Global insurance premiums are on track to cross USD 7 trillion by the end of 2022 (Source: Swiss Re). But underinsurance continues to be a serious challenge. India, for example, has a substantial protection gap of 70–80% for life and non-life insurance combined (Source: SBI). This means only 20–30% of the country’s insurance needs are being met, and a large section of the Indian population remains vulnerable to the financial impacts of death, illness, and other contingencies.
How can insurers close this protection gap? By opening the door to more people. For this to happen, insurance has to move away from traditional distribution mechanisms. Policies need to become targeted, affordable, and easy to buy. Fintech alternatives like embedded insurance could point the way forward.
What’s so hard about insurance purchases?
Insurance is necessary for maintaining the financial health of individuals and their families. No questions there.
Life insurance pay-outs safeguard loved ones when an earning member of a family passes away.
Health insurance provides timely payments to cover hospitalization and surgery costs during a medical emergency.
Auto insurance acts as a financial cushion when paying for car repairs after a collision.
The trouble is that insurance is not something one can shop for on a whim. When you set out to buy a policy, you have to begin with a plan. The purchase process calls for intent and due diligence—even when shopping online. You have to browse through multiple policy brochures, read the fine print, and shortlist the best products.
By the time you finally choose a policy, you have already jumped through hoops and fielded calls from eager insurance salespersons. And you are not done yet. There are forms to be filled out, documents to be submitted, and the premium payment to be made…
This is the problem with shopping for insurance in the traditional way. It is time-consuming, confusing, and far from intuitive. The experience is hard enough that potential buyers tend to delay their policy purchases and thus remain outside the insurance umbrella.
Embedded Insurance: Policy purchase made easy
The mode of distribution for insurance products has been unchanged for a long time. But embedded insurance technology is here now, and it is disrupting how policies are bought and sold.
With embedded insurance, a policy gets inserted within the transaction flow for some other product or service. This is akin to picking up an extended service warranty while buying a microwave oven at your local electronics dealer. Better still, embedded insurance is offered through digital platforms like websites and mobile apps. So, you can shop for items on your list and purchase a policy from any internet-connected digital device.
For example, a customer shopping for a smartphone online can add a damage protection cover right before checkout. Online retailers often tack on these bite-sized policies into their online purchase flow. Another common example is the add-on insurance offered by travel eCommerce sites. You head over to book flight tickets or hotel accommodation and come away with travel cover as well.
Because embedded insurance uses data science and artificial intelligence (AI), the policy offers are generally tailored to the needs of the digital user. Not just that. Since the backend technology has access to the customer’s data, insurance forms come partially or fully pre-filled. Less paperwork is always welcome!
Traditional insurance vs embedded insurance
Let’s consider a simple scenario:
A customer visits the nearest two-wheeler showroom to buy a motorcycle. He looks at the different options and then buys the bike model that he likes best. But there is one more step here: to take the bike on the road, the buyer needs to get bike insurance.
Some dealers may offer a policy at the time of purchase, but many do not. Should the latter be the case, the motorcycle owner has to embark on buying the necessary insurance. That means going through numerous brochures from insurance companies, weighing the coverage offered, zeroing in on the best plan, and then complete the paperwork and the premium payment.
Not only does this take time but also it is far less fun than buying a motorcycle. Buying insurance in the traditional way is nearly always a strain.
Thankfully, embedded insurance takes some of the hassles out of policy purchase. Suppose the customer is shopping for a motorcycle online. Just as he is ready to finalize the purchase, a notification pops up: ‘Ready to add bike insurance to your purchase?’ The premium quoted looks rather affordable.
To add the policy to his purchase, the buyer simply has to tap the ‘Accept’ button. The premium gets added to his total bill. He can then pay for the bike and the policy in a single, seamless transaction. No additional effort is required.
Embedded insurance purchase is seamless
For starters, the customer no longer has to go looking for insurance. Embedded insurance takes insurance to where the customer is. Here is a closer look at the different elements that make embedded purchases feel smoother and more hassle-free:
Convenience: It is far more convenient for the user to accept an add-on policy when they are already buying a bike or booking house-cleaning services. Digital shoppers can pay for coverage without giving the matter any extra thought. Automation makes things easier still, as documentation requirements are minimized and forms are auto-filled.
Trust: Many people stay away from insurance policies because they don’t trust insurers. But embedded insurance cuts through this problem. It does so by offering insurance policies on the digital sales channels of product and service brands that the customer already trusts.
Relevance: AI and data analytics are deployed to provide quotes for coverage that the customer actually needs. For example, you might receive a health insurance offer while making health-related transactions such as buying a fitness tracker or renewing your gym membership.
Affordability: Embedded insurance often takes the form of small-ticket plans. For example, farmers who buy seeds could be offered crop insurance. Here, the premium quote would depend on how many bags of seeds he purchases. The piecemeal coverage contributes to keeping the offers more affordable.
APIs ensure seamless policy purchase
Making embedded insurance possible is application programming interfaces (APIs). APIs work behind the scenes to ensure users have a smooth digital experience.
Well-designed APIs come with comprehensive documentation. The documentation supports developers to reuse the API on the distribution channels of partner companies. These distribution channels could include computers, smartphones, wearables, web apps, and Internet of Things (IoT) devices.
An API gateway sits between the front-end device and the back-end APIs and microservices. Here, a microservice is the simplest core element that can break down business functions. For example, in embedded insurance, one microservice might calculate the premium, another may be involved in the transaction, and a third may be involved in policy issuance.
When a request or call comes in, the API gateway passes the information to the corresponding API or microservice. This information is then either processed in the back-end or passed on to the user at the front end. All this background activity results in an orderly and hiccup-free experience for the end-user.
Supercharge your margins with Turtlefin OneAPI
Traditional modes of insurance distribution are passé. Bundled policies are where it’s at. People are increasingly shopping digitally, and embedded insurance is tied to these new consumer behaviours. That means third-party businesses can step up their game by entering the digital insurance space.
By partnering with Turtlefin, you can include insurance within your purchase flow and thus help users get coverage in a hassle-free way. Turtlefin OneAPI gives your customers instant access to personalized policies from more than 30 leading insurers. These add-on offers to enrich the user experience, increase customer loyalty to your brand, and create a valuable differentiator for your business.
Turtlefin has the tools and resources to set you up with a brand-new insurance vertical, one that brings you a steady stream of revenue without any hassle! While you focus on your core business, our experts take charge of the API integration. Right from the initial set-up phase to the final live testing, we handhold you through it all. Plus, our support team is always ready to help with any troubleshooting.
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Traditional insurance channels are losing ground because they do not reflect the new modes of consumption. Fortunately for consumers, embedded insurance is creating new ways to distribute insurance on digital platforms. Technology is leading the charge here, with automation and AI helping create policy offers relevant to customers and affordable. Best of all, the purchase process is seamless and hassle-free.