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In "Billion Dollar Lessons," a book that Chunka Mui and I published in 2008 on the lessons to be learned from 2,500 corporate bankruptcies and major writedowns, we found that companies often kidded themselves about the benefits that would come from synergy. We argued that the only real synergy was, "Do you want fries with that?"
Embedded insurance basically asks a customer, "Do you want some insurance with that?", so I've warmed to the concept over the years.
The benefits seem clear: Embedding insurance could allow for much lower distribution costs, letting insurers lower premiums, attract more customers and narrow the protection gap -- while giving insurers a massive new customer base.
So far, not much has happened. There is travel insurance and warranties, and bancassurance is popular in some parts of the world, but that's about it.
I've begun to see naysayers argue that embedding insurance is really just a way of nagging people to buy products such as overpriced warranties. Some even contend embedded insurance is bad for insurers. The insurance has to be so simple, the argument goes, that it will be a commodity, and all the leverage in the relationship will go to the company selling the product or service that the insurance is embedded into. If an insurer balks, that company can just swap it out and swap in insurance from someone else.
The best thinking I've seen on how to get past the insurance-as-commodity problem and to jump start the embedded insurance idea comes from Chris Bassett, a senior director at Capgemini, who has written for ITL about the need to design insurance products and services from the ground up for embedded opportunities, rather than just shoehorn existing ones into a sales process at the point of purchase.
In this month's interview, he lays out some intriguing ideas about how insurers can build long-term relationships based on the data that embedded insurance can generate and move past today's emphasis on quick, one-off sales.
The interview is well worth a read.
Cheers,
Paul
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