With over 140 million online buyers, digital shopping in India is booming (Source: Bain & Company). The pandemic lockdowns gave digital shopping a boost by compelling people to stay indoors and order essentials online. Increasing smartphone use and digital payment interfaces are also driving e-retail.
Interestingly, the growth of online retail is fuelling the rise of embedded insurance. Digital shoppers today can pay premiums without opening an insurer’s website. Embedded plans enable users to enhance their insurance coverage while shopping on trusted retail platforms.
Where coverage stands in India
The insurance sector in India may be growing, but it lags on key metrics:
Insurance penetration is the percentage of insurance premiums to the country’s gross domestic product (GDP). The figure stood at 4.2% in 2020-21, which is on the lower side.
Insurance density is the ratio of premiums collected to the total population. In 2020-21, India’s insurance density was just USD 78.
In comparison, global insurance penetration and insurance density were 7.4% and USD 809, respectively (Source: IRDAI).
Furthermore, the risk protection gap in India is currently between 83% and 92% (Source: Economic Times, SBI). Let’s unpack what this means. If the protection gap is 92%, the average Indian has insurance for only 8% of the losses they might face in an emergency. In rupee terms, the individual has savings and insurance worth only Rs 8 of the total Rs 100 needed.
What’s holding back these metrics? First up is the lack of awareness about insurance. Many Indians underestimate the financial risks of being uninsured. Besides, making sense of multiple insurance products can be a struggle. And securing coverage becomes even more challenging for individuals in the hinterland, where traditional insurance companies often do not have branches.
Can embedded insurance help?
Embedded insurance is the seamless bundling of risk protection products (such as life or health insurance) with some other product or service. Insurance is introduced as a value-added service into the digital sales channel for a non-insurance item.
Many e-commerce sites nowadays embed insurance into the purchase flow of different products. A user who is shopping for a pair of headphones could secure damage insurance for those headphones from within the same transaction window. Alternatively, somebody may be booking a home cleaning appointment through an app. During checkout, he might accept an offer for asset insurance, and then pay the premium and book the service in one smooth transaction.
Both the damage protection for the headphones and the asset insurance plan are examples of embedded insurance. The policy shows up at the point of sale in a way that feels organic and seamless.
Big data helps make the coverage offers even more relevant to the user. Embedded insurance technology runs on application programming interfaces (APIs) that are plugged into the backend of a brand’s digital platform. As this APIs access the available user information, artificial intelligence (AI) is deployed to underwrite the policy. This results in insurance offerings that are tailored to the needs of each shopper.
Embedded insurance at work: An example
Smartphone insurance is poised to become a thriving sector in the near future. India’s device insurance market could be worth USD 500 million by 2025 according to one estimate (Source: RedSeer).
This makes sense because smartphones are expensive and fragile. When a smartphone gets damaged, the repair bill can be high and the device warranty might not cover the costs. A warranty applies to manufacturing defects and software issues but not screen damage, liquid damage, theft, or unintentional damage or loss. Thankfully, device insurance covers all these risk scenarios. And embedded device insurance makes coverage more accessible.
Say, a user is shopping for a new smartphone on an e-commerce portal. After browsing through the various options, she finally settles on a higher-end model priced at Rs 70,000. As she clicks through to the ‘Checkout’ button, the retailer displays an offer: ‘Total Damage Protection for your new smartphone at just Rs 1,999’. Note how the suggestion is directly related to her smartphone purchase.
Our shopper is already spending Rs 70,000 on a phone. Therefore, she may be open to spending a little more on-device protection for the new smartphone. She accepts the offer and the policy premium of Rs 1,999 gets added to her cart. The user can now complete the transaction by paying for the smartphone and the policy through that same interface.
By the end of this exercise, the user has checked out multiple brands and offers opted for free home delivery, and purchased a new smartphone along with damage insurance. And she has managed it all on a single digital platform.
Embedded plans bring big benefits
Digital customers are the big gainers here, but they are not the only ones. Non-insurance businesses that embed insurance into their sales channels also secure some advantages. Let’s examine these benefits more closely:
Benefits for digital customers
Convenience: By making insurance available on everyday retail platforms, embedded insurance technology takes the hassle out of policy shopping. When users shop from trusted online brands, they may even have their debit or credit card details saved. So, buying a policy feels much more seamless.
Accessibility: Thanks to embedded insurance, users can buy coverage even if the insurer has no branch office nearby. Users can potentially access policies whenever they shop online. And they don’t even have to open the insurer’s website on a new browser window.
Personalization: Traditional insurance plans leave no room for flexibility. But embedded plans can be adjusted based on what a user needs and can afford. Insurance APIs use the available customer data to prepare policy quotes that are tailored to customer requirements.
Benefits for non-insurance businesses
Revenue stream: Adding embedded insurance into the point of sale could help companies to boost revenues without much investment. Digital sales channels would provide not only core offerings but also add-on insurance plans, with each policy sold bringing commission earnings.
Satisfied customers: The backend technology uses the available customer information to push out hyper-personalized premium quotes. A shopper can add the policy and pay for it without looking away from their device. This makes for a more enriching customer journey.
Competitive edge: Embedded insurance is still in the early stages. So, non-insurance businesses have a lucrative opportunity to join the insurance landscape. Embedded plans could act as a valuable differentiator, supporting these businesses to stand apart from the competition.
Embedded insurance on the growth path
The digital retail market in India could be worth anywhere from USD 120 million to USD 140 million by the financial year 2026. Smaller towns could be leading the charge here. Estimates suggest that four out of every five new digital shoppers hail from the smaller towns of India (Source: Bain & Company). Not just that, the number of smartphone users in India is expected to swell to one billion by 2026 (Source: Deloitte).
Adding heft to these numbers is the growing investments in digital shopping. In 2021 alone, digital shopping companies in India attracted massive investments of USD 22 million. Globally, this places India second only to the United States (Source: Economic Times).
If digital shopping in India is on the upswing, that’s good news for embedded insurance. Since policy bundling is so closely tied to online shopping, digital retail growth could boost the embedded business as well.
Launch your insurance vertical with Turtlefin
Consumers today want insurance products that are easy to understand and easy to buy. Your business could cater to this need for simplicity by integrating embedded insurance into your digital sales channels.
Turtlefin can help you get started. As a fintech company, we are uniquely positioned to connect insurers with non-insurance businesses like yours. We have the expertise to help you navigate the insurance sector as well as the technology to introduce embedded products at your point of sale.
How do we go about it? It all starts with Turtlefin OneAPI. Our plug-and-play insurance API is easily adapted to different sales channels. Not that you need to worry about the adaptation process. Experts from Turtlefin oversee the entire integration phase. When the API setup is complete, we help you test the platforms and go live.
Your customers gain instant access to products from more than 30 insurance companies. They can view premium quotes and buy coverage from your website or app. Each time they buy a policy, you earn a commission. And those sales figures add up!
To learn more about Turtlefin:
Bottom-line
Embedded insurance feeds into the shopping habits of digital consumers. Bundled plans are simple, flexible, and personalized—all of which drive consumer satisfaction and brand loyalty. Bright days are ahead for the embedded insurance sector, and both consumers and business partners are likely to gain.