Life in the digital age can be crazy. Constant notifications, phishing scams and data breaches, the social media fear of missing out, and all the shows you’ve been wanting to stream.
The innovations that have been brought to life connected and networked are still worth it, but it may seem that we always have to be vigilant.
What if all this connection, all the microservices and applications that were part of our lives, meant that we could live safer, more secure lives with peace of mind wherever we are online and in the real world?
With built-in insurance, we’re already getting there.
Just think about the last time you took a drive or car trip together. This likely involved a behind-the-scenes insurance transaction on either the passenger or driver’s side. Now you can find life insurance not only built into health and wellness platforms, but even available for a trip or extreme adventure such as skydiving or mountain biking.
Discover fresh insurance technologies to engage consumers.
However, these innovations are possible because insurers have the technological resources. Thanks to artificial intelligence, cloud and other advances, services are increasingly available at the location, scale or package that consumers and partners require.
“The industry is moving away from selling insurance to buying it,” said Denise Garth, chief strategy officer at Majesco, in an interview with Industrious. “Forty percent of insurance will be embedded in the next 10 to 20 years. Customers are the center of attention and this turns the entire business model upside down.”
Built-in insurance may not be an entirely fresh concept – just think about how long you’ve been receiving travel insurance quotes with your airline tickets. What is fresh is the ability of technology to incorporate insurance into so many fresh services and experiences.
Technology can add insurance to all kinds of fresh services and experiences.
To be able to offer such offers and reach customers where they are and when they need them, insurers must be able to reorganize, recalibrate and even rethink their offers almost like a set of applications or plug-ins that other digital companies can then include in their own victims.
“The current culture is ripe for embedded insurance,” Yoann Michaux, senior partner and director of insurance at IBM iX, told Industrious. “Insurance products are already being added to uninsured entities, and this data can be used to create product packages. This is an opportunity for insurance products to appear in consumers’ everyday lives in a new, modular way.”
And this is an opportunity for insurers: the estimated market value for embedded insurance services could reach $3 trillion.
Three ways to embed insurance
Various levels of built-in insurance are already ubiquitous in the market. There are pliable embedded services where customers can choose to purchase travel insurance; built-in services that are covered by the included warranty; or unseen embedded services, as is the case with Tesla, which offers customers its own Tesla insurance immediately after purchasing the vehicle.
However, with hybrid experiences come hybrid needs, and product purchase is no longer a key element.
“Today, a product is no longer just a risky product, it’s a combination of three things,” Garth said. “It’s a risk product, value-added service and experience.”
Millennials and Gen Z consumers are the dominant market buyers across all industries, and their customer needs and expectations are different from those of previous generations. Carriers must transform their business model strategies – regularly, simultaneously and instantly connecting and unbundling services to meet the ever-changing needs of an ever-changing demographic.
“A good agent will sell a product, but then it’s about how to leverage modern technology, principals and digital services to increase efficiency and scale that effect,” Robin Keira, CEO of Digital Scouting, told Industrious.
Many newborn people wouldn’t be able to name an insurance company they trust, but they could name their favorite retailer, gym, airline or vacation rental site.
Outside of health insurance, the next generation doesn’t think much about insurers. Many newborn people wouldn’t be able to name a trusted insurance company as their favorite, but they could name their favorite retailer, gym, airline or vacation rental site.
Most don’t realize that all these other companies and brands are actually insurance brokers, seamlessly adding insurance to their offerings.
“This opens the door for the embedded insurance industry to revolutionize the way we buy insurance,” says Garth, “but insurers need to decide where and what role they want to play.”
Making insurance fresh and fresh
What makes embedded insurance services fresh and fresh again is the drive towards digitalization that is catalysing change across all industries. Insurance carriers are aware of both the frictions and opportunities that exist.
Indeed, the need for carriers to innovate and reach customers is enormous if they do not want to simply be a side player offering bulk or freight services to companies that can actually maintain more lucrative customer relationships.
“There is a fight for the position closest to the customer, and an insurer that fails to establish such a connection will be reduced to the status of a commodity,” Keira emphasizes.
Imagine a next-generation end-to-end portal that goes beyond buying insurance and paying bills. These end-to-end portals would have built-in insurance that would go beyond the transaction itself and offer life, health, wealth and well-being advisory value to customers. By accessing their policies, customers could check the status of their 401k, create and maintain budgets, or monitor themselves using interactive health technology.
Carriers need to establish a relationship with the customer.
Some insurers are even experimenting with the concept of a risk concierge, which can lend a hand anticipate customer problems, such as a risky stretch of road on which a policyholder regularly commutes.
Insurance is intended to protect against future risks. And reducing risk requires access to as much data as possible. Combining unstructured data with embedded insurance offers could allow carriers to play a coordinating role and control the customer relationship.
Join the competition and beat them
Non-insurance organizations already have a presence in this space and create a high degree of customer loyalty and purchasing influence. For example, Shopify includes its own insurance directly on-site, Shipsurance. Startups like Spot have created fresh distribution channels by targeting consumers with dynamic lifestyles and offering them straightforward ways to purchase short-term life insurance directly on their platform.
For time-honored carriers, leveraging the right technology stack would enable them to play in the partner ecosystem or decide how and where they want to maintain customer relationships.
“There are many entry points and technology components for creating market solutions,” Michaux said. “To compete and even partner in this new ecosystem, incumbents will need omnichannel reach to deliver multiple potential experiences. This requires the ability to gradually switch from a physical channel to a digital channel; to weave this journey seamlessly.”
Companies are already using technologies such as artificial intelligence and automation to optimize and scale processes, improve the policyholder experience, speed claims processing and augment customer focus. However, with digitalization now enabling so many platforms to accelerate distribution services and transform into insurers, incumbents will need to revise their business models and strategy to operate wisely in the embedded ecosystem.
Having the right technology in place ensures success for both the insurer and the consumer.
This is one of the main reasons why many insurers are looking for an open, hybrid cloud in their embedded insurance offerings. Hybrid cloud offers clear benefits in both deployment and partnership – enabling operators to both connect more tools to their systems, innovate, and connect to more third-party systems. The latter is particularly vital because insurers are looking for more and more market opportunities for their currently micro-offers.
“Secure and connected hybrid cloud, artificial intelligence capabilities, blockchain and API solutions must integrate seamlessly to modularize and optimize legacy systems,” Michaux said. “This will allow carriers to be in many different places at once, enter this sphere and connect their own systems through an ecosystem of partners.”
Historically, insurance has evolved in response to current times and circumstances and will continue to evolve in this way. Customers need protection against future risk and will purchase it in the same way they purchase other digital experiences, through an immediate set of accessible, valued services offered by trusted, established consumer relationships.
Garth argues that this is not so much an industry disruption as a revolution in which incumbent carriers must quickly draw battle lines and figure out whose side they are on. “This is not a disruption, but rather a growth opportunity,” Garth said, “and having the right technology stack will best prepare insurers to see new opportunities and optimize for success.”
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