Making embedded insurance more customer-centric

No two insurance policies are the same, and that extends to the way carriers deliver their embedded insurance models, one expert told the Insurance Canada Technology Forum. 

But before capitalizing on this latest digital sales opportunity, insurers must guarantee their consumers’ needs are at the forefront of the embedded experience, Renée Walkom, chief operating officer at Foxquilt, a digital MGA, said during ICTF2024 in Toronto.

Why embed?

Embedded insurance is a strategy that bundles a policy within the purchase of another service or product offered by an insurer’s partnered business.  

“It’s most well-known with warranty when you’re purchasing a product, or travel insurance when you’re purchasing a flight, but there’s really no limit as to what that could look like,” said Walkom.

For consumers, it enables them to get an insurance policy added-on at point of sale without having to separately seek out coverage. 

For the business partner delivering the embedded policy (for example, an airline that’s bundled travel insurance within flight purchase), it helps mitigate future risk by making it explicit to consumers that they’ve either added or declined the add-on coverage. 

“It also significantly improves their flow, so [less] drop-off when people don’t have to leave the ecosystem to go separately get insurance,” added Walkom.  

She called this form of quoting a type of blackbox underwriting. “It’s really about having a fully automated underwriting process such that your rate rules, forms and all of your pricing algorithms on the back end are built into the technology. 

Embedded benefits

For digital-leaning consumers, or small business consumers who may only have time to apply for insurance after-hours, this is of particular benefit.

“You could do the entire process without ever touching or needing to touch a human,” Walkom said.  

Regardless of how insurers choose their embedded model or distribution method, the customer is meant to be the primary beneficiary.  

“When you’re focusing on the integrity of the technology, and the underwriting, and you’re completely agnostic to the channel, then it’s the customer who wins at the end of the day,” Walkom said. 

When done right, embedded insurance benefits consumers through: 

• Empowerment – by putting the option to purchase insurance right in front of consumers, it allows them to exercise their purchasing power, suggested Walkom. 
• Ease and access – embedded insurance is meant to integrate the insurance purchase directly with another sale, which removes barriers and limits excessive transactions. 
• Personalization – a dynamic underwriting model makes it so that consumers’ quotes change in real-time while they input their information. It also allows for individual or isolated (iso in industry parlance) pricing for entrepreneurial consumers who may have hyper-specific coverage needs for their business ventures, Walkom said.  

Where and how to embed insurance 

There’s a spectrum of embedded options that insurers may consider integrating with their business partners. 

One is a ‘light’ embedded insurance model, where a simple hyperlink directs a consumer to their insurance purchase.  

Then there’s a data embedded insurance model, which enables data transfer from consumer to business partner.  

“What this could look like is the information you’re filling out on an application in [a home enhancement service] for example, is automatically transferred to your insurance application,” Walkom said. “Similarly, when you receive your certificate of insurance, or you cancel your policy, that information is automatically transferred back to the partner.” 

Or there’s the full embedded model, which takes “the entire purchasing journey and [puts] it within the ecosystem of the partner,” Walkom said. “So, it’s your quote-to-bind, but it’s also endorsements, cancellations, any billing changes — and all of that existing within the partner ecosystem.” 

Broker’s role

There are many ways insurers might consider distributing embedded insurance. Ultimately, it’s up to the insurer and their partnered business. 

“We get a lot of questions on, ‘is it solely for direct to consumer? Is it intended to remove brokers from the process? Is it really meant to be an ‘aggregation tool?’” she posed.  

Or, there’s perhaps the most famous type of embedded insurance — the enterprise distribution — which could range from e-commerce shops, to banks, to airlines and more.

And no, Walkom emphasized, embedded insurance doesn’t have to remove the broker from the purchase.  

“An embedded play…is not about removing brokers from the process. That’s actually one of our key partnerships,” she said. “What this can look like, first of all, is taking that seamless journey and putting it also in the hands of brokers and agents.  

“If a consumer can bind in five minutes, so can the broker, which is extremely advantageous when you’re talking about really, really small policies,” she said.  

“If it’s a $300 policy, no one wants to be spending a lot of time — certainly not a broker, the middleman — trying to get that to fruition,” she added. “They would have the [opportunity], not just to see the quote, the availability and the product fit, but to complete the process on behalf of their clients.” 

Feature image by iStock.com/TopVector