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Exploring Embedded Insurance Across Industries
AI & MI InsurTech

Exploring Embedded Insurance Across Industries

By Rajarshi October 25, 2023 - 48 views

Embedded insurance is steadily becoming a transformational concept across industries like insurance, finance, e-commerce, and a wider scope of transactions. It is steadily becoming a major insurance sales channel while ensuring access to a higher number of customers. Based on reports, the market for embedded insurance is slated to touch $700 billion in GWP (gross written premiums) by the year 2030, which is six times the present market size and more. 

A Closer Look at Embedded Insurance

This concept is enabling better insurance integration and industry-specific insurance alike. Embedded insurance means the bundling of insurance with any service or product. This means that customers do not have to purchase any insurance coverage directly. Whenever they purchase any product or service, there comes an option to obtain insurance at a comparatively lower cost. The easy availability of the same and reasonable cost make it a better option for customers. This is steadily gaining popularity since several areas are not readily covered under insurance policies. 

Embedded insurance solutions can offer coverage at reasonable costs for transactions like buying bus tickets or railway tickets, for example. There are also options to obtain insurance while purchasing electronic goods and other devices. 

How it Works and Major Benefits 

Based on recent embedded insurance trends, here are some points worth noting. 

  • A majority of non-insurance entities are tying up with insurance companies or insurtech brands to scale up their product offerings and enable embedded insurance alongside. 
  • For instance, Airbnb has tied up with AON, Generali, and Europe Assistance for its travel insurance solutions, covering travel delays, cancellation of trips, baggage, and medical costs. The Volvo XC40 Recharge Pure Electric is now sold with three-year insurance coverage from Allianz as well. These are only a few examples. 
  • More non-insurers will identify embedded insurance solutions as a new growth and revenue stream, while they may also be differentiators for customers. 
  • Insurers can scale up their customer base by tying up with travel, aggregator, trading, and other entities that have huge customer bases. 
  • Insurance integration is possible since the plan is integrated with a service/product and is added to the overall price. This lowers distribution costs for insurers and offers a value-added proposition to customers. 
  • Customers also feel more comfortable while purchasing insurance via a service provider or brand which is familiar/known to them. This can make a positive difference in their lives and is a big differentiator for customers. 

Challenges and Steps to Follow for Insurance Companies

There are a few challenges for insurers while some inputs will help insurance companies successfully venture into embedded insurance. 

  • There are challenges linked to regulatory compliance whenever there is a movement of information throughout multiple geographies. 
  • There are issues where the claims processing mechanism has to be in sync with skyrocketing sales growth and the process has to be smooth with a 360-degree view of customers, analytics, and AI/ML. 
  • Insurance companies should identify industries, entities, and non-insurance players for productive partnerships in industries like travel, car rentals/purchases, e-commerce, consumer goods, hotel bookings, and many others. 
  • Insurance companies also have to launch newer products with higher value propositions at reasonable prices. They may choose joint branding with their partners or issue policies under the brand of the partner. 
  • Policy issuance procedures should be integrated with the sales process of the partner while the claims receipt, evaluation, and payment systems have to be designed in an efficient manner. 

Insurance companies will increasingly require technology-enabled embedded insurance solutions to successfully foray into this space. A strong PAS should be built for launching and creating newer products and integrating partnerships along with rating engines for simpler policies with lower terms and conditions. Joint branding initiatives like white labeling of the front-end portal will be crucial along with integrations with partner systems and simpler claims systems. Embedded insurance offers several advantages for customers as well. 

How Customers Benefit 

Customers benefit from embedded insurance solutions in the following ways: 

  • Embedded insurance enables major advantages for all customers. They can purchase insurance at the point of sale (POS) itself without leaving the application or website that they are logged into. 
  • This helps them save time and effort while boosting their overall experience. It also enhances the satisfaction and loyalty levels of customers. 
  • Embedded insurance also offers a wider range of product options to choose from as far as customers are concerned. 
  • It enables a more personalized approach towards insurance solutions. With the integration of non-insurance products and insurance, companies may offer personalized/tailored solutions that cater to specific customer requirements. 
  • This leads to higher customer trust and confidence in the insurance industry and ultimately enhances the customer retention levels for insurers. 
  • This concept also enables higher cost savings for companies, especially for acquiring new customers. They may also save claims processing costs since they will have more data access about the customer’s purchase and personal details. This may lead to higher profitability for insurers and subsequently lower premiums for customers as well. 

Going forward, it is evident that insurance companies will rely more on embedded insurance and partnerships with a wider spectrum of entities and brands. The industry will adopt this concept to offer a differentiator and higher personalization for customers along with evolving in tandem with the latest market trends. 

FAQs

What is embedded insurance, and how does it differ from traditional insurance models?

Embedded insurance refers to the bundling of non-insurance products/services with insurance plans at the point of sale at nominal costs. It is different from traditional insurance models which cover only specific categories and have to be separately purchased by applying and completing documentation. 
How can embedded insurance benefit consumers in various industries?

Embedded insurance can be beneficial for customers since they can quickly get access to insurance with their products/services at the point of sale without leaving the application or website. This coverage is available at a lower price and often tailored to their specific needs. This will ultimately boost convenience and save time as far as customers are concerned. 

What industries are currently embracing embedded insurance, and what are some notable examples?

Several industries like e-commerce, travel, hospitality, automobiles and consumer goods are already adopting embedded insurance. Some examples include Airbnb’s partnership with Generali, AON, and Europe Assistance for its travel insurance plans. 

What challenges and regulatory considerations are associated with the adoption of embedded insurance in different sectors?

There are a few challenges including adherence to regulatory policies regarding data usage, security, and consent. Other challenges include creating 360-degree customer views, movement of data across geographies and regulatory mechanisms for the same, and ensuring a smooth claims processing system in sync with the non-insurance partner’s processes.

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