How embedded insurance creates seamless experiences for consumers

Nedeljko Kuzmanović Categories: Business Insights Date 08-May-2024 5 minutes to read
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    Wouldn’t it be nice if you could buy insurance as quickly as ordering a cup of coffee from your favorite cafe? No confusing jargon, no cumbersome paperwork, and no stressing about the fine print of terms and conditions; as simple as checking the box. Well, this is now possible with modern embedded insurance solutions.

    Believe it or not, the concept of embedded insurance is about one hundred years old. In 1925, Chrysler pioneered this idea, and many businesses adopted it and further adjusted it depending on their industry. It’s simple yet brilliant.

    Understanding embedded insurance and its growth

    Being one of the biggest car manufacturers, Chrysler decided to make things easier for their customers and focus on providing convenience to gain a competitive edge. They did so simply by including fire and theft insurance for one year in their car pricing. This was possible thanks to their partnership with Palmetto Fire Insurance Company. Unsurprisingly, the offer soared in popularity.

    The embedded insurance market deals with insurance policies integrated into other products or services. Instead of buying insurance separately, buyers can get it as a part of some other plan they decide to buy. Very convenient, simple, and most importantly – seamless for the customer.

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    Today, embedded insurance is rapidly growing. The continuous technological development is bringing tremendous benefits to both businesses and end consumers. The market is predicted to increase significantly, from $156.06 billion in 2024 to $722 billion by 2030. That's quite a big jump.

    You may be wondering – why now? Where is this traction coming from?

    The main benefits of embedded insurance

    Two things are fueling embedded insurance market growth: customer demand and an increase in technological capabilities.

    Modern consumers expect instant gratification and immediate solutions to their problems. Convenience has become the norm, and successful businesses invest an effort to learn how to meet and exceed these expectations. Embedded insurance is one of the main tools in their arsenal because it provides a sleek, integrated experience, meeting customers where they are.

    Nedeljko Kuzmanovic, Partner and InsurTech expert at Vega IT

    There are two main benefits of embedded insurance:

    • better customer experience
    • higher sales due to personalization

    Better customer experience

    What is the reason why embedded insurance has so much business potential for modern companies? It connects the dots in the customer journey and addresses their needs in real-time.

    It is estimated that by 2028, more than 30% of all insurance transactions will be made through embedded channels. It’s easy to understand why. Modern customers don’t want to waste time with traditional insurance procurement. They might even choose to be uninsured just to avoid the frustration of going through that process. Embedded insurance effectively solves this issue and helps consumers bridge the protection gap.

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    You can think of the protection gap as a hole in your safety net. Let’s say you have insurance to cover your home, car, or health expenses. Your coverage might not be enough to fully protect you against unforeseen circumstances (e.g. natural disasters, an accident, or a major illness). That difference between what you're protected for and what you might actually need is the protection gap.

    Instead of leaving customers vulnerable to financial risks, embedded insurance solutions suggest relevant options for each individual. This brings us to personalization.

    Higher sales due to personalization

    Embedded insurance creates a win-win situation for customers and businesses. Customers get immediate and relevant suggestions for insuring the products they are buying, while businesses get higher profits through insurance sales. Personalization is a powerful tool here.

    With so many insurance policies and packages on the market, businesses have a unique opportunity to separate the wheat from the chaff for their customers and offer the most relevant option to them. It’s important to do so because customer needs and budgets differ.

    From a technical standpoint, Application Programming Interfaces (APIs) are typically used to ensure different systems and platforms can interact with each other. This allows for gathering customer information and suggesting the most appropriate insurance offer to the customer, depending on what they are buying or where they are in their journey.

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    If the insurance offer is relevant, valuable, and affordable, the customer will likely add it to their purchase and walk away from the interaction happy. Satisfied customers mean loyal customers. Delight them by providing a seamless experience, and they’ll become advocates for your business, recommending you to their friends and family.

