How embedded insurance is transforming the insurance sector

Asia-Pacific is the largest market for embedded insurance across the globe, with a few of the most significant insurtech firms emerging from China and India. In fact, according to a recent survey by Momentive.ai, Indian banking customers were ranked the highest in terms of welcoming embedded insurance offers, and ‘convenience’ stood as the major driver of this interest.

Insurers are incorporating technology into their operations to provide consumers with a hassle-free experience and provide insurance solutions that are tailored to their needs. Insurtech is the additional layer that provides enhanced client comfort and value-added services. This distribution model has not only provided a channel for additional insurance revenue, but it also has advanced the insurtech game.

Through the implementation of artificial intelligence (AI), the internet of things (IoT), big data analytics, open APIs, and other technological breakthroughs, embedded insurance provides a sophisticated solution for customer grievances at one end of the spectrum while creating a frictionless experience on the other.

A win-win formula

By design, embedded insurance provides consumers with added value, a frictionless purchase process where insurance is purchased, not sold, and has an insurance value proposition that is easily accessible to consumers.

According to ResearchAndMarkets.com, the sector will grow gradually at a CAGR of 21.6 percent between 2022 and 2029. Furthermore, the Asia-Pacific Embedded Insurance industry is expected to grow by 32.3 percent on an annual basis to reach $24,127.3 million in 2022.

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As an insurance brand or a carrier, embedded insurance solutions is a key strategy for staying competitive and providing a simple, value-added, high-quality customer experience. The factors which have accelerated the growth of embedded insurance in India in a positive industry are:

Charging the untapped markets: Embedded insurance gives insurers access to new markets that were previously closed off to them. Many insurers are now able to provide microfinance companies with life insurance, personal accident insurance, etc., enabling them to reach the untapped rural market. Embedded insurance is a powerful instrument for insurers and third parties to expand the insurance sector's reach in India's underdeveloped markets, particularly in rural and underserved areas.

Streamlined on-boarding: Insurance has long been seen as a cumbersome procedure, from the purchase process, which requires filling out extensive application forms, all the way through the claims process, which requires navigating a series of steps in order to submit a claim. Making the switch to embedded is all about simplifying things.

Embedded insurance leverages the existing customer data that a customer has provided in the core buying journey. The existing data ensures that the coverage given is comprehensive, suitable, and simply a click away. Embedded products are supplied to clients when they feel they need them the most, rather than requiring lengthy phone conversations and extensive application forms as with insurance. The claims procedure is also simple; there's no requirement for proof of purchase because there's already a record of what was purchased and when. It establishes a painless, closed-loop insurance system.   

Low client acquisition costs: An insurance company typically spends roughly 20 percent of its income advertising to new clients. Moreover, according to pre-pandemic research, 43 percent of senior-level insurance business decision-makers believed that their present data sources were inadequate for prospects and programs that would create maximum profit potential.

Embedded insurance cultivates multi-line policyholders and decreases churn by engaging policyholders at the exact appropriate point in their journey. Moreover, since embedded insurance acquires clients through an established channel for a parent product, the effective cost of customer acquisition is substantially lower. Direct-to-consumer insurers have the lowest costs due to lower commissions and more efficient cost structures, allowing them to spend more on advertising than their competitors, and hence generate faster growth.

Enhanced Customer Experience: One of the most important advantages of embedded insurance is that it boosts customer satisfaction. Insurers now have the opportunity to market their products and services directly to individuals who require them. Insurance companies that have thus far been outside the realm of insurance have an opportunity to make this offering today and increase the value proposition for the customer. We have seen a slew of products such as eyewear, sporting goods, and even jewelry are up for grabs when it comes to the embedded insurance advantage.

Embedded insurance provides more customised coverage. This enables customers’ plans and premiums to be adjusted to their specific needs. With integrated insurance, customers get precisely what they want. Since the insurance policy is matched to the needs of the buyers, they get the greatest benefit and value.                                                                   

Innovative product offerings: Embedded insurance players may construct personalised, more relevant, and best-priced insurance policies using consumer data that was previously not recorded or, if captured, not digitised in a paper-based insurance offering. They can also change the features and cost of these plans, as well as discontinue them if they are no longer feasible.

Insurance Penetration in India: Insurance coverages that may be added to cab trips, bicycles, cleaning services, mosquito diseases, COVID, pets, and other services have been rising. The majority of these did not even exist in India a few years ago. Life insurance, for example, may be purchased through payment apps for as little as Rs 100 per year. Through a streamlined issuing procedure, embedded insurance not only contextualised product construction but also made insurance inexpensive and simple. As a result, insurance penetration surged in the country, which had been stagnating for more than two decades. This paradigm has offered a wealth of new opportunities for insurers to create, penetrate, and target insurance categories that they have never been in before.

Embedded insurance is only getting started, but it has the potential to become a trillion-dollar business. It has progressed from simple gadget coverage markets and warranty goods to more comprehensive automobile insurance coverages, and is projected to expand into other areas of business if data privacy concerns are addressed. Insurers should study their markets and assess how they may collaborate with insurtech to provide more efficient goods and services.