Embedded Insurance: Simplifying Products with Automation

Patrick Nobbs

Embedded insurance reduces some of the most common complexities in insurance, making it more accessible for consumers.

Products that are fit for purpose

From the point of view of the insurer, tailoring a policy to perfectly fit the customer’s needs can be tremendously complex, time-consuming and expensive. Marketing and selling that policy can also be a rather daunting challenge.

From the consumer’s perspective, deciding among innumerable insurance options connected to a purchase can be confusing in the event a consumer ready to purchase in the first place.

Automated embedded insurance has greatly streamlined the process for insurers and insured alike.

Examples of embedded insurance include extended warranties offered alongside the purchase of white goods (appliances), flight cancellation cover offered alongside the purchase of an airline ticket and motor insurance bundled into the purchase of a new car. Whatever industry or organisation is integrating insurance into its value proposition, embedded insurance products have a couple of specific features:

  • The cover is simple, tailored to the customer and relevant to the core product or service being purchased.
  • The insurance has an appropriate level of cover – no more and no less than is needed.

Case study:

A US-based online rug retailer found that around 5% of their customer shipments were damaged in transit, costing the company $3 million annually. By embedding product and shipping protection into the sales process, the customer experience has been greatly enhanced. And with attach rates at 45%, the company is now able to offset half its shipping losses.

Processes that delight

Insurance processes are also made much simpler through embedded channels:

  • Customers are offered the insurance they need when they need it, removing the necessity to search and apply separately for appropriate cover for their purchase.
  • This all happens in real-time, making use of rich customer data from the retailer and AI to automatically calculate risk and offer a relevant insurance product at an affordable premium.
  • Accepting the insurance is simple, often involving just one click to opt in and receive the cover on offer.
  • Automated claims functionality – which makes use of pre-authenticated customer data – removes lengthy claims processing and greatly enhances the claims experience.

Case study:

An electric bike brand didn’t want their customers to have to worry about theft or damage to their new purchase, so embedded targeted protection products into their online sales process. The cover can be added in just two clicks, and the claims process is fully digital.

The importance of automation: a win-win revolution

By reducing the complexities commonly found in traditional insurance products and

processes, embedded insurance is enhancing consumer satisfaction. With no need to re-share personal data with an insurer in order to obtain a quote, the speed and convenience of automated insurance offerings is a real bonus for customers. Simpler insurance products also make for a better understanding of cover – meaning fewer nasty surprises at the claims stage. And simpler claims processing removes the headache of lengthy claim submissions.

The claims experience can be further improved when claims pay-outs are automated, as in the case of parametric cover. With happy customers comes repeat business and a stronger brand reputation for retailers and insurers alike. Furthermore, the frictionless nature of automated insurance removes barriers to purchase, encouraging sales and closing the protection gap.

Automating insurance processes also results in real cost-savings for insurers. From real-time quotation and risk pricing to smart claims handling – insurers can reduce their claims loss ratios and realise business efficiencies. These cost savings are invariably passed on in the way of lower premiums.

The Final Word

If the last three years have shown us anything, it’s that there’s no going back to the manual and inefficient days of the past. Whatever comfort the old ways may have held, the push to integrate new technologies and automation into the insurance value chain is leading to a simpler and more efficient insurance landscape. Embedded insurance is just the most obvious example.

This article contains excerpts from the Sapiens whitepaper, Embedded Insurace: Unlocking Un-tapped Potential. The whitepaper contains many more insights vital to understanding the current face of insurance, as well as its future. Read it here.

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Patrick Nobbs

Patrick Nobbs Patrick Nobbs is regional marketing director for EMEA and APAC at insurance software provider Sapiens and had has several years experience in the financial services and technology sector.