Embedded insurance - insurance as a byproduct

Embedded insurance is all the talk at them moment. Projected to take over a substantial amount of the market in the coming years, technology plays an important role in this process.

However, the concept is barely new, for years we have been buying holiday services, flights or accommodations, and getting travel and cancellation insurance as part of that process. We get extended guarantees on white goods, and our phones are covered for loss and damage.

Insurers do the same embedding coverages from other insurers their own insurance products, for example the legal assistance, included in car insurance, can be from a different insurer than your main insurer. Typically they would call that a 'rider'. But essentially, its the same.

Lease companies have been bundling the car, loan, maintenance services and insurance, all into one package, giving a one-stop-shop experience.

Insurance - Not an embedded desire

People don't like dealing with insurance, it's a burden, the products are not properly understood by most and the actual benefit is not really seen by many clients. 

So if one can get it without dealing with it, better!
This also means that insurers need to invest a substantial amount just to obtain their customers and convince them to buy additional covers beyond the legally required coverages or what clients find obvious.

At the other end of the insurance journey, people don't always submit a claim for a magnitude of reasons on one hand, and insurers don't always have the most consumer friendly or efficient way to handle claims, on the other.

Embedding insurance as a service

Embedding insurance in non-insurance products or services allows all parties to benefit of the offering.

It takes away some of those concerns  clients might have, where buying the insurance on the back of another product, makes the purchase more natural and should eliminate some of the risk gaps that could happen when purchasing alone. 

Manufacturers/sellers of the main product want to get in on part of the action and gain financially off the insurance sold and keep the customer close.
Insurers gain by reducing their distribution cost and being able on the pure insurance process.

Embedding the risk

Image by mohamed Hassan from Pixabay 

So, who takes the risk? Well no change here, its the insurer. The fact that you are buying insurance as part of another product or service, doesn't mean that the risk is held by the one selling the insurance to you. 

Whoever is embedding the insurance in their product, doesn't underwrite the risk or needs to put reserves aside for that risk, they are acting as an agent or broker, just more seamlessly.

The same would 

No just embedding the obvious

As mentioned, embedded insurance has been going on for a long time and in obvious places such as mobile phone protection, travel insurance, lease products, buyers protection. 

Car manufacturers are joining in the fun, as they are taking a more and more active part in selling components beyond the car it self.  

Though embedding insurance doesn't have to mean just the obvious. Corelogic have a complete offer around real estate, embedding property insurance in their offerings as part of  property acquisition services. 

Cyber insurance is the most recent to join the club, already being added to various offers, such as those of Google cloud. Parametrix Insurance are selling a revolutionary downtime insurance, why not embed this as part of  services rendered?
Health, life, pet, commercial are the next in line. 

In Spain, CaxiaBank together with bsurance announced that they have partnered to offer embedded life insurance in the bank's online offerings. Although bsurance's platform enables embedding insurance at the point of sale, in this case we are probably still looking at the older bancassurance model, using a more modern platform, where insurance is still a second line product, rather than part of a larger offering.
The strive towards more digital life insurances, without underwriting, will lead to more embedded life insurances in different products.

Health insurance is more challenging. It is currently happening the other way round, health insurers (and life insurers) giving rebates and discounts when using smart products such as apps (like Yuvital) or smart fitness devices. The equation can be turned around, install the app and get insurance.
Alan in France has started the revolution with their innovative app. 

Embedding claims

When we are talking about the claims process, it can be proactive in to make it embedded. Embedding the claims notification and payment and automating it, makes the embedded insurance proposition even more compelling. Flight delayed? Flight stats monitored by the insurer and access to your itinerary allows for an automated claims process, without client interactions. Sensors in the car, can trigger at least a first response from the insurance company such as SOS from IDI. Using more natural car embedded components will move even this function to a part of the car manufacturer's overall product.

Embedding the claims process as much as possible, will lead to a higher client satisfaction of the whole product allowing recurring customers and cutting of costs.

Technology enabling embedding

Embedding or connecting insurance in the past has been less easy than InsurTechs are enabling these days. Old techniques of embedding insurance would include reports sent from seller to insurer, some just a document, some more useable such as CSVs or sometimes APIs that insurers open specifically. 
Sometimes, the risk is not even reported directly to the insurer, when a claim comes in, the insurer will check on the seller's platform if the risk was actually written.

More an more InsurTechs are enabling seamless integration of insurance, especially on those types of insurances where more underwriting is required. I mentioned bsurance previously, other platforms around are CoverGenius, BoltTech (who are constantly increasing funding) have a variety of options to embed insurance, Tint, the latest addition to great investment rounds has a platform for embedding including underwriting and claims handling. Many more technology platforms can be found in a great embedded insurance blog here.

A variety of embedding

Embedding insurance in an existing product can be done using a variety of options and techniques. For the simpler risks, no underwriting is required, thus making it relatively simple to embed with fixed options and prices, and embedding behind the scenes.

Once more underwriting is required, the process becomes more challenging, throw in offering insurance as part of an online acquisition, we start getting into seamless integration, UX/CX and more.  

Embedding it right

Getting the embedding right is not a straight forward process. It involves cross company functionalities and effective process and vendor management.
Critical in today's marketplace, but not immediately achieved

Embedding? Need to understand more? 

From an insurance or technical perspective.
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