As the world continues to evolve, new economies form that change consumer behavior. Just as the gig economy came about, the most recent has been the creator economy. In recent years, we have seen younger generations (gen z, gen x, and even millennials) blazing their own paths, choosing to work for themselves, and valuing independence and freedom more than anything else.
As a result of these economic trends, the insurance industry must adapt to survive. Embedded insurance is a $3 trillion market opportunity that is a win-win-win solution for insurers, third party organizations, and customers alike. Embedded insurance is a seamless way to distribute insurance services and products to where your customers are. Insurers who take advantage of this approach can quickly tap into new markets and new lines of business, while end customers benefit by getting access to relevant insurance at the right time and place. Lastly, third party organizations who embed insurance into their current product or service can help enhance their brand, differentiate their products, and drive their revenue.
Below is a list of reasons why embedded insurance is the future for insurance companies:
1. Lower distribution costs for Insurers and new revenue streams for third party organizations
By embedding insurance with a third party organization, insurers are able to take advantage of a company’s existing user base. Since the relationship and trust has already been built between company and customer, insurers can simply focus on offering additional products or services that benefit that specific niche of consumers. This increases revenue streams for the third party organization, adds value for their end customers, and cuts distribution costs for insurers, who can eliminate the time and money spent on acquiring new customers. It’s truly a win for everyone involved.
2. More affordable, relevant and personalized insurance to end customers when and where they need it most
As an insurer, your customers include both individuals and businesses – which globally, are both underserved by the insurance industry. As global trends change due to to demographics, digitization, urbanization, and climate change, so does the disruption to traditional ways of living. In fact, research shows that human behavior is changing at rates never seen before in history. One can no longer ignore the rise of the omni-channel, social-media-driven, conscious consumer that is worlds away from where they were even just two years ago. And truth be told, customers have the closest relationships with organizations they interact with the most or who are involved in special moments of their lives. That rarely includes insurance companies. As a result, insurance companies are better off embedding insurance products b2b with companies that already have a strong relationship with their customers. By embedding relevant insurance at the point of sale – i.e. when consumers are actually thinking about the associated risk(s) with that product or service – insurers can reach customers at the right time, in the right state of mind. Insurance is simply embedded into the customer journey, offering a much more seamless and personalized experience.
3. Insurers get a better reach to their customers
Embedded insurance allows insurers to be at the right place, at the right time. For instance, when buying an expensive smart device, the insurer can recommend the relevant insurance product for the buyer during check-out or any other time in the customer buying cycle. More often than not, customers will take the opportunity to secure their purchase in the most hassle-free and affordable way. To this same point, no traditional insurer can anticipate the specific needs of a myriad of niche requirements, nor would it be cost effective for them to try. That’s why it makes sense to embed insurance through third party organizations that already understand their customers’ needs and wants. These companies have likely been collecting data about their specific customer since their inception, meaning they already have identified information that would take an insurer way too much time and money to try and understand on their own.
4. It’s quick, easy, and hassle-free
Without a doubt, buying insurance is a complicated and tedious process. A buyer thinks a hundred times before investing in any traditional insurance policy. However, embedded insurance makes the process quick, easy, and uncomplicated. It takes out the endless paperwork and fine terms that send customers running in the other direction. We have seen from countless psychology studies, that people are paralyzed by choice. The beauty of embedded insurance is that, most of the time, it’s one product or service that is being offered to consumers that is relevant to the very thing they are looking to protect risk with. Embedded insurance helps remove the paralysis that comes with the decision making process when people have too many options to chose form. It’s either do you want to add on insurance to protect this product or service, or not?
5. Building a global safety net
The bottom line is that the more insurers, third party organizations, and customers that get on board with embedded insurance, the wider we can cast a global safety net. Embedded insurance is crucial to providing relevant insurance to the millions of businesses and individuals who are unserved by current methods. This will help close the protection gap, and build a world where more people feel safe and protected from risks.