If embedded insurance isn’t a topic in your boardroom, why not?
The global market for embedded insurance is projected to grow to about $500 billion by 2030.
Embedded insurance is revolutionizing the insurance market by seamlessly integrating insurance products into non-insurance services.
This innovative approach not only enhances consumer protection but also expands market reach and improves customer engagement.
But where is the market going, and how are insurance and non-insurance brands alike approaching embedded innovation?
There are numerous examples of embedded insurance across sectors. Exploring some of them can help bring the concept and its potential to life.
One compelling application of embedded insurance involves smart home devices like security cameras and water leak detectors, which can be bundled with property insurance. For instance, if a water leak is detected, the insurance policy may automatically cover the repair costs.
Similarly, in commercial leases, landlords can embed liability insurance to safeguard tenants against injury or property-damage claims. Even in the auto sector, ride-sharing companies are exploring embedded insurance to provide coverage for drivers and passengers during trips.
Embedded insurance extends beyond personal lines. For instance, CFC has launched transaction liability insurance embedded into online M&A platforms, enhancing risk management for smaller businesses during mergers or acquisitions.
Meanwhile, the Generali Vitality product exemplifies how embedded insurance integrates wellness incentives into health insurance, promoting healthy behaviors and reducing claims costs significantly. This approach not only benefits consumers but also enhances insurer profitability and customer engagement.
Another example of this is Nubank, a digital banking pioneer founded in Brazil in 2013, which serves over 40 million users across Latin America, offering a range of services including personal and business accounts, credit cards, investing, loans, and insurance.
Partnering with Chubb, Nubank leverages its technological focus and customer trust to seamlessly integrate embedded insurance into its offerings. This collaboration allows for personalized insurance recommendations based on detailed customer data.
Despite only 20% of customers initially having life insurance, over 70% expressed interest in obtaining coverage. By offering insurance, Nubank differentiates itself from other online banks, deepening customer engagement, fostering brand loyalty, and generating additional revenue.
The growth potential of embedded insurance is significant, with projections suggesting a CAGR of 25% until 2030, potentially reaching more than $500 billion in global premiums. This growth is driven by digital adoption and strategic partnerships between insurers and non-insurers, leveraging economies of scale and enhancing the customer experience.
Despite its promise, embedded insurance presents challenges, particularly regarding regulatory compliance and the ethical use of AI in risk assessment. Transparency is crucial to building consumer trust and ensuring fair treatment.
To capitalize on embedded insurance fully, insurers and non-insurance brands must tailor offerings to meet specific consumer needs, whether in property protection, liability coverage, or wellness incentives. Strategic partnerships with the non-insurance brands that will distribute the product, combined with technological advancements will be key in reshaping business models and delivering enhanced value propositions.
Insurers must also consider the role of data in embedded insurance, using insights for product design, risk management, and customer engagement. Platforms facilitating no-code/low-code development enable rapid innovation, empowering insurers and non-insurance brands to adapt quickly to market demands.
Looking ahead, embedded insurance represents a transformative force in the industry, demanding attention in boardroom discussions as a catalyst for growth and revenue diversification. By embracing this trend and fostering strategic collaborations, insurers and non-insurance brands can secure their relevance and leadership in the evolving insurance landscape.
I firmly believe embedded insurance offers a strategic opportunity to reimagine insurance distribution, enhance customer value, and drive industry innovation. Its integration into diverse sectors underscores its transformative potential, and I urge leaders at insurers and non-insurance brands to add this topic to the agenda for their next board meetings, and innovate boldly, putting the relevance and value to the customer front and center, and to capitalize on emerging market opportunities.
Alex Astengo is the UK manager at Root. He can be reached by sending an email to alex@rootplatform.com. Opinions expressed here are the author’s own.
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