Q&A: Explaining embedded insurance with Jess Hurley, EIS

Embedded insurance is being able to digitally position a product at the point of insurance sale. For example, the point of sale for an automobile purchase and an insurance product. A simple transaction that is seamless and doesn't require another site or phone call. Even within the transactional process itself, it is just one order form. Another example would be an Amazon warranty, you don't have to sign another contract, it is all embedded in that process and that transaction. To enable this, it requires a lot of data transfer to accept a policy and the embedded policy becomes the virtual agent at the point of purchase and the execution of the insurance product, whether that be life, P&C, travel or health.


In traditional insurance, you talk to an agent and they might be someone you know. An ecosystem like that is local. You have an agent and that's how you get access to an insurance company. The distribution channel is expensive. Independent agents are still necessary but for small purchases they have to be moved online. People are choosing to make those decisions online. Everything is moving online. Ecosystems need to extend online. 

When you embed for the front end, it is about creating a seamless transaction process. So the agent aspect of it and the understanding of a policy is embedded into the transaction itself. It reduces the required partners by embedding. You are closer to the consumer. It's the new ecosystem in the new world. Portals are going away. The agent model is still very prevalent. Supporting agents and MGAS with portals is still important. 

It dramatically changes relationships. If you talk to big carriers about this, building customer relationships is critical for insurance companies. The relationship with the insurer and the importance of the relationship with an agent–as a consumer, you go to an agent and they tell you what your insurance policy says, no one reads the policies and insurance companies know this–when someone buys insurance they're trusting the agent. 

Trust has been a huge aspect of buying an insurance policy. Communication has taken its place. What is the contract? Trust is being transferred to brand and communication. Brands are stable companies, well-entrenched and well-financed. This happens by creating stability and communication through digital channels. 
Communicating the contract is critical. How do you do that digitally? I'll be honest–one of the reasons I don't buy warranties is because I don't know what is in there. To click through and look through, I've never done it. It's important to communicate clearly the value of the contract and maintain trust with [the customer] through the process. It costs 10 times more to get a customer than it does to keep one. When you do get one you want to keep them. The flow of income–if it is in place for six months or a year, that represents a stream of income an insurer can bet on and make money on. 70% or more of insurance revenue is generated by investments of non-reserved funds.

To manage risk and create efficiencies you have to create digital connections that allow the communication of the contract and good relationships like trackers for the claims process. 

It is a radical change from relying on agents and employees to communicate trust to then move to digitally communicating it through brand and communication. The important thing is when a claim hits–specifically in P&C and life–consumers only have so many interactions with insurance companies. So, making sure that people understand at the time of the claim what they've signed up for and how it will be handled is important. 

High-touch communication at the point of an accident, for example. That is the kind of communication we are talking about.

For any company getting products out the door–if they've been selling insurance to a certain number of states and they want to expand, they have to build another product because you have different zip codes, because risk profiles change. Different underwriting and risk profiles. 

But launching new products is critical, it gets new customers in the door. If your insurance company is built like an engine and it only offers one policy every time you change the policy you have to rip up the old policy.

Being able to get a company to launch products more quickly is number one. How can I get to a point to launch products and test new products?

During COVID people were driving less and driving miles were reduced–insurance companies have made millions because there was no risk. Usage-based insurance models only pay for the miles you drive; it's attractive to people who are in cities—but may not be for country drivers or people who drive every day. 

Companies want to look at how to launch products into an area like New York metro that is usage-based. It involves interacting with billing. When you set up a contract with the old system, your billing is locked in–and so, creating data flow that can take miles driven and pull it from a car, telematics, mobile devices, ingest it and get into a repository and extract it for billing, use it and implement a change in a bill–it is kind of a hard thing. It is hard for companies that don't have high-tech systems. 

How do I create these systems that are dynamic and subscribe to privacy regulations? The point is that's the challenge.