Embedded insurance is emerging as a new way to distribute insurance services and deliver value to the market for all stakeholders. For insurers, this has become a trillion-dollar opportunity with great potential for creating new revenue streams and lowering distribution costs by focusing more on midsize companies. For end customers – individuals, families, and firms – it is about getting the insurance you need for your situation at a price that fits your budget.
The adage that “insurance is sold, not bought” is no longer relevant because of more contemporary, adaptable methods of insurance distribution that resemble nearly an everyday aspect of people’s lives. We have entered a new era when insurers can focus on previously untapped buyer niches.
What Varieties of Embedded Insurance Exist?
Three embedded techniques are primarily used: related, linked, and bundled embedding.
Linked and bundled embedding have existed in the market for a long time. For instance, service and insurance are included in the price when you purchase car financing or a refrigerator from Amazon.
The game-changer, though, is the related embedding. It is the city’s newest cool kid, the gap in the chain, and the way to achievement and a firm that can face the future.
Having said that, let us get to the point:
Offering insurance to the consumer in any digital place within the partner’s digital universe is a related form of embedding. Here, insurance can be digitally positioned in a way that connects the core product’s linked value to insurance. It is not dependent on a deal between the partner and the client, though.
An illustration would be a car salesperson giving tips on how to choose the best car in a blog post. The blog post exposes the buyer to an advertisement as part of the insurance sales process.
For distribution partners who want to offer insurance and generate revenue from their existing website, related embedding is a can’t-get-enough delicacy. The explanation is that they recognize the extra value of providing insurance, which is equivalent to higher commission income and longer client lifetime values. Additionally, distribution partners can benefit from this without turning their online space into an advertising circus while also boosting client loyalty.
The goal of linked embedding is to convert the partner’s point of sale into a sales channel for insurance. The end user interacts with the insurance product as an addition to your partner’s sales flow, in other words. An electronics vendor who connects extended warranty insurance to a TV or a smartphone is an example of connected embedding.
Because the customer journey enables the consumer to make an easy and wise choice connected to their actual need—the TV or the smartphone-linked embedding speeds up the decision-making process.
The customer receives additional value from the customer journey since it includes elements other than the product itself. Or to put it another way, the buyer is taken on a voyage that resembles flying on a magic carpet.
The customer receives added value from the customer journey because it encompasses more than just the goods. Or, to put it another way, the customer is taken on a voyage that makes them feel as though they are flying a magic carpet.
A user can purchase bundled integrated insurance together with other services with only one click. Therefore, it is crucial that your insurance be pertinent and regarded as being inextricably linked to the good or service from the perspective of the customer. You will be successful if you can persuade the buyer that purchasing the good or service without insurance would be as dumb as consuming Coco Pops without milk. And if there is one thing, we would go to any lengths to avoid, it is seeming foolish (or, for some, to eat a bad breakfast).
In the automobile sector, where auto insurance, service, and financing are combined into one all-inclusive offer, packaged embedding is common.
What Are the Advantages of Embedded Insurance?
Personalizing insurance is the focus of the embedded insurance model. For many years, insurance firms have offered universal plans to everyone. The drawback of such plans is that they have flaws, do not satisfy the needs of all customers, and make buyers suspicious because they are also pricey. Embedded insurance gives the client exactly what they require. Because the insurance policy is customized for the customers, they receive the greatest benefit at the lowest cost.
Customers frequently avoid purchasing insurance because it involves too much paperwork. The insurers would hold off until the clients purchased the coverage. Customers avoid the time-consuming procedure of purchasing a separate policy by receiving incorporated insurance when they purchase a good or service. With embedded insurance, insurers may quickly acquire new clients, and consumers can quickly obtain the coverage they need without wasting time filling out paperwork.
With embedded insurance, which is not achievable with conventional insurance methods. Based on consumer profiles and customer needs, businesses can develop tailored rules.
How Embedded Insurances Work to Bridge the Gap in Protection
In India, the protection gap—the difference between the amount of insurance required and the amount purchased—is currently at least 70%. By integrating smaller goods into larger ecosystems, insurance companies are actively finding these protection gaps and striving to take advantage of this market. Thus, the customer, insurance, and point-of-sale channels or retailers all win. As a result, everyone benefits.
Point-of-sale channels, in most circumstances, can seamlessly embed insurance into their customers’ journeys. In addition to increasing their cash stream, it also increases client loyalty. Additionally, due to its convenience, embedded insurance is becoming more popular. In this nation, there are more hands carrying smartphones than ever before. In India, the under-penetration of insurance has thus been significantly reduced because of the simple availability of insurance on digital platforms that can be accessed through phones.
As embedded insurance enables them to easily access a greater number of potential clients, insurers are also in a profitable position. With cutting-edge items that are specially created to meet the needs of their customers, they grow their consumer base. Because the product is used more frequently, embedded insurance products also have much-reduced distribution costs and better underwriting risks.
Customers ultimately stand to gain the most from this because it lowers their financial risk at a young age. Thereby encouraging future financial responsibility and improved savings. A favorable outlook on insurance encourages people to consider alternative insurance products more quickly.
How might embedded insurance help business partners, insurers, and insureds?
According to a recent PYMNTS study, 60% of typical life and health insurance policy purchasers who obtained their coverage through traditional providers would be very interested in congruent bank-embedded offerings. In addition, 49 percent of the consumers polled for the study said they would be more interested in offers from banks because of their convenience and the assurance of reliability they provide.
For this model to be successful, firms will need to find the correct balance between client interest protection, speed, and efficiency of corporate processes, and adherence to regulatory and data protection standards.
Most importantly, embedded insurance is a useful tool for third parties and insurers to increase the penetration of the insurance business in India’s underdeveloped rural and urban markets.