Embedded insurance has become crucial for insurers as it seamlessly integrates coverage into purchasing, using, and maintaining assets and services. This customer-centric approach, driven by technological advancements and evolving consumer needs, has transformed the insurance landscape. Experts predict that within five years, over 30% of insurance transactions will occur through embedded channels, showcasing the potential of this innovative model. Embedded insurance refers to incorporating insurance products into non-insurance transactions in real time. For instance, consumers can be offered device insurance at checkout when purchasing a new smartphone or instantly add travel insurance while booking a flight. This integration provides immediate risk protection at the point of sale. Although not entirely new, embedded insurance has surged in prominence due to technological advancements and changing consumer expectations. According to McKinsey & Company, the embedded insurance market in Asia is expected to reach $270 billion in gross written premiums (GWP) by 2030, underscoring the necessity for insurers to adapt and capitalise on this trend.
The Role of Insurtech in Transforming the Embedded Insurance
The role of Insurtech in transforming embedded insurance is pivotal, as it leverages cutting-edge technology to enhance insurance integration into everyday transactions. This innovative approach reshapes the insurance landscape, making coverage more accessible and relevant to consumers. For example, as a leading technology firm, Zopper is crucial in insurance distribution by offering low-value coverage and streamlining the claims process. We seamlessly integrate insurance into the core systems of our distribution partners, making it a seamless part of the customer journey. Zopper has made significant strides in various insurance distribution formats, including Phygital, Bancassurance, and Retail.
Here's how Insurtech companies are transforming embedded insurance:
Enhancing Customer Experience
Insurtech companies utilise APIs and advanced software solutions to embed insurance products directly into the customer journey. For instance, when purchasing a smartphone, customers can simultaneously opt for device insurance without leaving the retailer's platform. This integration reduces friction and simplifies insurance acquisition, leading to higher adoption rates. Data analytics and AI enable Insurtech companies to tailor insurance products to individual customer needs. By analysing customer behaviour, purchase history, and other relevant data, insurers can offer personalised coverage options that are more relevant and appealing to consumers. This personalisation enhances customer satisfaction and loyalty.
Increasing Accessibility and Reach
Insurtech facilitates the development and distribution of microinsurance products, which provide coverage for specific, short-term needs at affordable prices. Embedded microinsurance can be seamlessly integrated into various transactions, such as ride-sharing services offering accident coverage for each trip. This makes insurance accessible to underserved populations who may not have access to traditional insurance products.
Driving Innovation in Product Development
Insurtech enables the creation of on-demand insurance products that can be activated and deactivated as needed. For instance, a customer renting a car for a weekend trip can purchase short-term auto insurance through the rental platform. This flexibility meets the evolving needs of modern consumers who seek convenient and cost-effective insurance solutions. Telematics and IoT devices allow Insurtech companies to develop usage-based insurance models, where premiums are calculated based on usage and behaviour. Embedded insurance for connected devices, such as smart home systems, can provide coverage based on real-time data, offering customers more accurate and fair pricing.
Improving Operational Efficiency
Insurtech leverages automation to streamline underwriting, claims processing, and policy administration. Automated systems reduce the time and cost associated with manual tasks, allowing insurers to offer faster and more efficient services. For embedded insurance, this means quicker policy issuance and claims settlement, enhancing customer experience. Advanced analytics and AI-powered algorithms help InsurTech companies detect and prevent fraudulent activities. Embedded insurance products can benefit from real-time monitoring and verification processes, reducing the risk of fraud and ensuring the integrity of the insurance ecosystem.
The Path to ‘Insurance for All’ by 2047
IRDAI's vision for insurance is loud and out in front of us. Given India's vast audience base and rapidly expanding digital footprint, our chairman highlighted the emerging need for leveraging data to provide personalised experiences, underlining the shift away from traditional ‘one-size-fits-all’ policies. In line with this thought, tailor-made solutions towards individuals are only here to stay as we advance. This new era demands that insurance players anticipate change and become architects, ensuring that the journey towards ‘insurance for all’ is not just aspirational but achievable. By leveraging partnerships, enhancing customer experiences, and addressing potential challenges, the insurance industry can harness the full potential of embedded insurance, ultimately leading to a more insured and resilient global community. The future of insurance is not just about protection; it's about integration and convenience, making embedded insurance a crucial component of the industry's evolution.
Author: Mayank Gupta, Co-Founder and COO, Zopper
Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of IIA and IIA does not assume any responsibility or liability for the same.