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Embedded Insurance platforms: More potential for sales

Die Herren Lewandowski und Möbis von IKOR
Jakub Lewandowski (left) is a Senior Manager at Dock IKOR Polska, an Innovation Hub focused on Integrated Development at IKOR. Patrick Möbis is a Senior Manager on IKOR‘s management staff.

Whether it's comprehensive insurance for a rental car, pet health insurance for a dog food purchase, or a travel cancellation policy for a Greek vacation, Embedded Insurance not only allows digitally savvy target groups to make the right bundled purchases for the situation - it's fast, automated, and integrated end-to-end. By using car rental platforms, zoo commerce providers with online tourism companies as partner networks, insurance companies and brokers can tap into coveted target groups and open up promising sources of revenue. And: Smart "embedded" contract constructions shorten the time to market. The associated solutions are flexible, even though they have to meet numerous regulatory requirements.

Compensating for declining numbers of sales employees

The Embedded Insurance partner concept is mutating into a "seamless" enabler for personal insurance sales. In Germany, this sector has shrunk by more than 20 percent over the past ten years; there is a shortage of new talent among brokers and in exclusive sales. New direct channels such as Embedded Insurance's personalized concept for specific target groups support direct sales, which are often very lean.

Added to this is the time advantage of the concept: insurers who get "ahead of the curve" timewise and have already set up their Embedded Insurance infrastructure before or during product development accelerate their time to market. The focus here is on nothing less than direct-insurance-capable contract constructions with corresponding coverage.

A flexible Embedded Insurance platform provides the sales force via intermediaries and online marketplaces in the partner network, with coverage commitments in a manageable number of product variants - virtually in T-shirt sizes S, M, L. If these represent a true subset of the overall or core system product, direct deals are successfully validated against the overall product model from a technical perspective: It remains computable while violations of product definitions and necessary underwriting are omitted. This means that cleanly designed products are compliant and can be automated one hundred percent in the closing process.

Market potential of Embedded Insurance is growing

With their system-infrastructure greenfield advantage, agile insure-techs are already supporting the dynamic embedded business segment as direct insurance companies. The US company Cover Genius ("End to End Insurance"), for example, has long been working with sales champions such as Booking Holdings, Amazon and eBay. Meanwhile, the Belgians from Qover are cooperating with e-car manufacturer Tesla and have long since presented smart business cases to the insurance community. The motto is always: If you don't play along at the customer interface, you will soon be outclassed by digitally "ticking", sales-relevant target groups.

The market in which these target groups are active is currently gaining momentum. In Europe, the U.S., and Asia, Embedded Insurance has long been considered a successful discipline and is likely to become a trend as a form of affiliate marketing (if not as a business model): According to a forecast by Instech London, global revenues from Embedded Insurance will climb to $722 billion by 2030. This is roughly equivalent to the level of the US military budget in 2022.

To tap into this potential, insurers need start-up-like agility and highly creative concepts: Flexible on-demand business (responding when the customer is interested in "X plus insurance," composite purchases, outside the proprietary IT ecosystem) has hardly been attractive to insurers so far because of the volume distributed on the Web. Strategically, however, it will become increasingly important. The market trend and outlook suggest more complex B2B2C insurance products with higher margins will also develop and enter the embedded playing field.

Success is "multi": insurers become "first choice" for international distribution platforms

To improve customer experience and risk management across industries, Embedded Insurance meets the needs of the global customer base. The solutions address the fact that insurers operate headquarters as well as country subsidiaries. Products need to be created accordingly. It recognizes that markets are regulated differently, and that there are different core system providers with different market specifics. In terms of technology, a "glocal" Embedded Insurance platform therefore requires appropriate country or region layers that take into account local regulation and insurance behavior - five factors:

  1. Multilanguage: As Embedded Insurance is deployed in different countries and regions, the solutions need to be available in multiple languages. Customers should be able to read policies in their native language and communicate with customer service in a way that is convenient for them. Corresponding layers therefore implement a "multilanguage" customer interface. For example, a policy for a flight from A to B is identical in every country; the associated embedded product must be structured in the same way. The marketplace partner, in this case the airline, specifies the premises according to its platform and must set up the associated insurance products on offer accordingly.
  2. Multicurrency: Embedded Insurance solutions must handle multiple currencies for the sake of global customers. Seamless integration of multiple currencies into insurance policies and billing processes creates a seamless customer experience.
  3. Multilegal: Different laws and regulations shape insurance in national markets. Solutions must therefore take national or regional differences into account and align offerings with the respective regulations. The process and IT architecture adapts to the different legal systems, takes specific requirements into account, and is subject to the sovereignty of the respective regulatory authorities.
  4. Multitax for Insurance: Embedded Insurance solutions need to reflect a wide variety of tax regulations in order to correctly account for taxes on different lines of insurance and customers in different sales markets.
  5. Multirisk Carrier Solution: Successful Embedded Insurance solutions cover a wide range of risks for comprehensive insurance protection. To offer a flexible choice of insurances including variants, solutions need to integrate multiple insurance providers.

Conclusion: Plug and Play for Insurers, Merchants and Travel Platforms

Because product development in the conventional insurance business takes around 12 to 18 months, Embedded Insurance must become faster from the partner's point of view. Embedded Insurance solutions bring the necessary flexibility under all these premises at the same time - for more speed in realization.

This is despite the fact that large international insurers with their evolved IT landscapes usually operate several different core systems, with colleagues in neighboring countries rarely working on the same systems.

Despite these constraints, end customers want seamless and enjoyable experiences around the world - in their local language, with their currency, or in terms of their geographic location. As an advertiser, insurance companies seeking to enter the international market therefore need to cover many areas: For example, insurance companies manage the needs of their local end customers on a country-specific basis via the risk carrier. The core systems must bracket the associated links, data flows and processes so that Embedded Insurance platforms and the "plug and play" for insurers, dealers, car manufacturers and travel platforms will actually be successful.


The continuation of this article is dedicated to IT solutions for Embedded Insurance (PDF in German).

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