Everyone now seems to be talking about launching embedded insurance propositions are there are already several players focusing on the obvious plays of flight delay cover, unpaid invoice cover and even loss of income bundled with the sale of bikes for delivery riders. So you want to get on the embedded insurance bandwagon, it’s estimated to be a $700 Bn market over the next few years so we’re guessing you would! Well, what’s stopping you?

A recent psKINETIC poll still cited legacy systems, an inability to digest new data and proposition design as the three key barriers to creating and launching new embedded insurance propositions.

Our blog ‘Is Embedded Insurance Too Difficult A Problem To Solve For Traditional Insurers?’ touched on what embedded insurance is and how insurers can prepare for the opportunity. 

This is undeniably a massive opportunity for insurers, offering relevant products via modern, applicable channels. The model, however, is not the traditional one insurers are comfortable with because it means building the propositions from the outside in as well as a real focus on automatically ingesting data rather than having a dialogue with the customer.

Turning the traditional model on its head.

Customers today are accustomed to expecting personalised, real-time experiences that are based on their need at a specific time. The problem for insurers, centers around how to offer a customer-centric, seamless buying experience, designed to meet a specific risk at the exact moment it’s required, say when hiring an e-scooter or booking a flight, this experience won’t work if the customer is expected to go through a separate process in order to purchase cover. These low-value, embedded insurance products need to be underwritten based on data that can be readily obtained through real-time, 3^rd party online data sources coupled with the data that is collectible from the core transaction for purchasing the product or service.

With embedded insurance, data is key, especially as it is likely to be coming from a multitude of sources. Insurers need to be able to harness this data in order to be able to underwrite the insurance policy by better understanding need and behaviours. Emerging ecosystems are opening up new opportunities through their distribution channels and can offer insurers insights into customer demand, activities and even interests. They understand these huge datasets and help to create the ideal channels for embedded insurance.

Are open API’s the solution?

In order to remain competitive, insurers must deliver better customer experiences through relevant products, so integrating new technologies to leverage data sets is imperative. For an industry with a legacy infrastructure unable to embrace the modern digital world, coupled with complex and shifting regulations to meet, the speed of change is slow particularly as new MGA-based InsurTechs are introducing propositions and capturing market share.

Let us not forget the claims process here, which is an equally important component of the embedded proposition. If you are unable to fulfil the claim in real-time, without any human interaction there is no advantage to the customer using your service, after all this is about convenience. Legacy systems just arent equipped to deal with these high volume, low value, real-time claims. Even insurers that have spent tens of millions on implementing new core policy and claims admin systems are citing legacy systems as a core barrier.

Technology is definitely the enabler. The industry is becoming inundated with InsurTechs with business models leveraging innovative technology. The advantage; they can offer embedded insurance without the constraints of legacy.

How? Many are utilising open APIs and the advantages these bring, to ingest data but the use of these, for some insurers at least, constitutes. There are a number of services such as psKINETICS “Intelligent Glue” springing up that assist insurers to close this capability gap.

Open banking can play a key role for embedded insurance propositions whether it’s for validating when a purchase had been made, for verifying spending patterns or for checking whether an invoice payment has been received (for invoice insurance).

Taking advantage of the opportunity

Embedded insurance not only brings advantage to the customer, insurers also benefit from the lower cost of operation and embedded propositions also eliminate customers comparison shopping making it highly important to capture distribution channels. The ability for insurers to enable product and service providers to embed insurance into their propositions quickly and easily will become a key competitive advantage.

In conclusion, the real winners in the embedded insurance space will be the organisations that have digital at core operations with the capability to easily ingest dynamically generated 3^rd party data from a range of sources in a variety of different data formats. The insurers’ brand will become less important and their ability to tweak product features, pricing and claims fulfilment options real time through dashboards and control centres will increase. Insurers are going to need to develop their own Centres of Excellence around Digital.