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Embedded insurance is currently a hot topic in the industry. This has permeated many of our recent conversations as clients assessed how a built-in feature is currently impacting or could impact their distribution plans. The sense of urgency is exacerbated by breakthrough companies such as Tesla pointedly throwing his hat into the insurance ring.
Some recent research on embedded insurance has focused on the technology requirements for carriers in the field and the architecture needed to implement their products. Others have a different opinion. For example, Accompanying focuses on product design as the key to success.
While these capabilities are critical, we want to approach the promise of embedded through the lens of an oft-forgotten insurance agent. We believe that the agent continues to play an important role in the embedded world.
First, we’d like to share our definition of inline code. We define inline insurance as any insurance that can be purchased as part of a business deal with another product or service. Built-in insurance is not a new innovation. Buying airport life insurance before flying was “Version 1.0” of a built-in model that has grown into an incredibly lucrative business.
Then, as consumers began to buy more and more expensive products, we moved to “Version 2.0” of embedded products, where customers could seamlessly add insurance when making a physical purchase. Think of a car finance provider at a car dealership that is also licensed to sell insurance, car rental insurance that is sold at the counter, or the ability for customers to buy an extended warranty when they buy a device.
With the development of technology and online trading, we have come to “Version 2.5”, which we consider to be built-in insurance via the Internet. This embedded version allows customers to purchase insurance along with “digital” products such as concerts or plane tickets. More recently, this embedded version also gives customers the option to obtain car insurance through sites such as Credit Karma, original equipment manufacturer (OEM) auto parts insurance, or through online car sales sites.
Coverager has mentioned products that are meant to be used in the background, including Volvo Electric Vehicle Insurance in partnership with Allianz or Point injury insurance included with ski passes. We see this as a new paradigm of security, built-in version 3.0, in which the consumer does not have the ability to choose a carrier, level of protection or cost. Customers must have a high degree of confidence that the provider is providing them with the right coverage and the right deal.
Where agents fit into the embedded insurance experience
Through our insurance consumer research, we have learned that while customers are increasingly learning about insurance and comparing options online, they are often not ready to make a purchase without first consulting with an agent. Most customers still call the call center. According to Accenture consumer insurance research, 85% consumers prefer to interact with a human when asking for advice about products or deals, and only 15% shop exclusively online.
While consumers are looking for common ground when buying just one insurance product, they are increasingly looking for guidance when combining multiple, more complex products. As the risk of choosing the wrong type of coverage increases, customers want to be able to rely on a single source of reliable information to help them understand their risks and figure out how to get adequate coverage.
We believe agents continue to play an important role even as some products move to Embedded 3.0. In particular, we believe this role includes helping clients understand their risk profile and how the coverages and products they purchase cover them explicitly or implicitly, including where coverage may overlap. We believe that insurers should pay attention to the relationship between agent and embedded distributor and the implications for operators, agents and embedded distributors.
We’d love to get in touch with you to discuss your thoughts on built-in and potential opportunities for your business. Connect with Scott AND Bean.
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Disclaimer: This content is provided for general informational purposes and is not intended to be used as a substitute for consultation with our professional advisors.
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