What is embedded insurance, anyway?

May 23, 2023 6:57 AM

Both insurance and technology professionals ostensibly use buzzwords with the goal of simplifying understanding of emerging concepts. But in a rapidly changing business environment, terms can sometimes take on lives of their own. That risks rendering them at best uninformative, and at worst masking the innovations that led to the popularity and proliferation of the underlying concept.

With that in mind, Digital Insurance reached out to several practitioners and asked them to define "embedded insurance." The responses illustrate the strategies and tactics coalescing underneath the umbrella term, and provide an actionable base of knowledge for others around the industry wondering how to take it on.

Wayne Slavin

CEO, Sure Insurance

Taylor Hooper

(via email): Embedded insurance is a hot topic at the moment, and many carriers and insurtechs are getting the definition of embedded wrong. The truth is that embedded insurance has been around for a while – however without the benefit of data and digital technology.

Consider two simple examples of low-premium, embedded-like insurance products that have morphed from analog to digital. The first is rental car coverage offered to customers while checking out at the rental counter. This is now offered in the moment when you rent your car online. The second is an extended warranty that was once offered by employees at companies like Best Buy or Home Depot when a customer paid for a new TV or appliance. In both cases, customers are now offered these protections at the point of sale online. With the analog-to-digital evolution of embedded insurance, the option to purchase insurance is now embedded into an online experience at the moment of need for the customer. That's the true definition of embedded insurance in the digital age – offering insurance at the moment of need.

Robert Schaffer

VP of product solutions for individual life insurance, Prudential Financial

(via email) To me, embedded insurance means customers are able to understand and simply purchase insurance within another product or service experience. For the life insurance industry, when a consumer is purchasing a home with a mortgage, a decreasing term insurance solution could seamlessly be offered within their mortgage application experience...

I see embedded insurance as a way to meet the protection needs of the nearly 106 million Americans, who are under-insured or uninsured, by expanding access through a distribution channel they already interact with and trust. Integrating into legacy systems is difficult. While APIs are an important part of embedded life insurance solutions, the whole purchasing experience must be smartly rethought with the consumer in mind to be successful. Meaning, embedded life insurance needs to ensure the consumer understands the product with simple clear explanations and transparency about the pricing and process to obtain protection right for them.

Darcy Rittinger

COO, Cover Genius

(via email): In an increasingly digital environment, customers don't want to take an inconvenient "second step" to seek out insurance options like getting on the phone with a broker. With embedded insurance, customers receive tailored offers alongside the core product they are purchasing. By leveraging transactional and real-time data, digital companies can offer customers highly relevant, tailored protection while also benefiting from an additional ancillary revenue stream.

John Riggs

SVP, applied technology solutions, Hartford Steam Boiler

(at the InsurtechNY event in March): The first point is you lead with technology. The second is you lead with insurance. When I say lead with tech, I don't mean necessarily IoT tech or sensors, you can include that, but I'm talking about the product itself. The product is a non-insurance offering: it's technology-enabled like pumps, electrical equipment and many different varieties of business-to-business type offerings that you embed insurance within as part of the customer journey, at the point of sale. When you do that, you typically do that from an OEMs perspective, for one reason differentiation, make your product better than the competitors product because you're offering something they're not offering. … Typically they need to be connected, they need to be already sensored up, so to speak, so that we can get data from them.

The other one is within insurance. You look at an insurance business that provides equipment breakdown or some flavor of property coverage, then you embed technology into that, so that it cannot be separated. You require technology for that type of insurance offering because it's helping you to mitigate risks and therefore do more intelligent underwriting and deliver a better insurance product to the clients and to the end customers.

Kiran Boosam

Global Insurance Industry Leader, Capgemini

Forms of embedded insurance have been around for many decades now — it was a part of credit cards, travel insurance, [and] roadside assistance, [for example]. Now, more famous, is the ability to transact in real time. … Where you are able to distribute insurance through ecosystem channels, embedded can happen with insurance as a value-add or embedded can happen [as value added to] insurance. The benefit is that it takes the insurance where it makes the most sense for somebody who is doing some other transaction, their perception of risk is the most optimal at the point of the transaction, so purchasing insurance becomes very intuitive.

Jay Grayson

CEO and co-founder, Surround Insurance

There's two ways that I would look at this. One is sort of the dimensionality of it — commoditized to specialized, and touchless to high-touch. And so you find areas where it's a commoditized product that you can absolutely do truly touchless, and you see that at checkout processes and in travel and other places.

Embedded still means that you can deliver a customized and high-touch experience. But the second part of this to me on the definition of embedded is that to the customer, that you're very, very close to their decision-making point. To me I would look at what that point of sale experience needs to look like so you could deliver at that point of sale a very, very highly commoditized and no decision highly digital experience, but you also can deliver a fairly customized and high touch experience at close to point of sale. So I define embedded personally as from the customer's lens that it is very close to their purchase decision and if not together with that purchase flow within that purchase decision.

Raghav Tanna

SVP, small commercial lines and COO, Tarmika

(via email): Embedded insurance is a strategy that involves integrating insurance products and services into the purchase or use of another product or service, typically offered by a non-insurance company. This integration enables insurers to reach customers through new distribution channels and to provide seamless, convenient coverage to policyholders. The aim of embedded insurance is to make insurance more accessible and easier to purchase, while also enhancing the overall customer experience.

Jim Dwane

CEO, bolt

(via email): We define embedded insurance as offering relevant insurance coverage at the point of need in any customer journey. We take a broad view in defining embedded insurance because we think it's important to define it by the multitude of benefits it provides – for the customer, the distribution partner and the insurer.

Unlike the traditional insurance customer purchasing journey, where the customer must leave a customer journey to buy insurance, embedded insurance creates the opportunity to offer relevant insurance coverage at the point of need – making the purchasing journey relevant and convenient for the customer. For distribution partners, particularly in a challenging external environment, offering an embedded insurance product is yet another way to provide more value to their customers and to drive more revenue. As a result, companies can further monetize customer acquisition costs, and increase retention and customer lifetime value.