Embedded insurance is currently a hot topic in the industry. That’s permeated many of our recent conversations as customers evaluate how embedded currently impacts—or could impact—their deployment plans. The sense of urgency is exacerbated by disruptive companies that Tesla throws its hat, meaningfully, into the insurance ring.
Some new perspectives on embedded insurance have focused on the technology requirements for carriers to play in this space and the architecture required to embed their products. Others have a different opinion. For example, Coverer focuses on product design as the key to success.
While these features are critical, we want to approach the promise of embedded through the lens of the often forgotten insurance agent. Our view is that the agent continues to have a meaningful role in an embedded world.
First, we want to share our definition of embedded. We define built-in insurance as any insurance that can be purchased as part of the commercial transaction for another product or service. Built-in insurance is not a new innovation. Buying life insurance at the airport before a flight was “Version 1.0” of built-in – a model that turned into an incredibly profitable business.
Then, as consumers began to buy more and increasingly expensive items, we came up with “Version 2.0” of embedded, where customers could seamlessly add insurance while making a physical purchase. Consider the car finance provider at the car dealer who is also licensed to sell insurance, car rental insurance sold over the counter or the option for customers to purchase an extended warranty when purchasing an appliance.
With the development of technology and online commerce, we arrived at “Version 2.5”, which we consider as web-enabled built-in insurance. This version of embedded allows customers to buy insurance together with “digital” products such as concert or plane tickets. More recently, this version of embedded also gives customers the ability to get auto insurance through sites like Credit Karma, original equipment manufacturer (OEM) auto parts insurance, or through online car sales sites.
Coverager has mentioned products that are designed to be in the background – including Volvo’s electric vehicle insurance in collaboration with Allianz or Spot’s damage insurance is included in the lift tickets. We see this as a new protection paradigm, embedded 3.0, where the consumer does not have the opportunity to choose the operator, protection level or cost. Customers must have a high degree of confidence that the provider is giving them the right coverage and the right deal.
Where agents fit into an embedded insurance experience
Through our research on the insurance consumer, we’ve learned that while customers are increasingly comfortable learning about insurance and comparing options online, they often aren’t ready to make a purchase until they’ve consulted with a human agent. Most customers still pick up the phone to a call center. According to Accenture’s Insurance Consumer Study, 85% of consumers prefer to interact with a human when asking for advice on products or offers and only 15% complete their purchases online only.
If consumers look for human touch points when buying just one insurance product, they increasingly need guidance when combining multiple, more complex products. As the risk of being wrong about the type of coverage they need increases, customers want to be able to rely on a single source of truth to help them sort out their exposure and figure out how to be adequately covered.
We’re sure agents still have a significant role to play even as some products move toward embedded 3.0. Specifically, we believe that role includes helping clients understand their risk profile and how the coverages and products they buy explicitly or implicitly cover them – including where there may be overlaps in coverage. We believe that insurers should pay attention to the relationship between agent and embedded, and the implications for carriers, agents and embedded distributors.
We would love to get in touch with you to discuss your thoughts on embedded and potential opportunities for your business. Stay in touch with Scott and Bob.
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Disclaimer: This content is provided for general information purposes and is not intended to be used as a substitute for consultation with our professional advisors.
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