Embedded Insurance - The New Term on the Block
We live in an era of end-to-end solutions and gravitate towards facilities that provide us with the ‘one-stop-shop’ experience. That is one of the reasons why
malls have been a raging hit in most countries across the world. What started as just a few stores under one roof now comprises an end-to-end service offering. A place where you can shop for your groceries, avail of entertainment, get your meals, purchase clothes, shoes, and many other items, and even book a car. Today, when you go to a mall, you can even purchase high-value items on credit through low cost or no cost EMIs. This means that you can avail credit without actually going to the bank, applying for a loan, and going through the cumbersome process of filling up forms. More importantly, it is instant.
Now, imagine if you could also buy insurance in such a seamless manner. For example, you go to the mall to purchase the latest mobile phone. Along with the mobile, you are also able to seamlessly purchase a bite-sized insurance policy to protect your phone and maybe the cost of this policy is already embedded in the phone contract. This way, you get your phone and the right policy in one go. No extra effort or research. This is exactly how embedded insurance works and can add value.
What is Embedded Insurance?
Embedded Insurance entails leveraging technology to abstract the insurance functionality and enable any third-party product or service provider or developer in any sector to seamlessly integrate innovative insurance solutions into their offerings either as an add-on (complementary or at a nominal cost) or as a native component. Embedded insurance can add value to all stakeholders in the insurance ecosystem as it enables access to more affordable, relevant, and personalised risk mitigation products.
Value to insurers: It allows insurers to enable wider access to their products through potentially lower-cost distribution. As the number of touchpoints and engagements increases, insurers will also have access to more customer-centric data that will allow them to enhance product innovation, create more personalised offerings, and reduce underwriting risks.
Value to consumers: The ability to seamlessly purchase insurance can be highly valuable to a consumer. In addition to improving access, embedded insurance also precludes the need to go through cumbersome processes just to buy an insurance policy. Moreover, if available at the point of purchase, the policy is most likely going to seamlessly meet your immediate needs.
Value to third-party players: Embedded insurance can help third-party players enhance their value proposition and potentially expand business as well as revenue streams.
Value to insurtechs: Considering that there is a fair bit of technology involved in creating and distributing embedded insurance, its wider adoption will give insurtechs an opportunity to create value accretive products and elevate the ecosystem.
Overall, embedded insurance can help bridge the insurance protection gap in the society by ensuring that all members of the society have easy access to the right set of insurance solutions.
Enabling Embedded Insurance
So, what will it require to accelerate this trend?
For an insurance company, deploying an embedded insurance program will require an API led, flexible microservices architecture or a move towards becoming an open insurer. This means that the insurer needs to decouple the architecture to cater to the needs of each customer at each touchpoint. Through a microservices architecture, the insurance company can build a core modular capability that can seamlessly be integrated with third-party components or services that would all communicate using APIs.
An alternate, and perhaps less intensive approach, would be to deploy embedded insurance as ‘Insurance-as-a-Service’. In this model, the insurer can use transactional APIs or use technologies and solutions offered by insurtechs to plug customisable and real-time digital insurance solutions into the partner ecosystem. For insurance companies to truly leverage this opportunity, they will have to think about the right technology, the right mix of partners, and the relevant insurance products. Inevitably, the partner ecosystem will play a key role in the success of this endeavour. Insurers must seek out insurtech partners that have an in-depth understanding of insurance distribution along with the right cloud-native technologies to ensure a successful embedded insurance strategy.
Technology is orchestrating deep change in the insurance ecosystem and engendering opportunities for immense value creation that can elevate the entire insurance ecosystem. TurtleFin, with its extensive understanding of the insurance ecosystem and continued focus on technology, is well-positioned to offer financial institutions value accretive products in the insurance space. Products offered by the firm help insurance intermediaries digitize insurance sales, onboarding, and servicing to ensure that the end consumer forms a relationship of trust with the intermediaries. It is time that the ecosystem truly harnesses the opportunities presented by technology intervention in the industry.