Embedded Insurance is the Future

Most recently, a report by Nasscom cited that Indian consumers lead the world in demand for contextual and embedded insurance from their banks. Global data also cites that EI premiums, which are forecasted to reach $500 billion by 2030, account for 20% of the overall insurance market. All these data reflect a gradual but entirely positive shift of Indian customers from traditional to innovative insurance product consumption. If we delve deeper, embedded insurance and finance present a trillion-dollar opportunity for insurtechs, creating new revenue streams and lowering distribution costs by focusing more on the mid-market and tier II /III regions for better revenue generation. Embedded insurance isn’t just a change in the distribution model but a holistic shift in how customers think about insurance and its role in their lives, providing more power, flexibility, and control. 

Let's explore the potential of embedded insurance and how insurtechs and financial institutions have leveraged this trend to stay competitive and relevant in today's digital economy.

Personalised offerings for better customer service:

Embedded insurance creates rich data at the point of interaction, an opportunity for insurtechs to deliver highly personalised financial solutions. Leveraging data analytics or machine learning to real-time behaviour patterns in the last one decade have enabled insurtechs and insurers to deploy offerings that help customers. 

• Instant gratification: Insurtechs / Insurers and financial institutions have provided instant credit offers at the time of any purchase, especially for heavy-duty home appliances, furniture, etc. They show the customer a low-interest instalment loan option, increasing the purchase chances.

• Rewards: Insurtechs have started to use spending analytics to provide targeted rewards. For instance, if the spending data shows that a customer is buying from a specific aisle at a grocery store, then a bank can offer cashback points at the store. 

• Product Recommendations: Embedded finance/insurance enables dynamic product recommendations for savings accounts, insurance, retirement plans, or any other product tailored to users' spending, income patterns, or life events. Relevant offers at the right time make for satisfied customers and pave the way for greater cross-selling opportunities.

• API-based integrations: E-commerce, travel, and healthcare platforms, as well as seamless data exchange, enable insurers to identify prospective customers and pitch their offerings during purchasing. This move significantly reduces distribution costs and shifts the customer mindset towards insurance and protection. Embedding insurance in the proper distribution channels in rural India also helps reach customers whom insurers do not typically tap due to demographic or geographic location constraints.

Establishing a robust architecture:

Insurance APIs, modular architectures, automated workflows, and robust platform setups are revolutionising the insurance industry by enhancing efficiency, flexibility, and customer satisfaction. APIs enable seamless integration across systems, facilitating real-time data exchange, automated underwriting, and secure data sharing, streamlining operations and reducing manual interventions. Modular architectures allow insurers to develop customisable products without extensive code changes, fostering innovation and adaptability to evolving market demands. Automated workflows minimise manual tasks, accelerating processes like claims handling and policy management, which improves operational efficiency and reduces errors. Robust platform setups ensure high performance, security, and optimised data management, supporting advanced analytics capabilities that provide meaningful insights for informed decision-making. These components have empowered insurers to deliver superior products and services, enhancing customer experiences and maintaining competitiveness in a dynamic market.

Bridging the insurance protection gap in India:

Innovations in technology, supportive regulatory developments, and a vibrant ecosystem of insurers, insurtechs and distribution partners are converging to redefine how protection is delivered across demographics and geographies. However, there are several gaps, and one of the significant challenges is affordability and accessibility, especially in the tier II and III areas. Furthermore, a lack of understanding about products, top-ups, and affordable sachet-sized products is still a huge miss. Addressing these challenges requires a multi-pronged strategy such as bundling insurance products, narrating the importance of the same, evolving technology and innovation for swift premiums disbursement. Insurtechs do what Fintech does for the financial services sector - connecting insurers with the distribution partners by providing them with an end-to-end infrastructure layer to distribute their insurance products. Insurtech will be pivotal in helping key distribution partners determine the right insurance and product combination that best suits their requirements and bridge the protection gap. The role of an insurtech is to help large companies with captive audiences that want to offer insurance to their customers; they become the core customers to whom the brands provide all insurtech infrastructure. Additionally, strategic revenue models that enable profit sharing with partners and offer competitive premiums are critical to business growth. Insurtech companies are prepared to empower insurance providers in India with excellence in underwriting, portfolio management and claims verification capabilities.

AI’s potential in the future:

AI is swiftly transforming the entire insurance industry, which is mainly driven by insurtechs at the forefront of adopting cutting-edge technology. With AI transforming the whole insurance and financial ecosystem—claims, distribution, underwriting—insurtechs and insurers worldwide and in India are accelerating their businesses by adopting cutting-edge technology and AI to improve customer experience. AI is a set of tools to help insurtechs improve risk assessment, increase claim settlement efficiency, reduce workflows and accounting, and ensure compliance-friendly. While it’s well known that AI in insurtech relies on a prodigious amount of data and analytics, what’s less apparent to those coming to grips with new technology is how the results of this process can be applied to customer personalisation. The vast amount of data collected by AI and machine learning, as well as other tools, can be analysed to create more detailed pictures of customers than ever before.

Embedded insurance is poised to be the norm rather than the exception across various sectors, from digital commerce and travel to automotive and live events. Consumers will simply expect the brands they trust to offer options that add value to their purchases, including protection solutions that consider financial security. Moreover, they will also expect to understand and appreciate the value of these offerings, with clear explanations of the benefits and costs, so they can make informed decisions about what works best for them.  

Article by Mr. Mayank Gupta, COO and Co-founder at Zopper