Life in the digital age can feel frantic. The constant notifications, the phishing scams and data breaches, the social media fear of missing out, and all the shows you’ve been meaning to stream.

The innovations that have come with our connected and networked lives are still well worth it, but it can feel like we always have to be on-guard.

What if all this connection, all the microservices and apps that were a part of our lives, meant that we could live safer, more secure lives, with piece of mind everywhere we went online and in the real world?

Thanks to embedded insurance, we’re already headed there.

Just think about your last ride share or car share trip. That likely involved a behind-the-scenes insurance transaction, either on the passenger’s part or the driver’s. You can now find a life policy not only built into health and wellness platforms but even available if you’re taking a trip or going on an extreme outing, like skydiving or mountain biking.

These innovations are possible, though, because insurers have the technological means. Thanks to AI, cloud and other advancements, services are increasingly available in the place, scale or package that consumers and partners require.

“The industry is moving away from selling insurance to buying insurance,” Denise Garth, chief strategy officer at Majesco, said in an interview with Industrious. “Forty percent of insurance is going to be embedded over the next 10 to 20 years. The customers are in the driver’s seat and that’s flipping the entire business model on its head.”

Embedded insurance may not be an entirely new concept—just think of how long you’ve been getting offers for travel insurance along with your plane tickets. What is new is the ability of technology to insert insurance into so many new services and experiences.

Technology can insert insurance into all kinds of new services and experiences.

To achieve such offerings, and meet customers where they are and when they’re in need, insurers have to be able to reorganize, recalibrate and even rethink their offerings almost as a suite of apps or plugins that other digital businesses can then insert into their own offerings.

“The culture right now is ripe for embedded insurance,” Yoann Michaux, senior partner and insurance lead for IBM iX, told Industrious. “There is already a presence of insurance products being added to non-insurance entities, and that data can be leveraged to bundle products. This is an opportunity for insurance products to exist in consumer’s day to day lives in a new, modular way.”

And it’s an opportunity for insurers: the estimated market value for embedded insurance services could reach USD 3 trillion.

Three ways to embed insurance

The different levels of embedded insurance are already pervasive in the market. There are soft embedded services where customers can opt in to purchase travel insurance; hard embedded services that come with an included warranty; or invisible embedded services, as is the case with Tesla, which offers customers Tesla’s own insurance instantly with vehicle purchase.

But with hybrid experiences come hybrid needs, and the purchasing of a product is no longer the core element.

“A product today is no longer just the risk product, it’s three elements combined,” Garth said. “It’s the risk product, plus value-added services, plus the experience.”

Millennials and Gen Z consumers are the dominant buyers in the marketplace across all industries, and their customer needs and expectations are different from those of past generations. Carriers need to shift their business model strategies—regularly, simultaneously and instantaneously bundling and unbundling services to meet the ever-shifting needs of an ever-shifting demographic.

“A good agent will sell product, but then it’s about how you leverage modern technology, principals and digital services to scale efficiencies and scale that effect,” Robin Keira, the CEO of Digital Scouting, told Industrious.

Many young people could not name an insurance company they trust, but they could tell you the name of their favorite retailer, gym, airline or vacation rental site.

Outside of health insurance, the next generation is not thinking a whole lot about insurance carriers. Many young people could not name an insurance company they trust as their favorite, but they could tell you the name of their favorite retailer, gym, airline or vacation rental site.

What most do not realize is that all of those other companies and brands are effectively insurance brokers, seamlessly adding insurance into their offerings.

“This opens the door for the embedded insurance sector to revolutionize the way we buy insurance,” Garth says, “but insurers have to decide where and in what role they want to play.”

Making insurance fresh and new

 What makes embedded insurance services fresh and new again is the drive toward digitization that’s catalyzing changes across all industries. Insurance incumbents are aware of both the friction and the opportunities that exist.

Indeed, the need for carriers to innovate and get in front of customers is immense if they don’t want to simply be a background player offering bulk or commodity services to the businesses who actually get to have the more lucrative customer relationships.

“There is a battle for the position closest to the customer going on, and the insurer that doesn’t make that connection will be reduced to a commodity,” Keira points out.

Imagine a next generation one-stop portal that moves past buying insurance or paying a bill. Embedded insurance would exist in these one-stop portals that go beyond just the transaction to offer customers advisory value in life, health, wealth and wellness. While getting access to their policies, customers could perhaps check the status of their 401k, create and maintain budgets or monitor themselves via interactive health technology.

Carriers need to form a relationship with the customer.

Some insurers are even experimenting with the concept of a risk concierge that can help predict problems for customers, such as a dangerous stretch of road on a policyholder’s regular commute.

Insurance is about protecting against future risk. And lowering risk necessitates access to as much data as possible. Combining unstructured data with embedded underwriting offerings could allow carriers to be the orchestrator and own the relationship with the customer.

Joining, and beating, the competition

Non-insurance organizations are already present in this space and creating a high degree of loyalty and purchasing influence with the customer. Shopify, for example, includes their own insurance directly on site, Shipsurance. And startups like Spot have created new distribution channels by targeting active lifestyle consumers and offering them simple ways to purchase short-term life insurance policies directly on their platform.

When it comes to traditional carriers, leveraging the right tech stack would make it possible to play in a partnership ecosystem or decide how and where they want to own the customer relationship.

“The entry point and technology components to building market solutions are multiple,” Michaux said. “To compete, or even partner in this new ecosystem, incumbents are going to need a multi-channel reach in order to provide multiple potential experiences. This requires the ability to switch step-by-step from a physical to a digital channel; to intertwine that journey seamlessly.”

Firms are already utilizing technology like AI and automaton to optimize and scale processes, improve policyholder experience, speed up claims processing, and increase customer centricity. But with digitization now making it possible for so many platforms to accelerate distribution services and become an insurance provider, incumbents will need to revisit their business models and strategy to play smartly in an embedded ecosystem.

Having the right technology puts the both the insurer and consumer in the driver’s seat to success.

It’s one of the chief reasons many insurers are looking to an open, hybrid cloud approach for their embedded insurance offerings. Hybrid cloud offers distinct advantages both for deployment and partnership—allowing carriers to both connect more tools to their systems, driving innovation, and to connect to more third-party systems. The latter is especially important as insurers look for more and more market opportunities for their now micro-offerings.

“Secure and connected hybrid cloud, AI capabilities, blockchain and API solutions all need to integrate seamlessly to modularize and optimize legacy systems,” Michaux said. “This will allow carriers to be in many different places at once, to enter into this sphere and connect their own systems through an ecosystem of partners.”

Historically, insurance evolved as a reaction to its present time and circumstances, and it will continue to evolve in this manner. Customers need protection from future risk and will shop for it the same way they move through the rest of their digital experiences, via an instant buffet of accessible valued services from trusted established consumer relationships.

It’s not so much a disruption to the industry as a revolution, Garth argues—one in which incumbent carriers need to quickly draw their battle lines and figure out what side they are on. “It’s not a disruption, but rather an opportunity to elevate,” Garth said, “and having the right tech stack ready will best prepare insurers to spot these new opportunities and optimize for success.”

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