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    Embedded Insurance Products: This Decade’s Great Opportunity

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    insurance industrys evolution of identity curiousity and growth canada

    How the insurance industry can realize the $3.5 trillion opportunity of embedded products and partnerships.

    In the past five years, the embedded insurance product has been an extremely popular and important topic for the industry – especially for the professionals in the product development space.

    This trend has been driven by advancements in technology and an industry that is looking to develop new ways of selling products, targeting both underserved customers segments and existing customers who are frustrated by the insurance industry’s traditional business models. Technology is making it possible for insurance to integrate into an existing value-chain that customers are already loyal to and find attractive.

    This article will look into why embedded insurance is of interest to customers and insurance companies alike, as well as describe two primary methods of how embedded insurance products can be developed.

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    How embedded insurance benefits consumers

    According to the 2020 Insurer Compass Report conducted by Insurtech Insights, a significant number of people are looking for ease-of-use when it comes to interactions with their insurance company:

    • 79% of consumers shop around when they have difficulty filling in applications

    • 62% of customers search for alternative coverage when struggling to make a claim

    With numbers like the above, it’s clear that consumers are looking for a frictionless experience with their insurance purchases – and embedded insurance can provide this to them.

    Embedded insurance products can utilize existing underwriting data from an existing ecosystem, putting a customized insurance product in front of them without having to provide additional application details. As a result, they are seeing insurance in an environment that they trust. The insurance works with an existing process, rather than disrupting it or adding friction.

    Embedded adds value for insurance providers and brokers

    For insurance companies, embedded insurance provides an entirely new distribution channel. It also provides them with more consistent and precise underwriting data.

    Through embedded arrangements, insurance companies can create products that are aligned perfectly with a specific customer and their needs. And because of the accuracy of the data, the pricing can be adjusted with more detailed precision, in real time.

    For example, it’s common for builders to encounter minimum premiums for project-specific insurance. With embedded products in a digital marketplace, they could find coverage for small projects delivered at scale for pricing well below traditional minimums.

    Another clear advantage for the insurance company is being able to access higher quality underwriting data from the direct source of the embedded product partner. This data usually comes from the partner’s ecosystem and has already been vetted for quality, as it is being used for a core experience and/or purpose.

    Two ways to develop embedded insurance products

    Embedded insurance products are made possible through two technical approaches:

    • Application Programming Interfaces (APIs)

    • Event Streaming

    Application Programming Interfaces

    APIs are the gateways between two applications or digital ecosystems. For example, a digital marketplace for the purchase and sale of used equipment could directly interface with an insuring and pricing platform.

    An embedded insurance product can utilize APIs to ingest external underwriting data for a frictionless customer experience.

    As well, APIs are key for a truly personalized customer journey, as the embedded insurance product can be reflective to the information and experience a consumer is getting in a partnered digital ecosystem.

    Event Streaming

    Event streaming is all about data collection. Whether it’s from information on driving events that are taken directly from a car, or biometric feedback from wearable devices, the embedded product can deal with real time and accumulate data to respond to customers’ unique needs.

    It is also a critical tool for making insurance accessible to a wider customer base, as the insurance product can evolve standard predictive prices to more direct usage pricing.

    What will come next for the evolution of embedded insurance?

    We are currently seeing the first evolution of embedded insurance products. This is already offering the industry more clarity on the mutual benefits of this model, for both customers and carriers.

    By fully utilizing the technology available, customers will have a better experience and the industry will be able to expand the marketplace. This will be made possible with an underwriting approach that is driven by data and a higher level of precision between risk exposure and pricing.

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    Originally published October 27, 2022, updated August 25, 2023

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