For every business, customer satisfaction isn't just a goal—it's the foundation for building long-term relationships and ensuring success. Merchants are finding new ways to satisfy their customers, and embedded insurance is one of them. It can delight customers by offering insurance right alongside merchants' products.
But while businesses are excited over the growth potential of embedded insurance, there's one industry that's feeling the pressure: insurance. For insurers and insurtechs, the opportunities and challenges of embedded insurance are neck and neck.
To embrace the shift, they must face these hurdles head-on.
Personalized Customer Experience
Merchants can ace customer experience with embedded insurance, but for insurers, it's not so easy. Here's what's holding them back:
1. Outdated UI/CX
While the world is busy building modern apps, many insurers are still stuck with complex systems due to a lack of resources and complicated regulations. Consumers will have a smooth UI experience until they are redirected to the insurance part. Jargon-filled insurance policies and complex claim processes often frustrate customers. Though insurers have started to make a shift, there's still a lot to be done. Until then, they can use the following strategies to ensure worthy customer experiences:
- Minimal Integration: Use the merchant's platform to show basic policy information and claim status. For anything complex, redirect to the insurer's website.
- Dedicated Customer Support: Support customers in navigating the complex platform through email and chat.
- Third-party Integration: Integrate with third-party digital tools to help overcome the outdated UI/CX hurdle.
Consider a customer renting a car online. The process is quick and seamless, but when the insurance part hits, the experience often becomes fragmented. Insurers can make a difference by letting the rental company offer only basic insurance details online and assisting customers with complex claim processes. Insurers like Geico and Lemonade have already started to improve their customer service with advanced support systems and third-party AI chatbots. Similar solutions can help customers navigate complex processes and enhance their experience.
2. Experience Through Merchants
When insurance products are bundled with the merchant's, ensuring a seamless customer experience falls on insurers. They need to establish clear communication with the merchant to avoid misalignment while framing the terms and conditions for the product. Insurers can improve the customer experience by involving merchants in all their processes:
- Merchant Support: Have the merchant handle customer inquiries and limit direct customer interaction. For instance, Tesla supports its insurance provider, State National Insurance, by handling most of the insurance queries on Tesla's platform.
- Co-Branded Marketing: Initiate joint marketing efforts to build brand awareness and trust.
- Data-Sharing Agreements: Maintain customer insights by creating data-sharing agreements with the merchants.
If you are a travel insurer, you can better use embedded insurance by partnering with merchants like online booking platforms. Imagine a customer booking a flight and being presented with a personalized insurance offer that covers everything from trip cancellations to lost luggage, all without leaving the booking site. This not only enhances the customer experience but also increases the likelihood of a purchase. Additionally, promoting products together with the booking platform makes the insurance offering an extension of the travel booking process, which can help drive more sales.
3. Data Privacy and Customer Knowledge
As embedded insurance involves data-sharing between merchant and insurer, it's the insurer's responsibility to safeguard customer data and educate customers about the terms and conditions. This can help avoid discrepancies in their claim journey. Here's how insurers can do it:
- Regulatory Compliance: Adhere to data privacy regulations such as GDPR and CCPA.
- Standard Privacy Policy: Provide clear privacy policies to customers that outline data collection and usage practices.
- Necessary Customer Education: Offer all the must-know information about the insurance products on the merchant's platform.
Transparency and trust are crucial to customer satisfaction. Imagine the impact of a seamless integrated experience where a customer is provided with all the necessary data about privacy policies and the risks associated with it while booking a flight ticket or getting employee-provided health insurance. This level of transparency not only builds customer loyalty but also strengthens the brand's reputation in an increasingly competitive market. Insurers can enhance the customer experience by keeping them informed, protected, and engaged about how their data is being used.
Enhancing CX With New Insurance Models
The advent of connected devices such as wearables, IoT, and smart home devices has opened a new era of possibilities for the insurance industry. It has led to the introduction of new insurance models that attract users to move from the old way of paying annual premiums. Data generated through connected devices further helps insurers cater to more specific and personalized products.
1. On-Demand Insurance
Is it possible to have insurance only when you need it, no matter how brief its usage? On-demand insurance offers this flexible and cost-effective solution by allowing you to activate coverage exactly when you require it. Consider a taxi service where the service provider offers insurance coverage along with the rent for that specific trip rather than requiring payment for an annual policy.
This model provides the convenience of using insurance for immediate needs and helps avoid unnecessary costs for coverage you don't use. Uber offers its customers and drivers the option to purchase insurance coverage on-demand. This means that both parties can use insurance protection only during the ride. Uber leverages connected devices like GPS and telematics to accurately track their vehicles, ensuring that both riders and drivers have protection precisely when they need it.
2. Contextual Insurance
Ever thought about insurance that adapts to your real-time needs? Contextual insurance makes this a reality by providing coverage based on the user's activities. Imagine you've just installed a smart home system that can analyze data like occupancy patterns, appliance use, and even environmental conditions. This data offers a clearer picture of potential risks in your home, allowing your insurance coverage to adjust.
This approach ensures that you're not paying for unnecessary coverage but are instead getting it precisely when you need it. Google Nest's extended warranty is a prime example of contextual insurance. At the time of purchase, you're offered a plan that not only covers accidental damage but also uses data from your thermostat to offer protection to your home.
3. Pay-Per-Use Model
Why should consumers pay heavy premiums for products they use occasionally? The pay-per-use model offers the flexibility to pay for insurance only when they use the product. It integrates insurance into existing services or products and provides the flexibility to use it only when needed.
Consider buying high-tech products. Merchants offer a standard warranty period for the product, and if customers wish, they can opt for an extended warranty. This extended insurance coverage can also be applied to specific parts of the product, perhaps only for the motor of a washing machine.
The First Step
Customer experience is not just about keeping customers happy—it's about acquiring and retaining them with minimal costs. That's why many businesses are shifting toward embedded insurance. To stay in line, insurers are relentlessly working to overcome challenges in embedded insurance and achieve the goal of delivering personalized customer experiences. The emergence of new insurance models is a clear sign that they are on the right track.
The future of insurance is undoubtedly embedded, and current progress will benefit insurers, merchants, and, most importantly, customers.