    Nedeljko Kuzmanovic, Partner and InsurTech expert at Vega IT

    Additionally, with embedded insurance, you can streamline distribution and reduce operational complexities and costs. As a convenient add-on to customers’ current transactions, they will be inclined to buy insurance and, above all, recognize you as their helper. Positive interactions lead to repeated purchases and word-of-mouth referrals.

    How embedded insurance caters to the younger generations

    The younger demographic expects simplicity and personalization – both in online and real-world transactions. They are used for personalized ad recommendations, playlists, and content. Insurance is not an exception.

    Up to 84% of members of Gen Z say their favorite brand treats them as individuals. It’s not a way to “wow” them anymore – it’s an expectation. Even when you look at their older peers, Millennials, the quality standards are very similar. They prioritize ease and efficiency and value brands that recognize their needs, and seamless experiences are at the top of their priority lists.

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    In the context of embedded insurance, this means businesses should adjust to their lifestyle and offer relevant insurance coverage at the right time. No traditional hassle or endless jargon-filled text they need to read. Clarity, relevance, and simplicity are the holy trinity to support this target customer group with insurance and boost sales at the same time. They will not tolerate buggy websites, high page load times, or anything below a seamless experience.

    Technical prerequisites and strategic advice for insurers

    We already mentioned APIs as one of the leading technological drivers for embedded insurance, but there are also various types of digital platforms and data analytics. The most important thing to remember is that you need to embrace both technology and innovation to do it right. Four key elements need to be in place:

    • seamless integrations
    • scalability and flexibility 
    • security and compliance
    • strategic partnerships

    Seamless integrations

    The value of embedded insurance is reflected in timing and relevancy. This means that you will need to smoothly integrate with various platforms and ecosystems. These might include eCommerce sites, financial services platforms, or smart devices. Insurers and their partners have to invest in APIs and microservices architectures that enable efficient communication and secure data flow between different systems.

    Scalability and flexibility

    When choosing the right technology infrastructure, it is important to think about future growth. It needs to be able to handle the increased load, dynamically adjust resources based on demand fluctuations, and support innovation later down the road. Cloud computing solutions are the go-to technology for this because they’re great for accommodating the growth of users, transactions, or data volume. 

    Security and compliance

    Security and compliance are a must for all industries, but we have to emphasize their importance in the context of embedded insurance solutions. Users share sensitive personal and financial data when opting for insurance online which means there have to be robust cybersecurity measures in place. Typically, more sophisticated tech solutions are required, such as data encryption techniques, role-based access control, multi-factor authentication, and much more.

    Strategic partnerships

    Lastly, you need to build strategic partnerships to make embedded insurance work properly. Insurers and businesses from all verticals can benefit from this type of collaboration. Insurance providers might tap into new markets and customer segments, while businesses can provide a better customer experience and monetize this relationship. Together, they can craft a compelling, joint value proposition that will leave the customers feeling seen, valued, and appreciated. Additionally, they can mitigate risks more successfully by bringing different areas of expertise to the table. As a result, both sides make a profit while the customer gets access to relevant insurance.

    With embedded insurance, everyone’s a winner

    Embedded insurance creates a win-win situation for everyone involved – be it the insurance provider, the company that’s selling products or services, or the end customer. It’s all about meeting the consumers where they are and making their lives easier.

    As we approach 2030, we are seeing more innovations in integration, better efficiency, and an additional focus on the customer. 

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    At Vega IT, we have deep expertise working with InsurTech and the embedded insurance sector. We help businesses and insurance providers create seamless digital insurance experiences, minimizing risk for everyone involved while offering unique value to the modern customer.

    It’s exciting to see how the future unravels in front of our eyes, especially when we’re taking an active part in shaping it. Do you need a technical partner to help you create embedded insurance technologies? Get in touch with Vega IT today, and let’s build the future together.

    Nedeljko Kuzmanovic Authorsphoto
    Nedeljko Kuzmanović Partner & InsurTech expert

    Strategically minded. Systematic. Extensive domain prowess. Nedeljko is a seasoned software engineer and a tech trailblazer strongly devoted to keeping up with the latest trends in the InsurTech industry. A passionate development lead and an unwavering mentor, always focused on supporting and guiding his team.

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