The insurtech sector has been for about ten years, and experts claim that while it has been successful in attracting new players, it has occasionally had difficulties with distribution and customer acquisition. According to Sebastien Bert, co-head of strategic alliances for the Americas at Swiss Re, on the most recent episode of Strategy Sessions, embedded insurance is stepping in to cover some of those gaps.
Carrier Management’s monthly webinar series called Strategy Sessions examines the hottest trends in insurance.
Embedded insurance, according to Bert, “changes how insurance is distributed.” I prefer to think of it as the sequel to InsurTech.
In what Bert referred to as the first InsurTech wave, Swiss Re started to observe a sizable new wave of entry into the insurance business about 2015. In 2019, a few years later, the business determined it was time to form strategic alliances with these new competitors.
It wasn’t just InsurTech, he continued, “but we were also seeing new entrants in the shape of corporates who were doing embedded insurance, and that was something incredibly fascinating to us and a chance to enter new markets.”
Embedded insurance is a developing sector of the insurance market where insurance is bundled with the purchase of a good, like a house or a car, providing protection to customers right at the point of sale. According to Bert, embedded insurance changes the way that the insurance sector traditionally brings customers to locations where insurance is provided.
We bring insurance to people’s places of residence, employment, and shopping, he added.
According to Bert, the majority of people frequently identify embedded insurance with straightforward products like warranties or vacations.
It has been around for a while, he said, “if you think about when you go on Expedia or one of these travel sites and you check out at the end and it says, ‘Oh, if you want to get travel insurance, click here.
As insurers become aware that more goods can become embedded, this is now changing.
“Consider all the ways that purchasing goods and services has evolved during the past 10 years. The customer journey is being digitized, and businesses like Amazon are changing the way we shop and buy,” he remarked. Insurance is not an exception to the general trend toward bundled products and increased personalisation among consumers. And the epidemic increased that trend, if you think about it.
He claimed that items like cars, homes, small businesses, and even workers compensation are gradually getting ingrained. Building the proper alliances is a problem for insurers as integrated insurance penetrates more product categories.
It’s a unique kind of collaboration, he declared. You’re collaborating with a business that may or may not have prior insurance sector experience.
Thinking strategically and taking into account any potential operational difficulties are crucial when approaching these collaborations, according to Bert.
You’re dealing with infrastructure, he continued, which is not insurance-facing. You desire a seamless consumer experience. and for the transition from the insurance side to the side without insurance to go smoothly.
Compliance and regulation are yet another significant difficulty when working with non-insurance partners.
There are additional sets of rules that you might need to be aware of when working with other products and services, he added. “I think most insurance carriers and reinsurers are well aware of the regulatory demands around insurance,” he said.
When it comes to the usage of data, there is also a consumer protection component.
“Embedded insurance’s great advantage is that it gives you access to customer data that makes for a more seamless customer experience, but you also need to be aware of the regulations that control the privacy protection of that customer data as well as the authorization to use that data when offering a product,” Bert said.
With so many factors to take into account, Bert stated that the most crucial step for insurers looking to enter the embedded insurance market is to create a plan and a shared vision with any potential partners.
We entered 2019 knowing that we wanted to be involved in the embedded insurance and insurTech markets, he added. “However, I’d advise reinsurers and insurance companies to create a plan first. What do you want to do, please? Considering the size of the market and the large number of recent arrivals You must first determine your specialization, your growth strategy, and the appropriate alliances you should pursue.
It’s also crucial, he continued, to comprehend and make sure that all of the partners’ motivations are in line. Bert is confident that over the next ten years, even though embedded insurance is currently a minor portion of the sector, this will change. He expressed the expectation that, as change occurs, insurance will become more widely available and reasonably priced to close both consumer protection gaps as well as distribution gaps in the market for insurers.
“We foresee [that] this is going to take maybe five to ten years to be a big component of the business,” he added. “It takes time for these partners to onboard insurance within their products and services. “The development of new insurance where individuals previously didn’t purchase it, in my opinion, is incredibly exciting. We kind of called this situation the protection gap, where people are either underinsured or uninsured and they are either unaware of it or simply decide not to get it because the goods are expensive or difficult to obtain. When a gap like this arises, embedded insurance can actually help.