Nobody wants to buy insurance. It is hard to understand, related to a future risk that is hard to imagine, and relative to that risk seems arbitrarily expensive. Topping that off is an often frustrating, burdensome, heavily paper and people-intensive process. Overcoming that would be game-changing. Meet the Embedded Insurance Innovators.
Insurance Inside – Insurance at the Point of Need
Embedded insurance bundles coverage within a product, service, or platform. That means the insurance product is not a stand-alone sale but is instead provided as an integrated component.
The beauty of this is that it is present at the time of need. The value and potential risk are instantly clear, and because of the nature of the distribution point, the products are simple and straightforward to understand. Because it is part of a larger solution and risk pool, some of the costs of insuring the risk can be absorbed by the solution provider, therefore, reducing the price to the insured.
Digital Acceleration
Our world and our economy have been becoming more digital ever and ever faster. That makes it easier to gather information, comparison shop, and transact purchases.
Interoperability between the services and platforms in the digital ecosystems surrounding and supporting our lifestyles and business have made it easier and easier for companies to transition from product to services and subscription-based offerings. Offerings that provide end customers with more holistic and integrated ways to achieve the life and business outcomes of greatest value to them.
Then along came COVID. According to some researchers, COVID has been like putting afterburners on the world’s digital transformation. It has moved remote working, online shopping, bundled services, and in-home delivery services forward by at least 5 years.
Defining the Insurers Digital Survival Kit
This quote from former Managing Director of McKinsey and Company, Sir Ian Davis, sums up what insurers that expect to thrive in the now superheating digital economy need to do. “For some organizations, near-term survival is the only agenda item. Others are peering through the fog of uncertainty, thinking about how to position themselves once the crisis has passed.”
Yes, insurers need to clean up their basic digital act. Digital Customer Engagement, Underwriting, Claims, Remote operations, and more. That is near term survival defined. However, if they expect to survive in the mid to long term they will need more than that.
They will need to provision their survival kit with a vision for the future and a portfolio of digitally born customer-centric offerings that provide relevance, value, profit, and growth in the digital future hurtling toward them on COVID fueled afterburners.
Further, they will need to become an integrated part of the digital ecosystems surrounding insureds so that they can engage and support customers at the point of need. That means new business models that broaden and deepen the value proposition, more personalization, integrated ancillary services, connecting to IoT and wearable devices, and oh yes, Embedded Insurance Offerings.
The Embedded Landscape
Mobility
Ford, BMW, and Tesla are just some of the auto manufacturers offering insurance to their customers. Though early in its journey, Tesla in conjunction with AXA is offering California customers 20% – 30% savings when compared to other carriers. Ford & Lincoln customers can log into their FordPass or Lincoln Way app and sign up for insurance for their connected vehicle that is underwritten by Nationwide.
BMW has teamed up with Liberty Mutual. Uber has teamed up with carriers, Allstate, Progressive, Liberty Mutual and Farmers to offer drivers rideshare insurance. And just announced, Unagi All Access, an electric scooter as a subscription play provides the subscription with insurance included.
Income Protection
InsurTech Anorak has established a relationship with Albany Park, to offer income protection through Starling Bank in the UK.
Commercial
Hokodo develops insurance and financing solutions for B2B marketplaces, cloud accounting platforms, and invoice financing providers, allowing them to offer protection and financing to their customers as part of their core customer journey.
Enterprise
CXA Group is a white-labeled platform used by banks, insurers, telcos, HR firms, and healthcare companies to provide reach and scale to a wide range of personalized insurance, banking, health, and wellness offerings for their enterprise customers, SMEs and employees of these enterprises.
Identifying the Opportunities in Embedded Insurance
Keep it simple is the watchword here. Here’s a starter set of qualification criteria.
Find opportunities where there is a clear, digitally identifiable point of need. Focus on simple insurance needs and coverage models that don’t need thesis level if, and, or but legalize. Prioritize and qualify partner networks and ecosystems based on the scale they operate at, their brand reputation, and the growth potential they represent. Find underserved – underinsured market spaces.
And the last recommendation, start in areas where there are likely to be little to no regulatory issues.
Development and Deployment Platforms & Partnerships
Don’t try to build these on top of legacy systems. Choose agile platforms that are cloud-native and do the majority of the heavy lifting for you.
Look for platforms that already have reach into the market you are targeting. Platforms that are already building an interoperable partner base and that can get you to the market quickly. There is a race on right now. A race that includes the names listed above to identify and capture relationships within key growth segments and the partners that can most effectively reach them. Being late to the game means you will get the leftovers that the first movers didn’t want.
The Business Case
A new digital normal is being accelerated by COVID and driven by personal and business insurance customers.
The expectations they have for the new digital normal include convenience, simplicity, personalization, and solutions that anticipate their needs and meet them at the point of that need. To stay relevant and grow in the new Digital Normal means providing insurance solutions that address those expectations.
Digital Insurance Leaders are already making their moves to secure partnerships and deliver Embedded solutions through them. The cost and time it takes to deliver solutions with the digitally native platforms are fractional compared to what it takes in a legacy environment. By not moving now, you cede New Normal relevance and growth opportunities to companies that move faster.
Your thoughts are greatly appreciated
Mike Connor
