Embedded Insurance 101


What is embedded insurance? 

Embedded insurance isn’t new, but awareness of its potential has grown in recent years. Put simply, embedded insurance is where insurance covers are bundled with existing online purchases. Embedded insurance is all about getting the cover people need at a reasonable price and when they need it most. Using emerging technologies to automate the process, customers get a much more streamlined experience. When embedded is done right, the benefits to companies are high attach rates, increased conversion rates and happier, more loyal customers. 


Why now?

People feel conflicted about insurance – they know it’s required to be able to pay for unexpected costs such as car repairs or a canceled trip. Despite this, it’s often bought as a ‘grudge purchase’ rather than a happy one. However, by using information the consumer has already entered as part of their buying journey and presenting coverage options directly at the point of purchase, embedded insurance is repositioning coverage as an essential accompaniment to purchases. 

Embedded insurance helps tackle three key challenges facing the industry: 

  • One size does not fit all – the events of recent years have led to a whole host of new risks that traditional insurance policies aren’t suitable for. However, flexible and highly adaptable embedded insurance covers are ideally suited to meet these new risks. And there is much more scope to adapt policies to create co-covers that work specifically for your clients. 
  • Great expectations – today’s consumers expect quick, clear and hassle-free digital experiences. Embedded insurance meets this need by using information already entered earlier in the buying journey to provide relevant insurance covers at point of purchase. 
  • Closing the protection gap – The ‘protection gap’ is widening all the time. Research puts this down to global trends in urbanization, digitalization, climate change and a poor understanding of new risks. Embedded insurance helps close this gap, with consumers seeing immediate value added to their purchases. The subsequent increase in cover helps reduce risks for a safer and more widely protected society. 


Which sectors is embedded insurance for? 

Embedded insurance, with its highly flexible, personalized model, suits the travel industry. Even before the pandemic transformed travel protection, multiple risks could affect travel plans, from delayed flights to lost luggage or canceled bookings. Despite this, only 23% of travelers report purchasing travel insurance to protect their plans. Not surprising when you consider that many insurance policies are limited and outdated, not providing adequate cover and requiring customers to file claims via complex manual processes. These go against the digital, streamlined experience that today’s consumers prefer and expect. Since 45% of travelers book their trips through one single website, there is a strong case for embedding insurance into travel bookings. 


What’s next for embedded insurance?

A key area of development in embedded insurance is parametric protection. These are insurance covers which are triggered by an objective event. This factual event is measured by a third-party data source which measures something quantitative, and the insurance is automatically triggered if the quantity crosses a predefined threshold. They are increasingly popular with consumers as the need to file claims is removed as compensation is delivered automatically. Common parametric products include delay insurance or weather guarantee cover. 

The benefits of embedded insurance are undeniable; customers enjoy the convenience of purchasing protection in seconds without needing to reshare their information, while partners can access additional income streams when selling risk protection alongside their product or service. The model is particularly attractive to tech-savvy insurers, as it provides low-cost distribution to unlimited customers at scale and in real-time. The insurance industry has long been ready for disruption, and embedded insurance is here to change the face of protection forever.

The full article is published on Insurance Edge

About the author

Meitav Harpaz is the CEO and co-founder Pattern.

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