If one topic has dominated industry discussion in 2023, it’s embedded insurance— the concept of bringing personalized insurance products to customers during relevant digital journeys.
It’s not hard to see why. Allied Market Research reports that the global embedded finance market was valued at $66.8 billion in 2022 and is expected to reach nearly $623 billion by 2032. Within five years, more than 30% of all insurance transactions will likely occur within embedded channels, according to Ernst & Young. Nearly two in three Gen Zers and millennials and three in five Gen Xers are interested in accessing an average of 15 different embedded financial products from brand names they trust. And Deloitte predicts that, if as much as 20% of the U.S. personal auto market implements embedded insurance by 2030, $50 billion or more in premiums could be redirected away from the industry’s traditional distribution channels.
No doubt, embedded insurance is a hot topic. The problem is, because of all the noise and hype around it, this sought-after capability is often poorly understood. As the founder of Mylo—one of the first embedded insurance platforms—I think the term is overdue for reexamination. A better understanding of what “embedding” means can lead to smarter solutions for agencies, carriers and companies that want to connect their customers with the right insurance.
A common misconception
The first mistake in my view is thinking of “embedding” as 100% digital insurance binding—just click a button, and you’ll have the right coverage. It’s true that embedded insurance has built serious momentum thanks to the successful adoption of simple add-on "insurance lite" products that can be easily bundled with other online transactions: Think travel, phone and pet coverage. But when it comes to more complicated (and essential) products like business, home, auto, group benefits and life, that model doesn’t stand up to reality.
The truth of the matter is, no single carrier has the appetite for every type of product that an insurance shopper may want in a 100% digital transaction. When you add multiple carriers into the mix—which is important for finding every customer their best value—the challenge is even greater. Recommended products like business owners' policies (which combine property, general liability and sometimes cyber) or umbrellas (which provide extra protection when the limits of specific policies are reached) require the help of an expert adviser who can put all the pieces together.
See also: A New Approach to Embedded Insurance
The right way to embed
That’s why I prefer a more nuanced definition. To me, “embedded insurance” means incorporating a simple, speedy and streamlined insurance shopping experience into a company’s digital experience—so customers have instant access to the guidance and options they need to make an informed decision when they need to make it. In other words, the entire process doesn’t have to happen online. For the foreseeable future, licensed agents will have an important role to play—to ensure every customer has the most personalized guidance.
So what exactly are companies “embedding”? Convenient access to everything a given insurance shopper needs—a wide range of insurance products, a suite of leading carriers, the guidance of expert advisers and a foundation of deep insurance expertise. We call this last piece “insurance intelligence,” and it’s one of the most important factors in a successful embedded platform.
Too many insurance websites use technology to rush their customers to complete the transaction. An online insurer or agency will typically present a list of coverages and ask the customer what they need—then use comparative rater software to show quotes with the lowest prices. Making the right choice is left to the customer, who may not know much more than they did when they started.
What’s missing from the experience is insurance intelligence: the deep expertise that identifies what solutions are in the customer’s best interests based on the information they provided—then makes expert recommendations and finds the best available value from an insurance company that has appetite for that risk
Not just about price
Embedding isn’t just about finding customers the lowest rates. Our industry has long been driven by a “low price/big savings” mentality. But that’s not always the right value proposition. When a policyholder has a surprise loss and learns they’re not adequately covered, will they be glad they saved 15% in 15 minutes? Are they going to pat themselves on the back for choosing the lowest-cost carrier if they’re trying to be reimbursed for a valid claim and don’t receive high-quality service?
The costs of not choosing a personalized policy from a top-rated carrier can be significant. In my view, technology should make customers aware of the right protections for their needs—instead of relying on shortcuts that can lower rates, such as reducing recommended coverage limits.
Make it easy
Most importantly, we need to make this experience as easy as possible. As I’ve said, I believe in putting a streamlined, guided experience directly in the path of shoppers who need insurance while they’re transacting other needs with companies they trust. This spares customers the need to research coverages and carriers on their own.
For example, Verisk finds 43% of small businesses are uninsured, leaving them vulnerable to a variety of risks. By embedding access to insurance education and solutions into relevant journeys for small business owners – such as in the customer experience of a digital HR partner – agencies can benefit from closing policies while business owners can gain peace of mind in getting the protection they need, even if they didn’t know they needed it.
An embedded insurance platform should also interact with customers through all the channels they value – online, over the phone or through chat. Up to 70% of insurance customers make at least one channel jump, switching from digital to human assistance or vice versa, particularly toward closing, according to a recent Boston Consulting Group study. Starting a quote online, for example, should be paired with the immediate option to chat or speak with an agent.
And customers should never have to answer the same question twice. Today’s sophisticated application programming interfaces (APIs) allow agencies and companies to pass data back and forth, which can enable a platform to automatically prepopulate customer information the partner was already given. This leads to a faster, stress-free shopping experience that can boost conversions.
See also: Is Embedded Insurance the Wrong Idea?
The future is here
Bottom line, embedded insurance should be focused on making quality customized insurance recommendations easy. The goal should be doing what’s right for the customer: offering the right coverage at a fair value with the best experience possible, not always the lowest price. Your customers need to be able to trust the services and products you and your embedded insurance partner suggest. The good news is that, by using appropriate technology, recommending the right coverage and carrier and presenting the best value, you’re going to look attractive to insurance shoppers. Everyone wins.
Of course, effective technology and insurance intelligence engines aren’t built overnight. If you lack the necessary tech capabilities and insurance expertise internally, it’s important to collaborate with an external partner who can make your embedded insurance objectives a reality.
Embedded insurance is like a bullet train that’s preparing to leave the station. But before you jump on board, make sure you’re on the right track – one that will efficiently deliver you, your partners and your customers to the right destination of genuine insurance value.
