Embedded insurance & managing risk in just-in-time supply chains

Can embedded insurance bring the Amazon-buying experience to the transportation & freight industry?

When embedded insurance is done right, it should engage customers in an educational exercise that gives them more information and control so they can, in turn, make better decisions. The decision to then add coverage or not rests entirely with them. (Credit: Aunging/Shutterstock.com)

Today, the barrier to entry for insurance is far too high for many cargo and freight small and midsize businesses (SMB).

In this highly competitive industry, freight and logistics professionals operate on razor-thin margins and must make decisions in seconds. Unfortunately, when they need spike and gap coverage, a game of phone tag with you could cost them a profitable load.

Additionally, as you rarely recover your investment in writing transactional insurance, a critical need in the spot freight market, SMBs are instead offered expensive annual policies, which often cut too deeply into their profitability.

All of this pain is further complicated by the fact that they likely don’t have the benefit of an in-house risk management team and statistical insights. As a result, they’re unable to accurately gauge the risks involved with any particular shipment — or understand exactly what they’re getting from the coverage they do purchase. This means they’re likely operating with broad risk exposure and embedded insurance is a solution to this challenge.

What is embedded insurance, exactly?

Leveraging API integrations, insurance networks can empower SMBs to opt into instant coverage with a single click, right from within their existing workflows.

It’s a seamless process you’ve most likely already experienced.

Consider shopping on Amazon, for example. When you decide this is the year to invest in a top-of-the-line blender for the frozen daiquiris your neighbors keep raving about, you can add a protection plan — it’s located right next to the “Add to Cart” button. Just click the checkbox to add the premium to your purchase price, and you’re covered.

Embedded insurance for the transportation industry can operate in much the same way.

Your clients have already done the heavy lifting of entering shipment details into their workflow. Embedded insurance simply harnesses this existing data to accurately price the risk at a granular level, and then enables them to instantly transfer that risk on-demand.

Just as important, embedded insurance enables the insurance industry to deliver critical insights right at the point of purchase — helping them better understand both their risks and coverage options. For example, a “risks and coverage details” link could launch a pop-up that highlights their exposure to Acts of God, theft and general average-related losses if they rely on carrier liability coverage alone — a fact misunderstood by many.

To be clear, embedded insurance shouldn’t employ scare tactics. Quite the contrary. When embedded insurance is done right, it should engage customers in an educational exercise that gives them more information and control so they can, in turn, make better decisions. The decision to then add coverage or not rests entirely with them.

Of course, it’s easy to speak to embedded insurance conceptually. Delivering a seamless solution is another matter entirely.

Taking a human-centric approach to embedded insurance

What we at Loadsure consider a good product is quite different from how it would be defined by the traditional insurance industry. We ask ourselves: How can we provide the customer value in the most frictionless way?

Using a quote-based solution, which can be integrated in just a few weeks, enables shipment details to be sent to an API. An AI learning engine then instantaneously prices the risk and sends back a quote with the premium, deductible, and terms and conditions — all from a single added step in the workflow. All the customer has to do is click, “Yes.”

Another option is to use a lightweight URL-link API, which can allow insurance networks to deploy even more quickly. While this approach isn’t quite as seamless (it delivers the insurance purchase flow in an iframe pop-up or another tab), it’s a fast and simple way for you to deliver added value.

In either case, this is very different from the way insurance works today — creating delays and adding costs through traditional processes, printed forms, and multiple human touches.

That said, while technology provides answers to critical challenges in the global cargo and freight industry, it doesn’t deliver every answer. Insurance brokers will always have an important role to play, though that role will evolve. Going forward, sophisticated technologies will manage mundane tasks and free brokers to attract new business, cultivate customer relationships and provide the careful guidance your customers need.

Empowering SMBs to make informed, proactive decisions

Right now, when your customers need to protect their goods and merchandise, they purchase coverage and they’re done. End of value.

Unlike traditional insurance, embedded insurance solutions plug them into an entire ecosystem, giving them full visibility into everything they’ve insured. What’s more, these solutions can empower them to slice their data and create customizable, granular reports broken down by carrier, commodity, and limits. Able to now easily understand their insurance costs, claims history and the value of their coverage, they can better manage their overall risk profile.

How so?

One part of the embedded insurance equation is providing liquidity when something goes wrong, and that’s critical. The other part is giving customers easy visibility into where their losses occur, insight that was labor-intensive and often cost-prohibitive to generate before — that is if they even had access to the data in the first place.

Even more exciting, with visibility into vast quantities of high-resolution data, embedded insurance solutions can deliver increasingly sophisticated risk management insights over time. AI learning engines will look for patterns in anonymized data and identify behaviors that create risk. When they discover a pattern for a particular category, every customer will benefit from it. Think of it like crowdsourcing insurance insights — everyone in the environment will be empowered to suppress their losses.

Enabling you to seize new business

It’s not just clients who will realize value from embedded insurance solutions, of course. It can benefit insurance brokers, as well.

For starters, embedded solutions enable brokers to write business they couldn’t before, simply because they didn’t have capacity.

What’s more, where the cost of writing some business was once too high in terms of time, effort and money, embedded insurance removes this friction. What was once not a profitable line of business, can be turned into a profit center with automation. Once a solution is launched into your wholesale and retail networks, or even into client workflows, it simply becomes a question of how much volume you can drive to the solution to boost revenue.

The future of transportation insurance is embedded

Damith Chandrasekara of Loadsure. (Credit: Loadsure)

Labor-intensive traditional processes introduce inefficiencies and added costs. The result: Risk management that’s crucial to business sustainability becomes too slow and costly to be accessible to the SMB. By leveraging AI and automation, embedded insurance reduces the complexity once involved in delivering coverage to a single click.

When you consider the barriers many SMBs encounter, factors that contribute significantly to the massive underinsurance of cargo and freight, it’s clear that a new approach is needed. Embedded insurance offers this simple path forward, delivering anytime access to instant, cost-effective coverage, while empowering you to increase your service levels and grow your businesses.

Damith Chandrasekara is CTO & co-founder of Loadsure. Previously, Chandrasekara served as CTO at 30dB, where he built a highly scalable social sentiment engine that delivered real-time insight into both public opinion and what drives it. It is within the multinational conglomerate, IAC Applications, that Damith grew from senior engineer to technology executive. His responsibilities spanned technology strategy and architecture; business plan development; management; reorganization; and funding of teams across IAC business units, the likes of Pronto, Mindspark, and Ask.com.

Opinions expressed here are the author’s own.

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