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Insurance innovation takes a big step with embedded insurance



As I was preparing for our Labor Day family backyard food this past week, I made a trip to the grocery store to get things on my list … burgers, brats, buns, ketchup, chips, salads, and the like. I started down the aisle (after cleaning my cart, of course) and as I approached the meat case, I came across a large and engaging display of the essentials of the Labor Day party. It was on a raised platform, so it was impossible not to see it. It didn't just have piles of groceries with prices calling out on signs. Instead, it was like a lifestyle day display for Labor Day, complete with a Weber grill, bag of charcoal, barbecue utensils, paper plates and cups, bags of chips, soda bottles and a table with a red checkerboard.

It was a vision of a classic cookout experience. Under the display, the "ingredients" of the experience ̵

1; chips, charcoal, plates, buns, etc. – were conveniently stacked, and just past the display, the refrigerator prominently showed a sale of minced meat, sausages and brats. My shopping list went pretty well with the items on the display and I quickly put them in my shopping cart without having to bother through the aisles to find each one separately. But the screen also reminded me that I needed a bag of charcoal … not the most glamorous part of the cookout, but still an absolutely necessary component to ensure its success!

Even though coal was a must, it did not have to be good and it did not make my shopping list. I should have come home and realized that I needed it when we got things ready, which resulted in a frustrating second trip to the store. But the store made it easy for me to remember it – and buy it – because they embedded it in the Labor Day cookout experience illustrated in their display. They basically created a whole "ecosystem" experience that contained all the key ingredients I needed. All I had to do was put them in my cart and check them out. This is an effective strategy to both increase sales and create a satisfying customer experience. In fact, a study from grocery stores from 2014 showed that products placed in such advertising screens were seen by almost twice as many store visitors compared to products stacked in the store's inner corridors. [i] Greater visibility, especially in the context of an engaging experience, significantly increases the chances of purchasing.

And this strategy is not limited to retailers. Embedding insurance as part of another related offering quickly becomes a powerful marketing and distribution strategy, which in effect removes insurance from the "inner aisles" and places it in front of customers when they buy other products or services. In an SVIA webinar I spoke at in August, we defined embedded insurance as a strategy that:

“Gathers coverage or protection when purchasing a product, service or platform. This means that the insurance product is not sold to the customer ad hoc but instead is provided as a built-in function.

It's an extremely effective way to overcome the decades-long burden that has plagued the industry: Insurance is sold, not bought. Embedded insurance completely changes this paradigm. With it is no longer sold because it is bought as part of something else.

Ecosystems are the basis for embedded insurance

An important driving force for the transition to embedded insurance is the increase in ecosystems. Swiss Re's report from 2019, Digital ecosystems: expanding the boundaries of value creation in insurance noted that ecosystems can be structured in broad clusters, such as "Home & Stay" and "Lifestyle" on the B2C side, and " Build / produce "and" deliver "on the B2B page. Within these clusters, more detailed domains can be defined, such as "Mobility" or "Transport & Logistics." Insurance fits into risk assessment, management and mitigating aspects of these ecosystem domains, including mobility / transport, property / housing and health / well-being / prosperity.

In today's interconnected world, insurance must play within these ecosystems, rather than just as an industry in itself. This differs from today where the customer, in order to get insurance, must use existing, traditional insurers (channels, insurers, MGA, reinsurers, etc.). It represents a fundamental transition from the inside out to the outside.

As a result, insurers need to rethink the scope of what they offer customers – to include not only the risk product but also value-added services from a broad ecosystem and a compelling digital customer experience. Those who act according to this new vision will see new, innovative and exciting new business opportunities that reach and engage customers when and how they want. Here are some examples of companies – inside and outside the industry – that are leading with an embedded strategy:

  • Zipcar: Car Share Membership Comes with Insurance
  • Microsoft and AXA / XL: The Microsoft Platform You Use to Run Your Small Business is associated with cyber insurance at a discounted price
  • Mylo and Move Guru: Concierge supplier for real estate agents to offer insurance to clients for homes, tenants, moving, etc.
  • bsurance: Provides buyer protection, bicycle, mobile device, deposit for boat charter and travel insurance at the point of sale.
  • BMW / Wrisk: All new Minis were sold with three months free insurance by the BMW Group with Wrisk – a new Mini Flex Car Insurance product.
  • Volvo: “Care” Offers a fixed monthly cost and no down payment for a new Volvo car, including insurance, tax, maintenance, service and repairs.
  • Clyde: Extended Warranties and Accident Insurance.
  • Certain: Micro-life insurance coverage during air travel.

Customers, especially Gen Z and Millennials, are a growing fan base for embedded insurance, which we found in our latest primary research with car and life insurance customers. Although the traditional purchasing methods from agents / brokers or directly through an insurer's website are still the most popular channels, there is great interest in buying insurance that is part of another product or service (see Figures 1 and 2). But why do customers like this method? The answer lies in the psychology of simplicity .

Figure 1
Figure 2

Customer Psychology Drives Simplicity

Embedding insurance is about understanding what the customer is trying to do and making it easy for them to do so. We found that the Fogg Behavior model was a very useful framework for understanding why insurance has gained its "sold not bought" reputation. The model illustrates why embedded insurance is so effective in overcoming this reputation. Several newly launched InsurTech models have used the model to redefine how they will offer insurance and engage their customers – successfully.

There are three factors in the Fogg Behavior Model such as embedded insurance addresses:

Motivation – Q: Why should customers buy insurance? Answer: The customer is already buying another product or service, so no "new" motivation is required to buy insurance later.

Ability – Q: Is it easy to buy? A: Yes, insurance is either included automatically or listed as a convenient supplement.

Calls – Q: Is there a compelling reason or trigger to buy right now? A: Yes, the request to add insurance occurs at the same time as the purchase of the primary product / service purchased.

Embedded insurance successfully passes all three of these tests. Embedded insurance is easier to buy, creates a better customer experience, contributes to the growth of insurance companies and helps to close the large protection gap among the uninsured or underinsured.

How do you customize your business model with embedded insurance?

Although my grocery store manager probably did not use the same terms, they realized that Labor Day Vacations had an associated "Labor Day cookout ecosystem" as a micro-replacement of the Lifestyle ecosystem, they created a platform (literally, it was on a platform) that bundled / embedded all related products anyone would need to create a successful family background.As a result, they created a very satisfying experience for me (and no doubt other customers) and most likely created a good bump in their sales.

For insurance companies, it's a little more complex, but the principles are the same. ] of the products and services, or the supplier of the products and services, what the insurers achieve depends on their ability to enter the market while there is still an unfair "white space". Of course, this requires leadership with an appetite for taking informed risk, the ability to move quickly, the ability to build partnerships within and outside insurance, and strong technology capabilities. to optimize the current business to maintain and grow the existing customer base; and speed of innovation using the next generation cloud-based insurance platform with advanced digital and data / analytics features and third-party services delivered via APIs that enable innovative companies to create fast values, unique customer engagement, a "test and learn" platform for minimal viable products and value-oriented, optimized costs.

But most important is a clear vision of the customer's expectations and journey combined with the ability to assemble a broad ecosystem of partners, products, services, data and technology that enables the customer to fulfill all their needs in a holistic and satisfactory way.

We believe that embedded insurance will be a standard in the future of insurance. Will you be ready to meet this new standard?


[i] Pak, Olga, et al., “Optimizing stock-keeping unit selection for promotional display space at grocery retailers,” Journal of Operations Management, December 2019, https: // www .researchgate.net / publication / 338008948_Optimizing_stock-keeping_unit_selection_for_promotional_display_space_ret_grocery


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