Embedded insurance – a disruption?

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Embedded insurance is part of a broader movement towards embedded finance, which offers more affordable, relevant, and personalized insurance services to consumers when and where they need it most. Over the last few quarters, embedded insurance is emerging as a new and innovative way to distribute insurance products and to deliver more excellent value to the market for the benefit of all its stakeholders.

For insurers, embedded insurance holds a trillion-dollar opportunity having the potential to create new revenue streams and lower-cost distribution. For investors and entrepreneurs, it offers the opportunities to create valuable new ventures, and for society at large, it helps in closing the insurance protection gap. Notably, as technological advances continue to make the industry entry less costly and complex, both incumbents and new businesses are launching native, embedded, and Insurance-as-a-service (IaaS) options within their digital ecosystem.

Moreover, it is not just the startups and FinTech disruptors giving IaaS and embedded a try. Small and big brands are adding insurance products and services to their existing digital ecosystem. Over the last few quarters, embedded insurance has grown from simple device protection to a more complex motor insurance coverage. TechInsight360 expects the segment to develop even further into other lines of business once issues such as data privacy are resolved.

Embedded insurance services on the rise

As the reliance on digital services is rising, embedded insurance offerings have started to appear in new and unexpected places. Notably, the embedded insurance model offers protection or coverage coupled with the purchase of product, service, or platform, insurers and partners are able to cross-sell and serve relevant products more broadly, virtually everywhere there is a risk. Consequently, the potential for embedded insurance products is massive, with an insurance cover around practically every corner.

Insurance-as-a-Service model

Embedded insurance provides incumbents with a great opportunity to work in partnership with platforms to differentiate, expand, and scale their offerings into new and emerging ecosystems. However, as the Insurance-as-a-Service model grows into prominence, a growing number of non-insurer players are also providing direct sales of partner insurance products to their customers.

Notably, IaaS is a digital, subscription-based offering that helps in streamlining aspects of the backend insurance infrastructure, thereby allowing non-insurers or other brands to provide pre-built, easy to implement, plug-and-play insurance products and services on their own platform. For instance,

• Thimble, an insurtech company offering on-demand IaaS, provides consumers with the flexibility to purchase insurance coverage for small business general liabilities. Therefore, offering protection against the risk of an accident like property damage and bodily injuries.
• Moreover, the insurtech firm allows customers to purchase insurance through mobile devices with policies issued in 60 seconds while offering the ability to pause or cancel the coverage at any time.
• Credit Karma, the FinTech firm, is an example of a non-insurer expanding into the insurance space by offering consumers discounted auto insurance policies based on their usage of their 30-day driving trial. Notably, the 30-day driving trial provides real-time feedback on their driving through a proprietary app.

Open, innovative, and on-demand – Embedded 2.0

Open APIs have been instrumental in the rising growth of Insurance-as-a-Service. An important piece of the puzzle, open APIs have helped create novel products, microservices, and business models that give insurtech, insurers, banks, and other businesses, including startups, the ability to generate new revenue streams these firms to create new and innovative products. For instance,

• Lemonade leverages API-fication as part of its embedded offering, sharing its API for easy integration into any app or website. Notably, the combination of open APIs and on-demand insurance products contributes to the growing prevalence of a new kind of embedded solution, which drives revenue and improves distribution efforts, and leads to better customer satisfaction by offering cost-effective and seamless protections.
Axle, Ember, Flock, and Kasko are all part of embedded 2.0, a new wave of transparent, flexible, and data-driven insurtech and FinTech product solutions, which are tailor-made for use within the digital ecosystems.

The future of embedded 2.0

Embedded services have changed significantly and increased over the past few quarters. However, TechInsight360 expects that the model and offerings have more to offer than their proven value. As the future of embedded 2.0, TechInsight360 anticipates seeing firms both inside and outside of the traditional insurance continuously innovating to find newer ways to serve their customers efficiently and in a cost-effective manner through personalization, on-demand, automation, and embedded financial services.