What is Embedded Insurance?
Embedded insurance refers to the integration of insurance coverage into the purchase of products or services from non-insurance entities. The model allows consumers to buy insurance as part of their everyday transactions, such as adding travel insurance when booking a flight or getting car insurance when purchasing a vehicle.
Recent trends indicate a significant growth trajectory for embedded insurance. In 2022, the market was valued at US$63.1 billion and is expected to exceed US$480 billion by 2033. This rapid expansion is driven by technological advancements and enhanced customer data, enabling better integration and more personalised insurance offerings.
The benefits of embedded insurance are numerous. Firstly, it offers a high degree of customisation. Customers can receive insurance products tailored to their specific needs, enhancing their overall experience and satisfaction. This customisation is made possible by extensive customer data collected by partnering companies. Secondly, embedded insurance improves customer retention by providing convenience and ease of access, often at the point of sale, which simplifies the purchasing process and enhances customer loyalty.
Market Expansion and Challenges
Embedded insurance facilitates market expansion and portfolio diversification for insurers. By collaborating with various industries such as automotive, e-commerce, and financial institutions, insurers can reach new customer segments and innovate their product offerings. This model also helps insurers manage risks more effectively by using real-time data to adjust premiums and coverage dynamically.
However, the adoption of embedded insurance also presents challenges, including data privacy concerns and regulatory compliance. Insurers must navigate these issues carefully to ensure that their embedded products are both effective and compliant with relevant laws.
Professional Commentary
Jason Wilby, Cofounder Open
"It allows customers to buy cover at key times, primarily point of sale - when they’re most concerned about protecting their purchase. By working with an embedded insurance provider, such as Open, brands can integrate their own data to provide intelligent and personalised insurance options - maximising relevance for the customers and improving prices.
"Embedded insurance is a game-changer in everyday sectors like motor, home, phone and travel. It allows brands to offer personalised pre-filled quotes to customers, removing the need for repetitive form-filling which can lose customers. It gives opportunities to upsell other relevant products, as well as unlocking savings for customers based on loyalty or reduced claims."
Andrew Pollard, Insurance Specialist at SAS UK & Ireland:
“Retailers and fintechs are among those implementing embedded insurance as a way to generate additional revenue, appealing to customers through the ease of getting relevant cover with little effort.
“The very reason embedded insurance is so popular is because it meets customers where they are and customisation and personalisation are becoming more and more important to insurers to stay competitive. Providers are turning to techniques such as AI-powered data analytics to better understand ever-changing customer demands and personalise products accordingly.
“With approximately 20% of global gross written premium (GWP) expected to migrate to embedded within the next decade, the rise in this type of insurance proves customer experience must be put at the heart of every decision insurers make - so they will need to leverage data and the latest technology to do so effectively.”
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