Rory Yates, Global Strategic Lead, EIS
According to varying sources of research, Embedded Insurance is an estimated $2-3.7 trillion market. That’s the kind of new value potential that’s hard to ignore.
Working with Simon Torrence, an expert in embedded insurance, back in 2022, I became intrigued by the idea that this huge potential is based on a much broader definition of embedded insurance than just interrupting another purchase experience.
This isn’t about cheap and everywhere. And it definitely isn’t about mis-selling, or sly-selling insurance. So let’s get this clear straight out of the gate.
Embedding insurance into another purchase experience, a life moment, a car, or home, etc., are all valuable things to do. But they’re not for every type of insurance or customer all of the time. Why, how, and when are all essential questions in determining whether embedding insurance will be a good thing to do or not.
There’s lots of ways to mis-sell insurance, and embedding it could easily become another.
However, follow these three rules and the risks of mis-selling can be avoided:
- When offering insurance as someone fulfills another activity, the purchase doesn’t need to be completed right there and then. You should never avoid properly explaining what the customer is getting into before they hit buy.
- Allowing customers to adjust or end their cover easily and in a channel of their choice is essential. Purchase traps aren’t a good idea. As is avoiding any regulatory requirements.
- Think about how you can embed insurance into people’s lives. This requires changing the proposition so it’s integrated into our possessions and the things we interact with and then making insurance adaptive to our needs. This will add to the existing proposition mix and lead to much better value for both the insurer and the insured.
Building Embedded Insurance 2.0 into your Strategic Future Now
The next version of embedded insurance, Embedded Insurance 2.0, if you will, is about creating new propositions and experiences that extend beyond simply prompting insurance purchases.
It’s about embedding insurance into our lives. Ideas like connected car insurance, usage-based, or more relationship-based models are all examples of this.
Consider a life insurer that checks their customer’s open banking data and enters a policy change conversation when a major life event happens. It’s an effective way of ensuring the customer always has the right level of cover and avoiding underinsurance issues.
Similarly, embedding your insurance into your customers car and thinking about ways to mitigate risk or provide usage-based options could be dramatically useful. Both will dramatically deepen the relationship you have with your customers.
Controlled experimentation is going to reap learning rewards and ultimately shape your ongoing strategy. With Embedded Insurance still in its infancy, it’s a really good idea to stay closer to your customers than ever before. Looking to get deep insight and feedback from them should be more than “analysing” statistical data.
Insurers should leverage anthropology-based approaches. This is the study of human beings and making sense of their behaviour, the features of our society and culture in the context of the things we do while going about their daily lives. This could provide important insights into the how, when, and where you embed. No one wants the next GAP insurance dilemma.
The important things to consider are the three “new’s” for your organisation. You’ll be aiming to create new value, in new technologies within a new working model. Most insurance businesses aren’t set up to harness the extraordinary value potential embedded insurance offers.
Doing so will take a mindset and organisational change. It requires a move from policy-centricism, to customer-centricism, and leveraging the adaptive technologies that drive modern ecosystem businesses. The right organisational design will drive the selection and use of the right technologies. Not the other way around.
While this can absolutely be a largely evolutionary process, the minimum viable organization (the minimum operational capability you need to drive the value outcomes you’ve defined) to support the product and drive success will be vital, and need a strong focus on change management.
Where is this All Headed?
With all the hype, concerns, and viability issues, where does this really leave us?
Given that embedding most insurance isn’t as simple as credit finance gaps in eCommerce experiences (see embedded finance), there’s even more work to be done to address the purchase and general complexity of insurance.
Ultimately, embedded insurance is about closer and more mutually productive collaboration between insurance and non-insurance industries. Insurers need to engage on a level playing field, and this in turn is about inter-operable ecosystems.
Let’s unpack this.
Most other industries have moved far quicker to an era where static APIs make the technical job of integrations easier. They’re also operating and interoperating data, creating fluid and intelligent relationships with partners in adjacent marketplaces.
This allows them to create adaptive propositions, personalized experiences via services built on any channel at any time business models. Equally, they’re highly scalable through cloud-native foundations, and adaptive having been built modular.
This is now possible in insurance, but for most it’s still a foundational change. The business potential for embedding likely stacks up, and it should probably form a key part of a lot of insurers strategic and transformation agendas.
It’s not whether you should look to embedded models. It’s about how you can achieve value for your customers and your business using this model.
What’s not in doubt, is the untapped potential remains enormous for customers and insurers.
