What is Embedded Insurance? Cover as Unique as Customers

By Shreyas Vasanthkumar

Driven by changing consumer demands and purchasing habits, the idea behind embedded insurance is simple: provide customers with relevant cover at the point of sale of a third-party product or service. As many eagle-eyed readers will note, this idea isn’t exactly new. Bundling insurance into product purchases at the point of sale is something that retailers have offered customers for decades; however, in the past such policies were rarely tailored, meaning they didn’t add tangible benefits for the consumer. 

The difference in today’s market is the availability and, more importantly, the ability of technology to deliver personalised cover that offers true value. Harnessing the power of artificial intelligence (AI) and machine learning (ML), embedded insurance uses customer data at the point of sale to generate a personalised policy; the ‘distributor’ then embeds the cost into the final product price. In short, the transaction is on-point, seamless and requires little to no extra input from the customer. 

Relevance is key

With gross written premiums (GWP) in the embedded insurance market predicted to reach over US$700 billion by 2030, there are strong growth opportunities in this sector. But trust, transparency and relevance are just as critical as using the right technology architecture to power and distribute embedded insurance products. 

This is because there is an elephant in the room – the concept of embedding insurance into a product or service at the point of sale, such as car insurance when purchasing a new car, gadget insurance when purchasing a new phone, or even pet insurance when registering with a vet – will naturally raise parallels with the “mis-selling” of payment protection insurance (PPI), for example, which rocked the financial world in the late noughties with continuing impacts and headlines into the last two decades. 

Trust and Technology

Embedded insurance, however, is distinctly different from PPI. Its foundations are based on the power of technology, innovative thinking and harnessing direct customer data that enables insurers to offer accurately priced cover that is relevant to the product or service the consumer is intending to buy. In effect, it is an insurance offering where the customer can clearly see the benefits personalised cover can bring, with full transparency, relevance and value at the core of the product. 

Insurers are already starting to make headway in this new direction, and the possibilities are seemingly endless; think distribution partners, such as car dealerships, selling motor insurance with any car purchase, trip protection as part of a flight, the option of personalised cover at the point of sale of a smartwatch, or embedded insurance in pet services with policies that offer everything from vaccination plans to pet collar device protection. 

Low Code Tools

No matter which third-party brands an insurer chooses to partner with to offer embedded insurance, the key for all parties is for the insurer to have a dynamic product selection that enables customers to purchase relevant and personalised policies. To achieve this, insurers need low code configuration tools that can allow them to quickly configure pre-underwritten products; they also need a cloud ecosystem that can provide scalability and flexibility and incorporate other third-party services. 

But this isn’t all insurers need to jump on board the embedded insurance train. Crucially, they need the correct technology that will allow them to actually embed insurance coverage into the third-party purchase journey of the original product itself. This is where modern core architecture systems, pre-built application programming interfaces (APIs), and Software as a Service (SaaS) platforms come into play. 

Unlike traditional legacy systems, SaaS platforms provide carriers with the agility they need to meet these market opportunities, engage their target market, and help them deliver innovative insurance products in a matter of weeks, not years. What’s more, with a modern SaaS core system platform – like that offered by Duck Creek – insurers won’t need to manage the underlying technology themselves. They simply experience the benefits of speed to market, pre-configured content, and a library of APIs that allow them to connect with – and ultimately open up – new distribution models.

Aimed at the individual 

While many benefits of embedded insurance are aimed at insurers and brands as the new distributors, ’embedding’ insurance into products and services is actually a crucial step towards helping revolutionise the fairness and relevance of insurance coverage for customers. 

Embedded insurance is no longer about offering a blanket of standardised policies; it is about identifying and embracing market opportunities and unique customer needs, all while providing a seamless and fair customer experience that protects products and services from the point of sale onwards. 

All this is made possible simply because the process of embedded insurance unifies customer data, delivering a 360-degree view of the potential policyholder. This, combined with the ever-growing amount of risk data (from cyber right through to weather) and the advancing capabilities of AI and ML-led analytics, means insurers can offer personalised coverage and optimised pricing based on an individual’s risk profile. 

And this is why embedded insurance is going to be a game-changer in 2023 and beyond.

About the Author

Shreyas VasanthkumarShreyas Vasanthkumar has been Managing Director EMEA at Duck Creek Technologies since March 2022. He is responsible for driving profitable growth across Duck Creek’s EMEA operations, as well as investment in key global accounts headquartered regionally. He joined Duck Creek from Hexaware Technologies where he was responsible for managing all sales and business development activities for Hexaware EMEA, growing the business from US$50 million in 2003 to US$1 billion in 2022.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.