Embedded insurance is the future. It creates win-win-win situation for all parties involved.

What is one of the biggest issues we face in the insurance industry nowadays? It is the fact that selling insurance, which is not purchased together with a product or service, becomes quite ineffective and inefficient. The consequence of this “separate sales” is that the insurance product is very often rejected by the customer as unappealing hassle what, at the end, results in a huge protection gap. And due to market changes in terms of digitalisation, climate changes and lack of innovation, this gap is just getting bigger.

Buying insurance online represents significant issue for majority of customers. Why? Simply because the customer journey is inadequate and complex. Most of the insurances are still sold offline. True, they are researched online, but purchase cannot be done.

How can we solve this gap?

It is about embedding the insurance into the digital service offering. It is important that insurance is offered on the spot when the need is there and the risk to the buyer is paramount. Embedded insurance bundles the insurance coverage or protection with the purchase of a core product or service. It means that the insurance is not sold separately to the customer, but it is provided as a normal feature of the core product or service. That is, the customer gets more affordable, relevant and personalised insurance when they need it most.

Various tech players present on the market are very well equipped to embed insurance into their e-platforms mostly because they are the ones who control important insurance topics like:

  • Customer Journey: As life is moving rapidly into the online sphere, tech players are the ones who can best influence and control the customer journey. They are able to meet the customer where they are, offer insurance product when they need it and, by that, increase the penetration rates of insurance sales in comparison to separate insurance purchases.
  • Data: One of the biggest assets of tech players is that they have the data about the customers browsing history, transaction history etc. Data are up to date and can be used by insurers for better underwriting, risk selection and risk monitoring.
  • Trust: Digital services enjoy high levels of customer trust due to superior customer experience they offer. This is the perfect opportunity for insurance companies, as embedded insurance can help close the trust gap between insurers and digital services.
  • Communication: Tech players are in constant contact with their customers via diverse digital channels in comparison to insurers who contact their customers mostly only on renewals. By offering embedded insurance, insurers can use these communication channels to increase the connection to their customer base.

How is the market doing it?

Ant Group manages a digital financial services platform in China with an enormous user base due to the ubiquity of Alipay and the superapp they’ve created around it. In terms of insurance they spotted a large underserved market in low-income rural areas that traditional insurers were ignoring. Rather than trying to resell existing insurance products from one or two partners, they created their own insurtech platform to connect demand with supply in a new way. Ant Group focuses on understanding the needs of its consumers, educating them about the value of insurance and then designing compelling solutions for them with its suppliers.

Its insurance partners take on most of the underwriting and regulatory risk and deliver products to Ant’s specification. The company now offers 2000 customised, affordable and flexible life and non-life products from 90 different insurance suppliers.

Uber is another big online platform with a close relationship with its users including its 3 million drivers worldwide. At any time, depending on local regulations, competitive threats and new market opportunities, Uber requires the flexibility to provide its drivers with different types of insurance, benefits and incentives, related to vehicle and personal injury cover, sickness, paternity pay or other income loss.

Some of its insurance solutions are provided to drivers for free, some are invisible, some are optional add-ons. Some are related to when the driver is ‘in service’, some not. Given the size of its driver base, it has the potential to offer more complex products like pensions, life and health insurance in the future, in addition to other financial services like the bank accounts and loans it already offers.

In all cases Uber prides itself on the simplicity of its user experience and requires insurance solutions which are easy to adopt, good value and quick to claim against.

Embedded insurance is the future. It creates win-win-win situation for all parties involved – tech players, insurers and customers enabling better protection of consumers, creating added value and strengthening the value proposition.

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Alma Ribanovic

Group Practice Leader Affinity

T: +43 5 04 04 349