Within embedded finance, insurance is provided as a native feature in the platform, marketplace or ecosystem. Not entirely new, bancassurance is one variant that has existed for long. In its current avatar, embedded insurance offers advantages for all involved, including tech players, carriers and consumers. A primal constraint in insurance distribution has been that purchase is disparate from the product or service covered, resulting in poorer data for carriers and lesser relevance for customers. It seems logical that tech players would be better suited to distribute such insurance due to superior control of customer journeys, compared to insurers.
Besides, the tech stack of insurers has suffered from inflexibility and difficulty in integration. This has sprung up a range of enabler start-ups, offering APIs for distribution, claims and even full stack, white-label solutions. Given that platforms are expected to control 60% of new sales by 2030, insurers that lag or don’t innovate, risk erosion of their profit pools.
Prevalent forms of embedded insurance include:
- Mortgage lenders offering title insurance
- Ticket and event organizers offering event insurance
- Car rental businesses offering rental insurance
- Phone insurance bundled with purchase of the phone.
A successful embedded insurance program tends to comprise:
- A digitized product (quote, bind and issue transaction seamlessly)
- Short-term, subscription-based, and frictionless product
- Pre-underwritten insurance products
- The pricing of coverage a fraction of the main product/service.
- Target channel partners are specific and grouped.
A pertinent example of an embedded offering is Bundle from Insuritas that delivers a suite of solutions that enables financial institutions, payment, and retail platforms to operate their own labelled, full-service insurance agency. Owners benefit from expanded wallet share, increased retention, and recurring revenue. Insuritas handles the agency platform and APIs, leveraging virtual and live agents with comprehensive marketing automation. With Insuritas, residential home loan originator Northpointe Bank realized an 84% growth in insurance policy sales in one year. Customers respond to a personalized email tied to their mortgage process and receive a quote, in a seamless journey where Northpointe Bank works with Insuritas to grow the agency alongside the bank.
Embedded insurance is integral to the concept of ecosystems and facilitates offering of holistic solutions to customers’ risk requirements. Such ecosystems have survived the first few years of hype. Among others, digital MGAs are capitalizing on the opportunity by carving out niches and partnering with merchants and brands to offer embedded insurance where incumbents are non-existent. Regardless of who takes the lead, embedded propositions are an opportunity for all market participants.
Another insurtech company Bestow, offers new embedded insurance technologies that empower businesses of myriad sizes to bundle life insurance within existing customer ecosystems. Customers can apply for, and once approved, purchase up to $1.5 million coverage in a jiffy within the partner’s application. A medical exam isn’t mandated. Bestow’s life insurance infrastructure handles the gamut of the purchasing experience for partners from pricing estimates to instant underwriting to policy issuance.
With ecosystem partners focusing on core competencies of product management or supply chain, they often lack the wherewithal to successfully launch insurance products. Devoid of a clear-cut strategy to go to market, going solo is a risky and daunting proposition. Only the largest platforms can afford dedicated teams – mid-market players find it necessary to partner. Hence, digital players are seeking value in embedded solutions, although it can take time. One plus is that augmenting the shopping experience for its customers serves as an effective marketing and retention tool. While the transactions and digital assets might get increasingly commoditized, the core value creation is from the ecosystem with its data that can benefit customers, providers and suppliers. In time, partners would have the opportunity to graduate from embedding insurance services to offering insurance-as-a-service.
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