Customers are increasingly buying services online and the key to embedded insurance is that it combines insurance coverage within the purchase of a third-party product or service in real time.
11 Dec 2023
- How is embedded insurance changing the insurer´s scenario?
- Advanced technologies in the core of Embedded Insurance
Customers are increasingly buying services online and the key to embedded insurance is that it combines insurance coverage within the purchase of a third-party product or service in real time. The customer experience is enhanced by providing insurance coverage just when customers perceive its value most, at the point of sale, when they realise the value of that coverage.
In the banking-insurance world, embedded insurance has been common practice for years, for example, the sale of insurance policies through bank branches.
The interconnection between services and platforms has become essential to provide users with a complete and seamless experience in the digital age. In this context, the concept of embedded insurance stands out even more.
Any transaction in which there is an element of risk can potentially benefit from embedded insurance, with online purchases being especially suitable.
Embedded insurance represents a merger between technology and insurers, offering insurance products directly within other platforms and services. It’s no longer the potential client who seeks insurance, but the insurance that finds them wherever they may need it.
While insurance has always been vital for individuals and companies, the way it’s been marketed hasn’t significantly changed for decades. Even with digitalization, the dynamics of insurance companies merely shifted online.
Today, insurance continues to provide protection and peace of mind amid uncertainty, especially following global events like the Covid-19 pandemic, showing that no matter how well things may be going, there can always be an unexpected turn.
Fortunately, embedded insurance responds to the changing expectations of consumers and the progress of digitalization.
Embedded insurance refers to the integration of insurance products and services on platforms or apps not traditionally associated with insurance. It means embedding insurance offers within other daily services.
Imagine renting a car through an app and, during that same process, receiving an offer to insure the car for the rental period. Or consider purchasing an international flight ticket on an airline’s website or app and being able to acquire travel, repatriation, or health coverage instantly. That’s embedded insurance in action.
The strategy behind embedded insurance is to offer coverage exactly when the client needs it, streamlining the acquisition process without additional steps or visiting other websites or apps. This experience becomes much more seamless and personalized.
Due to this, consumers can find a faster, simpler, and personalized insurance procurement process. We’re not just talking about integrating insurance services on digital platforms, but also about hyper-personalization to meet specific needs at the right time and place.
The potential of embedded insurance lies not just in its immediacy, but in its adaptability. In a world where services are expected to be both timely and tailored, insurance solutions can no longer be one-size-fits-all.
Traditional insurance practices often resulted in customers navigating through lengthy paperwork, generalized policies, and complex terms that didn’t necessarily align with their unique circumstances. Embedded insurance, however, transforms this paradigm.
Clearly, not only the customer benefits, but also the insurance company. New touchpoints with their customers emerge, new data can be collected for personalised pricing, the perception of value for customers is positive, and this is only the beginning to future services.
From a technological point of view, embedded insurance will allow technology and data to be exploited in a sophisticated way to enhance the customer experience, allowing third-party marketers and customers to access a broader set of personalised insurance solutions, improving the impact and effectiveness of marketing, providing better risk identification and selection, etc.
This hyper-personalization is key to embedded insurance, providing clients with fully tailored solutions. The development of APIs (Application Programming Interfaces) has enabled these different systems and platforms to communicate and offer the best option at any given moment.
This isn’t just a reinvention of insurance procurement, but an evolution in the relationship between insurers, digital platforms, and consumers. According to Fintech Weekly, by 2030, $722 billion could shift from traditional insurers to companies that embrace embedded insurance.
Embedded insurance not only represents a new way to present and acquire insurance, but it also incorporates advanced technologies that define its essence and efficiency. We can highlight some trending technologies, among others:
AI plays a fundamental role in the hyper-personalization of offers. By analysing large amounts of data, platforms can identify user patterns and preferences to suggest suitable coverage according to their profile and needs. This improves the accuracy of the recommendations and streamlines the contracting process.
Furthermore, AI-powered systems can continuously adapt and refine their suggestions based on new data and user interactions, ensuring that coverage options remain relevant over time. With AI at the helm, the insurance experience becomes more intuitive, predictive, and user-centric, offering solutions before the consumer even recognizes the need.
Given its digital nature and the constant flow of information, cybersecurity is essential in embedded insurance. Platforms must ensure the protection of users’ personal and financial data, avoiding vulnerabilities that can be exploited by malicious actors.
The robustness of cybersecurity is a fundamental guarantee to maintain user trust in embedded insurance.
This technology ensures transparency and security in transactions. In the realm of embedded insurance, blockchain can be used to validate and record insurance contracts, making the process more transparent and reducing the chances of fraud.
Automated processes eliminate the need for repetitive manual interventions, speeding up the contracting and management of policies. This means that a user can obtain insurance coverage in a matter of minutes, without unnecessary waiting times.
Low-code platforms allow for the rapid development of applications and systems with less need for programming from scratch. In the context of embedded insurance, this facilitates the adaptability and evolution of platforms, enabling them to quickly adapt to the changing needs of the market and consumers.
The ability to locate a user or an object in real-time through geolocation systems is an undeniable advantage in the world of embedded insurance. This feature can be used to offer location-based personalized insurance, such as travel insurance when detecting that a customer has arrived at an airport or vehicle insurance when identifying that a user is at a car dealership. Moreover, in cases of accidents or emergencies, geolocation allows insurers to offer assistance quickly and precisely, knowing exactly where the insured is located.
OCR technology allows converting different types of documents, such as images or PDFs, into editable and searchable data. In the context of embedded insurance, this greatly facilitates the process of gathering and verifying information.
For instance, a user could simply take a photo of their driver’s license or a medical report, and the platform, using OCR, would automatically extract the necessary data to process or quote a policy, eliminating the need for manual entry and reducing errors.
These characteristics highlight the innovative and adaptive nature of embedded insurance, aligning the traditional world of insurers with current technological demands and expectations. New technologies in insurance are key to achieving effective service for clients and platforms.
Embedded insurance is a trend that is part of embedded finance, a booming market that, according to a report by Simon Torrance for Finnavista, will be worth $7 trillion by 2031.