In Summary
This is a continuation of the IXT Innovation Webinar Recap that brought together the experts from OneDegree, IXT, and Deloitte to discuss how insurers can accelerate product and business innovations with InsurTech.
To Adapt or Risk Becoming Obsolete
Today, increasing adoption and enhancement of technology in the insurance industry is a direct by-product of how the market has evolved. Changing customer expectations, growing consumer knowledge and awareness of financial products, and the Covid-19 pandemic have forced the service and distribution models for the industry to adapt or risk becoming obsolete.
Critical Success Factors to Capture the Digital Opportunity
- Acknowledge the need for an omnichannel strategy beyond the conventional bunker and agency channels.
- Have an API-ready platform architecture that allows insurers and partners to integrate with each other’s technology stacks.
- Cultivate patience within the organization with regard to having steep expectations around the ROI of digital initiatives.
- Ensure the right talent mix that advances the digital agenda within an organization.
- Develop a customer-centric mindset that drives the digital business forward.
- Find the right partners, be it ecosystems or technology partners. It will go a long way in helping the business succeed in the longer term.
Within the next ten years, the insurance premiums in emerging markets will more than double to hit US$2.5 trillion. This spike in demand will be fueled by the emerging class of digital natives, who will be considering insurance products for the first time in their lives. And therein lies the hype behind digital distribution and services.
Getting Started with Embedded Insurance
Embedded insurance refers to the seamless integration and bundling of insurance solutions with consumer services in a single purchase flow. Such coverage tends to be made available to consumers when and where they will appreciate them the most.
Key factors when considering the types of embedded insurance include,
- Product relevance to the actual product purchased
- Personalization of coverage
- Affordability
- Ease of enrolling in such insurance programs
Why Embedded Insurance?
For insurers, embedded solutions represent the opportunity to develop, enter, and target new insurance segments via cross-selling and upselling opportunities. These digital users may not have been on insurers’ radar conventionally, but through these digital touchpoints, they are able to surface as a customer. For platforms such as e-commerce, embedded insurance can unlock several new opportunities. By adding financial services offering, they can obtain new behavioral insights about their user base, see strong NPS (Net Promoter Score) uplift, and generate a new revenue stream.
In short, embedded insurance allows various insurance services to be embedded into digital front-end solutions to gain further traction with the end customer. It is a continuous engagement model to enhance product conversion rates and drive consumer awareness about protection solutions.
Benefits of expanding into Embedded Insurance
- You can enhance the underlying product sold. For instance, having an extended warranty on sports bags as insurance increased its uptake and sales rate.
- Platforms get a commission for the embedded insurance offered and gain positive momentum on the underlying product sold.
- Insurance companies get access to more customers, and with partner support, they can facilitate a seamless customer experience.
- Embedded insurance is easy to buy and understand, so insurers can sell more policies and get their hands on more customer information.
- You can keep the customer on your platform with more offerings and services. Particularly when your digital channel has products that are not embedded insurance, you can balance the two different types of products.
The Claims Journey
In insurance, claims are the most critical touchpoint where customers realize the value of the product. A smooth claims process can drive further discovery of future solutions and engagements. But who owns the claims journey depends on the readiness of insurance companies to work with new digital platforms. Because sometimes, digital platforms want to take ownership of the end-to-end customer experience. So, when it comes to claims, there are straightforward programs where you can do automatic triggers of payouts, such as flight delays. There are also complex programs where the traditional First Notice of Loss (FNOL) and manual processing are required.
However, most embedded insurances are bite-sized and on-demand. The claims journey is, therefore, as important as the sales journey. Customers expect the claims journey to be offered by the app or platform where they purchased the insurance product. Hence, the app or platform should consider how they could enable customer self-service and claims submission to meet the customer expectation.
Embedded Insurance: Things to consider for insurers
- You cannot fit a square peg in a round hole. For example, you can’t embed motor insurance into a travel platform unless you are creative, have a great user experience, and can explain why.
- Identify the right product-market fit and build embedded insurance around it with the right use cases because customer needs are the utmost priority.
- Make sure the consumer can relate the insurance product to your brand. Although embedded insurance is purchased through other platforms, your brand should be visible to nurture the customer relationships post-sale.
Sizing the Opportunity
If you’re looking to engage apps or platforms for embedded insurance partnership, you can stack rank the opportunities based on the active user base, average premium, and estimated insurance policy conversion rate on the platform. For example, if a platform has 10 million users with an active user base of 20%, multiplying that with the number of activities that these monthly active users engage with will give you the number of digital touchpoints that can be made available on the sales platform. An example calculation is provided for sizing the opportunity in Exhibit 1.
Exhibit 1
On such platforms, insurers can consider many types of insurance plan offerings, but the insurance must be specific and relevant to the customers and products on the platform.
Launching Embedded Insurance
There are often three main parties involved in launching embedded solutions:
- The app or platform partner is the digital front-end that engages with the customer base.
- The tech partner that enables the launch and administration of such solutions.
- The insurance partner that is the underwriter of the insurance product and policy.
Insurers must learn how to collaborate with its app or platform partner to launch embedded insurance. The present reality remains that embedded insurance is often a platform-led agenda as they have a better grasp of what their customers really want. Therefore, even though insurers are excited about the opportunities, they need to learn how the app or platform partner works and prioritize their product roadmap accordingly.
Digital Insurance Value Proposition
- Inclusion – Enhancing the financial resilience of the underserved and under-penetrated in emerging markets.
- Innovation – Pushing the insurance organizations forward in terms of their mindset while also ensuring that revenue and profitability KPIs are not ignored.
- Efficiency – Delivering real-time customer-first experiences at scale with new technologies and cost-effectiveness.
Must-haves for the Modern Core Architecture to Succeed
- Move fast. The targets and speed at which the app or platform partners operate will require your organization to be able to launch and iterate products quickly.
- Be able to integrate with new partners and their technology stack and speak the tech language they speak.
- Maintain continuous engagement to drive interest and financial feasibility for the entire rollout.
- Have the right technology stack or even a DIY self-managed solution will go a long way in enabling your organization’s digital business success.