Author: Andy Watts, Business Development Director, INSTANDA
The insurance customer of today expects a product journey that’s as streamlined and easy-to-use as possible. In practice, this means that the product is designed to fit within an existing product journey – for example, someone using a second-hand marketplace app might choose to add purchase protection in case the item isn’t as it seems online.
This is not a new concept. For many years, insurance products have been bundled with non-insurance services – but the focus has now shifted to personalisation. This type of insurance brings the product to the consumer, at the exact point of purchase, rather than expecting the consumer to seek it out. The integration closes coverage gaps by recommending personalised products precisely when they are most relevant.
Yet, despite its convenience, survey data from INSTANDA’s 2024 Re-imagining the Digital Insurance Landscape report finds that only 44% of respondents are comfortable with their insurance being bundled with a related purchase, including just 31% of over 55s. This is one of several challenges for the insurer which need to be addressed if they are to capitalise on the opportunities on offer from embedding their products.
Update Your Tech, Before it’s Too Late
The first challenge that insurers may encounter when embedding insurance products is operational. This stems from issues arising from relying on incumbent systems that aren’t suited to embedded insurance because they don’t have the flexibility and speed required.
One solution lies in partnering with an InsurTech provider, which can enable insurers to easily connect with other businesses to offer embedded insurance. One specialty (re)insurer who is working with INSTANDA, has developed usage-based cover for event bookings—reflecting a shift towards more tailored, real-time protection. For instance, if a customer misses a West End show due to severe weather, they’re refunded through insurance purchased alongside their ticket. By embedding insurance directly into the purchase journey, insurers can therefore offer cover that is relevant, timely, and easy to access, without adding friction to the customer experience.
Partnerships with digital platforms allow insurers to replace heavy, outdated systems incrementally while wrapping innovative technologies around them. Moreover, they can quickly design, test, and deploy new products, adapting to changing behaviours and emerging risks without the long lead times traditionally associated with product development.
Building Trust and Consumer Confidence
The second challenge for the insurer looking to adopt embedded insurance, is building and maintaining consumer trust. Insurers traditionally build a brand association with their customers, with trust acting as a key pillar. With embedded insurance, there is less of an opportunity to build or signal a brand because the product journey is slotted into another, so the insurer is less visible.
Here, one of the primary advantages of embedded insurance becomes one of its challenges – streamlining the customer experience means that the insurer’s touchpoints are diminished, with fewer opportunities to build a brand. Since there are less opportunities to demonstrate a brand, consumers need to feel assured that the insurance product comes from a credible and reliable source, and that value is being provided.
To overcome these challenges, insurers need to build long-term partnerships with reputable distribution channels. Once that’s done, providing appropriate solutions that give value to the customer – rather than chasing short-term additional revenue – will cement a positive reputation.
Managing Regulation and Data Ownership
Finally, navigating regulation and establishing clear data ownership are vital—not just for compliance, but also for maintaining consumer trust. Embedded insurance involves multiple stakeholders, increasing the risk of data mishandling or unclear responsibilities. Insurers must define ownership, safeguard privacy, and stay aligned with regulations. Transparency around how customer data is used and protected is essential, especially when the insurer is less visible. Without it, trust can erode, exposing insurers to reputational and legal risks— thereby limiting the full potential of embedded insurance.
Whilst embedded insurance does come with challenges, it’s crucial for the insurer to overcome them – or run the risk of being left behind. To succeed, insurers must embrace new technologies to navigate operational challenges, build consumer trust, and ensure data privacy is upheld. By embracing innovation and transparency, insurers can capitalise on this shift, delivering value while safeguarding long-term success in an increasingly interconnected and consumer-driven market.
