech firms. Those companies offer relevant opportunities to embed insurance within their engagement journeys, with an extremely loyal customer base that trust them. Additionally, there are digitally native groups that today are rather underserved if not totally ignored like digital nomads or Gen Z as a whole – for those customers embedded insurance is a logical next step.
How can insurers operationalize embedded insurance: what strategies are insurers currently pursuing? What do you believe the winning strategy is?
Today the technology to enable embedded insurance is available, with hundreds of enablers that offer the technology but also the compliance, licensing, product design, and almost all the layers that stay in between the insurance capacity providers and the end customer. It is crucial for insurers to develop a clear vision of where they want to go with embedded insurance and what they want to achieve. We define embedded insurance as ‘partnering with brands to expose insurance products and insurance-powered value propositions within their products and services’. Embedded insurance has several use cases, all of them fall under two models, that we call the two embedded insurance archetypes:
- Offering insurance as a value-added service at some stage of the user experience where it can garner customers’ intent to buy (typically next to the checkout of digital sales funnels).
- Creating new value propositions customers are willing to pay and sharing their data for, with embedded insurance at its core. The starting point here are customers’ needs or problems.
For insurers it is fundamental to decide the right archetype for the context where they want to operate, because strategy, implementation, and the right partners for those two o archetypes differ completely.
Is the future of insurance distribution embedded? What is the role of agents and brokers? Is it an either-or situation?
Embedded is set to play a central role in enabling access and improving how insurance is used. I believe it can capture up to 20% of the market share in some lines of business. But more interestingly, by enabling access to insurance through brands, it can play a central role in reducing the protection gap. So, I see embedded insurance as the biggest growth driver of the market for the next decades. Agents and brokers are and will remain central in the insurance value chain and can absolutely play a role in embedded insurance too, they already do, to some extent. The question to me is more: do agents want to play a role? If they want to play a role, they have to embark in a deep digital transformation to perform their role of professional advisors in a more powerful way through the adoption of internet and digitally enabled tools.