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Insurers to build depth-integrated Embedded Insurance platforms

Before the platform comes the concept

Embedded Insurance allows online target groups to make more than just situationally appropriate composite purchases. Comprehensive rental car insurance or a travel cancellation policy for a vacation booking have long been just a mouse click away. They are automated and end-to-end integrated in partner networks and available on sales platforms. Insurance companies and brokers are thus not only tapping into coveted target groups and promising sources of revenue. Smart "embedded" business models and contract constructions enable faster time to market while flexible, global IT solution approaches that adapt to local regulatory requirements, among other things, deliver better products.

As a partner concept, Embedded Insurance is developing into a "seamless" enabler for personal insurance sales. New direct channels such as the target-group-specific, personalized Embedded Insurance concept support direct sales, which often have a lean structure. They also accelerate time to market by enabling insurers to build their Embedded Insurance infrastructure in parallel with product development for the partner sales concept. The focus here is on direct insurance-capable contract constructions with corresponding coverage of the partner platforms: a flexible Embedded Insurance platform provides intermediaries and online marketplaces in the partner network with coverage commitments in a manageable number of product variants.

The core systems and their integration must also play a role here because if the embedded product variants represent a genuine subset of the overall or core system product, direct contracts can be validated against the overall product model from a technical point of view. The model remains computable, violations of product definitions and necessary underwriting (process of risk assessment and acceptance of insurance contracts) do not occur. Cleanly designed products in the regulatory sense can thus be 100% automated in the closing process.

Patrick Möbis, Senior Manager im Stab der IKOR-Geschäftsführung

Despite all the stipulations, end customers want seamless and enjoyable experiences around the world - in their local language, using their own currency, wherever they are. As a result, advertisers seeking to enter the international marketplace have many needs to meet: Via the risk carrier, insurance companies manage the needs of their local end customers on a country-specific basis, for example. The core systems, as well as the associated integration layers and adapters, must bracket the associated links, data flows, and processes. Only with such a concept will Embedded Insurance platforms become "plug and play" for insurers and successful for their partners - dealers, car manufacturers and travel platforms."

Market potential grows massively

Agile insure-techs with their system-infrastructural greenfield advantage are already making virtuoso use of the dynamic embedded business field. The U.S. company Cover Genius ("End to End Insurance") works with sales champions such as Booking Holdings, Amazon and eBay. The Belgians from Qover are cooperating with e-car manufacturer Tesla - under the motto: Those who do not play at the customer interface will soon be outclassed by digitally "ticking", sales-relevant target groups. 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).

To tap this revenue potential, start-up-like agility and creative concepts are required on the insurer side: flexible on-demand business (responding precisely when the customer is interested in "X plus insurance" - in composite purchases - outside the proprietary IT ecosystem) is becoming increasingly important for insurers. And situationally, more complex B2B2C insurance products with higher margins will develop on the embedded playing field in the future. More complex tasks have to be flexibly mapped by the system landscape.

Jakub Lewandowski, Senior Manager im Dock IKOR Polska

Although major international insurers usually operate diverse core systems across markets, they require essential data for "embedded" offerings and must take local insurance behavior into account. On the IT side, this is solved by deeply integrated Embedded Insurance platforms that bracket the heterogeneous core systems."

Embedded processes require deep integration

For Embedded Insurance to improve the customer experience and risk management across industries, it must meet the needs of a global customer base. The solutions will take into account that insurance companies operate both headquarters and country operations, those markets are regulated differently and thus, products must be created accordingly. In technology terms, a "glocal" (i.e., global and locally oriented) Embedded Insurance platform requires that country or region layers take into account both regulatory and local insurance behavior. This is related to the different core system providers involved and a wide variety of market specifics.

And because product development in the conventional insurance business takes around 12 to 18 months, but Embedded Insurance has to be faster from the partner's point of view, Embedded Insurance solutions bring the necessary flexibility under all these premises at the same time – accelerating implementation. And this is despite the fact that large international insurers with their mature IT landscapes usually operate several core systems, including those from SAP, Guidewire, and others. This is because colleagues in neighboring countries rarely work with the same systems.

Five critical considerations in deep integration

Since Embedded Insurance can be used in different countries and regions, it needs solutions that are available in multiple languages: Customers should be able to read their policies in their native language and communicate conveniently with customer service. Layers implement the customer interface "multi-language". 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 own platform and sets up the associated insurance offers accordingly.

Embedded Insurance solutions must handle multiple currencies for the sake of global customers. Seamless integration of different currencies into insurance policies and billing processes, such as those that affect SAP-side payments, creates a seamless customer experience.

Different laws and regulations shape insurance in national markets. Suitable solutions therefore take national or regional differences into account and align their offerings with the respective regulations. The process and IT architecture adapts to the different legal systems; it takes specific requirements into account and is subject to the sovereignty of the respective regulatory authorities.

Embedded Insurance solutions reflect a wide variety of tax regulations to account for correct taxes for different lines of insurance and customers in different sales markets.

Successful Embedded Insurance solutions cover numerous risks for comprehensive insurance protection. To offer a flexible choice of insurances including variants, solutions need to integrate multiple insurance providers.

Overcoming Systemic Challenges

At the core system and integration level, SAP BTP Cloud, among others, can support Embedded Insurance offerings as an agile, scalable, adaptable, and secure solution. It helps insurers to seamlessly and quickly feed their Embedded Insurance business and sales model, and thus their services, into various sales platforms. This in turn helps to strengthen their own competitive position. Because the cloud is scalable and highly available, insurers can cope with peak loads without compromising performance while customers can access insurance offers at any time. Data is synchronized across the various platforms; it can be exchanged between systems without friction losses. In this way, the cloud makes IT processes more flexible while ensuring that insurance companies gain knowledge from data. Simultaneously it ensures that Embedded Insurance services meet the highest security standards and data protection regulations.

IT complexity is reduced because SAP BTP's cloud infrastructure minimizes or displaces the need for an in-house infrastructure. It does this by managing the technical aspects itself. On the one hand, the technologies of the SAP BTP Cloud, such as Artificial Intelligence/Machine Learning (AI and ML) and Internet of Things (IoT), can be used to create customized and appealing insurance services. On the other hand, globally positioned insurers best master the divergent worldwide market regulations in terms of technology and integration agnosticism with system integration platforms - such as the open-source framework SIP. Particularly when system landscapes as a whole are too heterogeneous, interfaces to systems such as SAP or Guidewire, and other infrastructures can be set up efficiently and without frictional losses. Only Embedded Insurance platforms with their integration layers and adapters lead to self-sufficient, polycentric as cross-functional - i.e., maximally flexible - systems. Their decoupled structures improve agility and the "plug-and-play" of new system components. End-to-end managers per process also help to verticalize the organization and the business model.


The guest article appeared in "Sapport Magazine" in December 2023 (PDF in German).

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