KEY TAKEAWAYS:
--Begin by understanding your data relationship with your partner, then segment your customer base.
--Be sure to set an ambitious enough goal, then test and test -- and never stop.
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While data has long been the lifeblood of the insurance industry, embedded insurance is the latest hot ticket to growth — and for good reason! Executives are practically salivating when considering their share of the $70 billion U.S. embedded insurance opportunity.
Understanding the consumer purchasing the product or service unlocks opportunities for optimization. Consumers should not all be offered the same insurance solutions for all purchases. Such consistent delivery will quickly become white noise for consumers, something to skim past when checking out. The use of data, beyond underwriting, may be the difference that puts distance between winners and losers in the landscape.
Leaders should begin by crafting customer segmentation. The data to fuel this segmentation may include past buying behaviors, which will likely come from a retailer's customer relationship management (CRM) or loyalty program. Loyal buyers may react differently to coverage offers than first-time buyers will.
See also: 9 Keys for Embedded Insurance
Third-party data can help fill the gaps. It may include standard attributes like age, gender, household income and presence of children. Some providers are even bringing in more advanced data, including a consumer's attitude toward uncertainty, price sensitivity, buying motivations and general interests.
Example: A consumer may be extremely price-sensitive, unwilling to insure any product or event costing less than $1,000. However, when it comes to children’s products, her appetite for uncertainty is reduced and she is more open to a policy on a $300 baby monitor.
Embedded insurance is a partnership
While insurance professionals understand the competitive capabilities of data, embedded insurance by its very nature includes other industries. As insurance products are distributed by non-insurance brands, there are many situations where partners may experience a "data skill imbalance." Said less kindly — the more sophisticated partner may need to drag the other forward if they are going to win as a team. Picture a three-legged race where Usain Bolt picks up his mother to get to the finish line faster.
As you seek to apply data for marketing and product use cases, a winning partnership will function one of three ways. First, both sides of the partnership may be sophisticated about data. Second, the less sophisticated partner may want to increase their data sophistication. But that takes time and skill, so there is a third option. The less sophisticated partner may be self-aware enough to allow the more sophisticated one to take the lead in strategy and implementation. We are back to Usain Bolt picking up his mother to finish the race ahead of everyone else.
Unfortunately, many partnerships build their strategy based on the lowest common denominator in terms of data sophistication. Data-savvy providers don’t want to push too hard early in a new partnership.
Checking a box? Or competing to win?
Merely checking a box and saying, “Sure, we’re doing embedded insurance,” is going to net exactly the results you would expect.
Many providers are early enough in their embedded insurance journeys that each incremental dollar is considered a win. With such a low revenue threshold, it’s easy to say “but we’re beating expectations! Don’t fix what isn’t broken.”
With low revenue expectations for embedded insurance, product leaders can no doubt breathe easier. Unfortunately, low revenue expectations typically also mean the product isn’t provided enough resources or strategically supported internally. Essentially, low expectations hold brands back from greater gains in the future.
How much embedded insurance revenue should you expect, given your customer base and product suite? By combining multiple datasets,and including a robust view of your typical customer base, you can generate much more accurate revenue forecasts.
While you are operating in a testing phase, or beta period, a pre-optimized solution is fine. The key is knowing when a product needs to graduate to the next level and truly enter the competitive arena.
See also: The Recipe for Embedded Insurance
Ready to win?
First determine which type of partnership you have. Are you more sophisticated when it comes to applying consumer data, or is it your partner? If neither party is experienced, the first step may be securing a partner that can help bring your organization forward.
Next, ensure that the data you bring into your analyses and processes is high-quality. The adage hasn’t lost power: It's still garbage in, garbage out. Use your data to establish meaningful goals for embedded insurance. If you take a full view of your product suite and customer base, you may discover that you should dream bigger.
Lastly, start testing and never stop. Consumer behavior is constantly shifting, and the providers that keep up are continually monitoring the performance of all strategies.
The rise of embedded insurance is the perfect example of how the world of commerce is continually changing. To win, providers must maximize all available resources to deliver a winning and simple customer experience.
