The relevance of insurance as a risk mitigation tool is well-known and widely accepted. What insurance does is, it compensates you for the monetary loss that stems from damage to your asset, health or life. By reducing the monetary burden of exigencies, it puts you in a better position to deal with extenuating circumstances and seek the best possible care or solutions. Despite its relevance, insurance penetration in India is still fairly low at approximately 3.7%. While there are several reasons for this under penetration, the primary ones include lack of awareness about the benefits of insurance, inability to make informed decisions, and limited access to the entire range of insurance solutions. In India, insurance is not bought, it is sold. We need to migrate to a position where every individual in the country recognises the need for insurance and actively seeks to purchase it. Inevitably, the various stakeholders in the insurance ecosystem, and especially insurtechs, will play an integral role in improving distribution and access to insurance products by optimally leveraging technology. Another aspect that will go a long way in improving access and making insurance available to the consumer, at a time when it is needed the most, is embedded insurance. This can potentially disrupt not just the insurance sector but also elevate the value proposition for multiple industries. It can make insurance accessible to a wider range of people and especially at a time when they really need it. Before we understand how embedded insurance can add value to multiple ecosystems, let’s first get to the basics of embedded insurance.
How does Embedded Insurance work?
Embedded Insurance involves extracting the insurance functionality and then embedding it into any third-party product or service which can either be offered as an add-on (complementary or at a nominal cost) or as a native component. Inarguably, technology plays a vital part in enabling this and creating an ecosystem that makes insurance more affordable and relevant. It is already well-known that embedded insurance enables insurance companies to collaborate with different platforms to differentiate, scale, and expand their product offerings across existing and new sectors. Further, with the growth of the Insurance-as-a-Service (IaaS) model, an increasing number of non-insurers will also be able to offer direct sales of partner insurance products to their customers.
Embedded Insurance to Grow on the Backs of Insurtechs
This creates a sea of opportunities for tech startups to innovate and create value across industries. While insurtechs are already playing an integral role in the insurance ecosystem by offering enhanced tech-enabled solutions, they can become catalysts for the widespread adoption of embedded insurance.
Seamless integration: Insurtechs are working as enablers to build a stronger and seamless insurance ecosystem for companies, intermediaries, and vendors who wish to offer embedded insurance as an additional value proposition. For example, TurtleFin offers an API based plug-and-play solution that can be easily and efficiently integrated into the client’s ecosystem. Through this solution, clients can seamlessly offer their customers holistic digital journeys that make the entire insurance buying process easier with digital onboarding, minimal paperwork, and a quick turnaround. It optimally leverages technology to provide access to accurate data which can help institutions keep track of their MIS and audit the relevant data. Further, Turtlefin also provides its clients with a reliable and scalable platform that is easy to integrate with their existing systems
Innovative products: Insurtechs can create customised products for the travel industry which is ripe for disruption considering that insurance companies often still offer a limited set of timeworn insurance policies to customers in the sector. Compounding the challenges of the customers is the fact that claims filing is more often than not fairly tedious, requiring detailed paperwork. Insurance companies can leverage technology solutions offered by insurtechs and other tech startups to make their products available through travel portals in a seamless and efficient manner, i.e., embed different types of travel insurance into the customer journey. The best thing is that value creation is not just limited to the travel industry. A payments company can offer embedded insurance for any purchase made above a certain value or a bike rental company can offer embedded insurance at the point of renting.
As is now becoming evident with the wave of embedded insurance, insurance doesn’t need to be the bastion of a select few. Insurance companies can partner with trusted brands and non-insurers to embed insurance in their value proposition by collaborating with the right technology partners. Embedded insurance has the potential to change the fabric of the traditional insurance distribution model and bridge the protection gap in society while offering customers the insurance that they need.