Embedded Insurance: The Future of the Indian Insurance Industry?
Updated: Oct 21, 2021
The advent of technology in our day-to-day lives has completely disrupted and changed the overall digital landscape of the entire ecosystem. Gone are the days, when people would download movies and songs or buy CDs and cassettes. Streaming on the go has become a part of our existence and this is where seamless integration has a significant role to play. With smartphones and mobile applications, the user experience is also high. Every industry is inching towards complete digitalization, including the financial domain. Since all transactions can seamlessly happen online, the efficiency of the entire system has improved. Machine learning and artificial intelligence have intruded on our lives way more than any of us would even realize. Even in the insurance industry, machine learning and AI have added value to the entire ecosystem. From the way we shop, to our favourite coffee shops, from our regular workout time to office destination, route, and traffic, every aspect of our lives is mostly controlled by AI. If you search for a hotel in a travel portal, you would immediately start receiving emails and see advertisements regarding the same. Similarly, when you buy flight tickets, have you ever noticed that you can opt for travel insurance at a throw-away price? This is called embedded insurance. Here the insurance plan is actually sold by another company but is clubbed within the application/website for the consumer’s convenience. It also enhances the total offering to the client.
What is Embedded Insurance?
The technical definition of embedded insurance is the process of embedding an agreement for risk management into a contract for some other product or service. The distribution model of Embedded Insurance has been around for a long time. As you purchase products or services, you also get an offer to opt for insurance. Most people are unaware that they've been exposed to this distribution strategy for some years. For example, if you purchase a vehicle from a dealer, the dealership will almost always ask whether you want to get insurance coverage from them. They will lay out all of the benefits of partnering up with an insurance company and offer low-cost rates on their policies. This has been the traditional way of cross-selling insurance; but it had its own problems of slow TAT, lots of paperwork, etc. The entire experience was a lot different from that of a click of a button now.
Insuretechs have been around for a while, trying to amalgamate technology into the insurance space and add value to the ecosystem as a whole and amplify the same via technology.
However, in the post-covid era, the physical and travel constraints lead to adaptation and innovation across the ecosystem. The Insuretechs were digital-ready and hence played a pivotal role which eased the way insurance was sold and bought. Even the adoption of technology by the insurance providers and the consumers was very agile. With covid, consumers have realized the need for risk mitigation tools especially health and life insurance which led to a rise in its demand.
But the bigger challenge still remains of low insurance penetration in India. This is where embedded insurance has a role to play. In order to bridge the gap and provide a complete offering to the consumer, embedded insurance has gained significant importance.
Now, suppose you purchase an expensive phone and have the option to insure the same by paying a small token amount so that any damages are covered even when the phone is out of warranty and you get a free replacement of the same; would that not interest you? However, this insurance existed long ago as well but due to the sheer lack of knowledge, inconvenience, and high effort involved in the transaction and claim, most people did not bother opting for the same. However, if the insurance is offered at the click of a button during the transaction with a promise of an easy claim, why would someone not opt for it? Thus embedded insurance is often referred to as frictionless insurance as well!
Why is embedded insurance a buzzword and getting a lot of attention in the fintech community?
Insurance is surely a complex product. With so many different providers out there, it can be difficult for customers to find the right insurance for their needs. This is where intermediaries have played an important role. Thus, with embedded insurance, people are offered coverage at a convenient point in their user journey which enhances the overall experience and is a win-win for all stakeholders. For example, with the right recommendations at the exact time with customized products based on their needs, consumers can opt for the one which best suits their needs. Travel insurance can be taken while purchasing flight tickets, personal accident insurance at the time of renting a car, insurance bundled with credit card, damage protection plans offered along with smartphones,etc. This would be beneficial for the consumer, the intermediary as well as the insurer, and the entire insurance eco-system as a whole as penetration deepens.
The rapid digitalization of India and the seamless transition of Indian consumers changed the traditional way of selling insurance. Now, customers expect similar personalized experiences across insurance products, pricing claims, and services. These changes are making customers more open to trying new ‘one size fits all’ product constructs and this is why Embedded Insurance is gaining popularity.
Benefits of Embedded Insurance
The future of insurance is changing and embedded insurance is surely a part of the new future. This new trend offers many benefits, including more efficient distribution and lower barriers to entry. It's just one way that technology is transforming this sector - it also has implications for consumers who will benefit from simpler solutions at lower prices when they need them most.
It's a win-win situation for all stakeholders. Insurers can expand their business with new income avenues by enhancing the offering to their customers; for intermediaries also, API integration can draw or retain existing consumers, boost sales or just generate new income sources and for consumers, they get a better offering with seamless customer experience.
Future of Embedded Insurance
The insurance industry is at the cusp of an inflection point and it could be the largest enabler in increasing insurance penetration in the industry. Thus, it is expected that businesses that enable the concept of embedded insurance could become quite valuable and be worth more than 3-5 Trillion USD in the next 10 years’ time. Insurance companies are looking to partner with InsureTech giants to enhance the insurance distribution space and large tech giants would emerge as niche insurance marketplaces to provide the facility of embedded insurance to consumers at the crucial junction of their purchase.
Quick solution: TurtleFin’s One API
TurtleFin has been digital-ready for a long time now; making it the largest insurtech company that pioneered the offline-online model in India. Our API meets the needs of its digital audience and creates a benchmark for optimally leveraging the right digital tools. TurtleFin is leading by adapting to new market trends and helping LFIs adapt seamlessly!
Benefits of One API
There are multiple benefits of using the TurtleFin API as it is a plug-and-play solution with technology and accurate data to help you keep track of your MIS and audit the same as well. With the lesser time required for integration, the overall policy turnaround reduces by almost 2/3rd, and that too with minimal paperwork as it is a completely digital journey.
So, if you also want your business to stay ahead in this fast-paced, ever-changing industry then contact us about our insurance solutions.