Agents & brokers will be the driving force behind embedded insurance 2.0
It’s time for commercial insurance to upgrade its embedded strategy and expand beyond affinity partnerships.
Embedded insurance 1.0 arrived on the scene set to completely change how people interact with their insurance company. By integrating at the point of sale, insurers could cut out the producer and directly sell to policyholders, drastically reducing expenses while gaining market share. While there are some niches in insurance where this absolutely makes sense (e.g., workers’ comp, pet, jewelry), many lines have yet to realize the embedded insurance dream.
Commercial insurance particularly seems to be missing out. Naturally, I’ve got to ask: “What gives?”
I could point to the tech. A typical carrier can’t bind a policy via API. Only a few of them can even quote. The idea of a magical experience integrated into the point of sale is still a fantasy. What starts as a neat idea on paper turns into an email asking for more information and an ACORD form. This isn’t what we signed up for.
It could be the economics. To get to scale, insurers need to partner with major players. Since only a few of those players control the majority of consumers, these non-traditional distribution partners end up controlling the cost of acquisition. This often makes it more expensive than traditional channels and erodes the economic benefit of embedded insurance.
It could be that no one really knows where to “embed.” Lots of people shop at Kroger. But putting insurance at the checkout lane of a supermarket is not the right time or place for people to think about insurance, regardless of how much volume.
While those are some influences, I think the main reason is more obvious; insurers shouldn’t build their go-to-market strategy (GTM) around only 5% of their target market.
In commercial lines, roughly 95% of businesses still go to a licensed insurance professional to get advice on what insurance to buy. So why are we building GTM strategies around the remaining 5%? Yes, it is good to use the tech to decrease the uninsured population by embedding in these affinity channels, but should we do it to the neglect of the 95%?
Let’s stop solely focusing on embedding where only 5% of the market is. Instead, start embedding in the systems that your distribution partners work in every day. Make it so producers can bind a policy with a click. Focus your efforts on the 95% of the insurance market that knows what they’re doing when it comes to a complex product.
By (truly) embedding in these systems you will not only access more market share, but you’ll be solving a real problem. In a recent survey, agents and brokers identified that their number one problem is marketing. No surprise. The second biggest annoyance is switching between multiple carrier portals. Even insurers who offer something “embedded” often require the agent and broker to bridge over into the insurer portal, requiring them to go through another login experience and enter more information. We can do better.
I won’t speak for the several niches of personal lines and workers’ comp where embedded insurance is working, but I will speak for small commercial. We need to use the tech and data we have to change the experience for agents and brokers, expanding beyond affinity. In doing this, we can open massive markets that were previously undesirable, resulting in a larger, more profitable market for everyone involved.
At Coterie, we built an easily embeddable small commercial insurance experience so we could unlock the 33 million small businesses that are underserved today (of whom, nearly half don’t have insurance). With this API, we’ve placed ourselves across the value chain, helping licensed insurance professionals sell policies in the systems they work in. Today, more than 65% of our volume comes via this API, whereas the rest comes via our agent/broker portal. This is not a plug, it’s a data point. One that is indicative of where the market is going.
If these stats tell us anything, it is how agents and brokers do business is changing and we as leaders in the insurance space need to wake up to that realization. We need to start focusing our efforts on what our customers want rather than attempting to cater to a transient 5% of the market who often costs too much to acquire.
I am grateful that embedded 1.0 birthed the tech and helped it fumble through awkward adolescence. However, it’s time for commercial insurance to upgrade its embedded strategy and expand beyond affinity partnerships. Let’s use the tech we have to improve the lives of not just the 5%, but also the 95% who work with agents and brokers.
The companies that create the most value for the largest market will be the most valuable companies. Right now, we have an opportunity to do just that. There is a massive market of underserved customers who, with the right tech, we can meet on their terms.
If we want to be valuable, we need to create real value.
David McFarland is a recovering actuary who is passionate about innovating in the insurance space. As co-founder and CEO of Coterie Insurance, he directs the insurtech in simplifying commercial insurance through data and design.
Opinions expressed here are the author’s own.
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