Whether it’s comprehensive insurance for a rental car, pet health insurance for a dog food purchase or a travel cancellation policy for a vacation in Greece: embedded insurance not only allows digitally savvy target groups to make suitable composite purchases depending on the situation – quickly, automatically and integrated end-to-end. Conversely, insurance companies and brokers can tap into coveted target groups and open up promising sources of revenue via car rental platforms, zoo commerce providers or online tour operators as partner networks. And: smart “embedded” contract structures shorten the time to market. The associated solutions are flexible, although they have to meet numerous regulatory requirements.
Compensate for declining sales staff numbers
The embedded insurance partner concept is mutating into a “seamless” enabler for personal insurance sales. This has shrunk by more than 20 percent in Germany over the past ten years; there is a shortage of new talent among brokers and in exclusive sales. New direct channels such as the target group-specific, personalized concept of Embedded Insurance support direct sales, which are often very lean.
There is also the time advantage of the concept: insurers who get “ahead of the process” and have already set up their embedded insurance infrastructure before or during product development for the partner sales concept accelerate their time to market. The focus here is on nothing less than directly insurable contract constructions with corresponding coverage.
A flexible embedded insurance platform provides the sales force with cover notes in a manageable number of product variants, including via intermediaries and online marketplaces in the partner network – in T-shirt sizes S, M and L, so to speak. If these represent a genuine subset of the overall or core system product, direct contracts are successfully validated against the overall product model: It remains computable, violations of product definitions and necessary underwriting are omitted. This means that cleanly designed products are compliant and can be fully automated in the closing process.
Growing market potential for embedded insurance
Agile insurtech companies are already supporting the dynamic embedded business segment as direct insurance companies with their system-infrastructural greenfield advantage. The US company Cover Genius (“End to End Insurance”), for example, has long been working with distribution champions such as Booking Holdings, Amazon and eBay. Meanwhile, the Belgians from Qover are cooperating with e-car manufacturer Tesla and have long since presented smart business cases in the insurance community. Always under the motto: if you don’t play along at the customer interface, you will soon be outclassed by digitally “ticking”, revenue-relevant target groups.
The market in which these target groups operate is currently gaining momentum. In Europe, the USA and Asia, embedded insurance has long been considered a successful discipline and is likely to become a trend as a form of affiliate marketing (if not a business model): according to a forecast by Instech London, global turnover from embedded insurance will climb to USD 722 billion by 2030. This roughly corresponds to the level of the US military budget in 2022.
In order to tap into this potential, insurers need start-up-like agility and highly creative concepts: Flexible on-demand business (reacting when the customer is interested in “X plus insurance”, in composite purchases, outside the proprietary IT ecosystem) has hardly been attractive for insurers to date due to the volume distributed across the web. Strategically, however, it will become increasingly important. In terms of perspective and situation, more complex B2B2C insurance products with higher margins will also develop on the embedded playing field.
Success is "multi": insurers become "first choice" for international sales platforms
To improve customer experience and risk management across industries, Embedded Insurance meets the needs of a global customer base. The solutions address the fact that insurance companies operate head offices and national subsidiaries. And that products need to be created accordingly. It takes into account that markets are regulated differently and that there are different core system providers with different market specifics. In technological terms, a “glocal” embedded insurance platform therefore requires corresponding country or region layers that take account of local regulations and insurance behavior – five factors:
- Multilanguage:As embedded insurance can be used in different countries and regions, the solutions must be available in multiple languages. Customers should be able to read their policies in their native language and communicate with customer service in a way that is convenient for them. Corresponding layers therefore realize the customer interface “multilanguage”. An example: A policy for a flight from A to B is identical in every country; the corresponding embedded product must be structured in the same way. The marketplace partner, in this case the airline, specifies the premises according to its platform and must set up the corresponding insurance products offered accordingly.
- Multicurrency:Embedded insurance solutions need to handle multiple currencies for the sake of global customers. Seamless integration of different currencies into insurance policies and billing processes creates a seamless customer experience.
- Multilegal:Different laws and regulations characterize insurance in national markets. Solutions must therefore take national and regional differences into account and align offers with the respective regulations. The process and IT architecture adapts to the different legal systems, takes specific requirements into account and is subject to the sovereignty of the respective regulatory authorities.
- Multitax for Insurance: Embedded insurance solutions must reflect a wide variety of tax regulations in order to correctly account for taxes for different insurance lines and for customers in different sales markets.
- Multirisk Carrier Solution:Successful embedded insurance solutions cover a wide range of risks for comprehensive insurance protection. In order to offer a flexible selection of insurance policies including variants, the solutions must integrate several insurance providers.
Conclusion: Plug and play for insurers, retailers and travel platforms
Because product development in the conventional insurance business takes around 12 to 18 months, but embedded insurance needs to be faster from the partner’s point of view, embedded insurance solutions provide the necessary flexibility under all these premises – for greater speed in implementation.
This is despite the fact that major international insurers with their evolved IT landscapes generally operate several core systems, among other things, because: Colleagues in neighboring countries rarely work in the same systems.
Despite these requirements, end customers worldwide want to have a seamless and enjoyable experience – in their own language, currency or geographical location. Insurance companies seeking to enter the international market therefore have to cover many areas of demand: Insurance companies manage the interests of their local end customers on a country-specific basis via the risk carrier, for example. The core systems need to integrate the associated links, data flows and processes so that embedded insurance platforms and the “plug and play” for insurers, dealers, car manufacturers and travel platforms will actually be successful.
