IS2's Joe Sultana talks embedded

Embedded Insurance: Friend or Foe? Embedded insurance is rapidly reshaping the industry. Whilst it offers exciting opportunities for growth and customer convenience, it comes with the inherent risks associated with mis-selling and the PPI scandal, as previously reported.  

However embedded insurance is here to stay – the potential benefits are too great to ignore, so the question needs to be, how can technology ensure that this time, as an industry, we get it right. Risks Embedded is nothing new, but until recently it has been very analogue and usually single tie and the technology to enable it has perhaps fallen short both in terms of the user journey and the auditability of the transaction.  Now products are digitised – multiple insurers can potentially plug and play via an API with dynamic pricing.  

This is where the market is growing fastest.  A recent survey by Chubb in 2023 showed that 81% of global financial services executives say digital insurance embedded in websites and apps has become a ‘must have’ not a nice to have offering. The inherent convenience of embedded insurance however can lead to a lack of informed decision-making. 

Customers purchasing a new phone at checkout might impulsively add on phone insurance without fully understanding the coverage details or if it duplicates existing insurance. Similarly, unclear communication regarding policy limitations and exclusions could create frustration and disputes down the line.  Furthermore, the integration of insurance products with non-insurance platforms raises concerns about data privacy and control. Technology as the Shield Fortunately, the very technology driving embedded insurance can also be its shield against past mistakes. Here's how: 

• Transparency through Automation: The product benefits must be presented factually as part of the journey.  From a legislative perspective this is a controlled environment where consistency can be provided through the technology.  The tech now enables a full audit trail of the transaction, questions answered, interactions and benefits and even any drawbacks or considerations that were included pre-sale.  We have also seen examples of the insurance being embedded and provided on a ‘free’ basis but only for a period; when the period expires then it can be renewed but with additional questions asked and cover options offered.
  
  
• Data-Driven Personalisation: Leveraging customer data responsibly allows for personalised recommendations and targeted offerings and bespoke pricing, which is TCF. The rules associated with the suitability of the product based on data collected are also consistent and can be audited now.
  
  
• Focus on Customer Education: Embedding short educational modules within the purchase journey can empower customers. Interactive tools can explain key concepts like deductibles and exclusions, fostering informed decision-making.

Insurance is a risk based, not transaction based product like banking.  The insurance sale is as a consequence of the product, not the product itself, and this is the issue – the purchase must be a conscious purchase decision and the technology can certainly help here.  The introduction of the Consumer Duty has put much more emphasis on the principles of transparency and delivering value to consumers, something that we didn’t have back in the days of the PPI scandal.  We need to ensure that these principals don’t get obscured by embedding the insurance behind the primary product being purchased. Building Trust: The Key to Sustainability Embedded insurance's long-term success hinges on building trust. Insurers, brokers and their software developers, must collaborate to ensure: 

• Clear Value Proposition: Embedded insurance should enhance the customer experience, not become a source of confusion. The value of each product must be crystal clear, communicated upfront, and aligned with the core offering of the non-insurance platform.  This is about simple products where the data needed is either in existence already, or collected as part of the journey.  This is not for complex commercial combined.
  
  
• Regulatory Compliance: Adapting to evolving regulations in the embedded insurance space is crucial. Collaboration with regulators and industry bodies is essential to establish clear guidelines regarding data privacy, product design, and sales practices.
  
  
• Prioritising Customer Centricity: Keeping the customer's best interests at heart is paramount. This means offering fair pricing, transparent terms, and a seamless claims experience.

By leveraging technology and prioritizing customer centricity, embedded insurance has the potential to be a win-win for insurers, brokers, and consumers alike. It offers a unique opportunity to expand reach, provide relevant coverage, and enhance customer experience. Embedded insurance is here to stay, and those who adapt and innovate will be best positioned to thrive in this exciting new era.

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Is embedded insurance friend or foe? - Insurance Post (postonline.co.uk)