Jonathan Stewart, Co-founder of Root, looks at how embedded insurance is changing the landscape of personal cover, and explores what steps insurers need to take to embrace this growing trend.
According to a recent Insurtech Insights report, the embedded insurance market could be worth an impressive US$1.5 trillion by 2032; and it’s hardly surprising to see why. Being integrated into the point of sale of a product or service via a retailer or manufacturer – rather than being offered as a standalone policy – embedded insurance is a win-win for customers and companies alike.
From a customer perspective, the ability to purchase insurance at the point of sale means cover can be accessed instantly, while bespoke customer data obtained by the retailer – such as usage patterns and preferences – means cover can be personalised; an important value-add that helps build trust and loyalty.
For insurers, the benefits of embedded insurance are just as significant, but most importantly it opens up partnerships with manufacturers and retailers, which in turn opens up distribution channels and ensures that a greater number and variety of products can reach a wider audience.
And this really is the key ingredient that makes embedded insurance so unique; it is versatile, can be easily customised, and in effect it can be embedded into practically any purchase. An electronics retailer might, for example, offer an extended warranty that includes insurance for accidental damage, while a car manufacturer could include insurance that covers the cost of maintenance and repairs. Travel booking platforms could even embed travel insurance policies at the point of sale to cover everything from flight cancellations to lost luggage.
The possibilities and opportunities are simply endless; however, for insurers looking to tap into this growing market they need a distinct set of skills and technologies. This is where insurtech policy administration systems can help.
One of the biggest challenges for incumbent insurers is technology. The constraints of legacy systems limit their ability to create and embed intuitive customer journeys, let alone plug and play seamlessly into digital ecosystems. To offer embedded insurance products, insurers need to do all these things. They also need access to data; without it they simply cannot personalise products and set the right premiums – both of which are key selling points of embedded insurance.
Fortunately, insurtech policy administration systems are emerging to help insurers navigate these challenges and enable them to become data masters. These SaaS and cloud-based systems are microservice-, API- and mobile-enabled, providing functionality for configurable digital customer journeys and end-to-end policy administration support. By harnessing these technologies, insurers can collaborate with retailers and manufacturers, who in turn can provide data to ensure embedded insurance products meet the specific requirements of their customers, at the right time, at the right price, and in the right format.
While the embedded insurance concept has been around for a while – albeit in a less sophisticated form – there is no denying that modern technology and advances in data and analytics are set to accelerate the trend and transform the way insurance is provided and consumed. It is a potential game-changer, offering significant benefits to both customers and companies alike. But only by adopting modern technology platforms will insurers have the ability to make the most of this vast new market, tap into new risk pools and customer segments, and drive growth and profitability for years to come.
Are you ready to embrace the trend?
Root is an end-to-end digital insurance platform that enables you to launch new products and digital engagement channels fast. We package all the compliance, regulatory and reporting complexities behind easy-to-use APIs, allowing your team to focus on building great customer experiences.