“We still hear, now and then, insurance companies saying ‘are we sure that consumers are interested in taking this insurance digitally?’,” says Simon Bentholm, chief customer officer of insurtech Penni.io.
It must be difficult to know how to respond to that, given evidence of consumer demand for digital financial services has been staring the industry in the face for a while now. According to findings from the EYGlobal Insurance Consumer Survey, while only 28 percent of consumers in Europe favoured digital contact with their agents before2020, that increased to 43 per cent during the pandemic. And, most telling perhaps – insurance being, historically, a product sought by an older demographic – 65 per cent of 45- to 64-year-olds said they would now happily use an app to manage their policy.
“We have an industry that for 20years has been enacting a self-fulfilling prophecy, thinking that the end user does not want to interact with them digitally,” says Bentholm. “They then make poor solutions which the customer does not want. ”
He believes that, as the consumer knowledge gap in technology dissolves, and more services are enabled online, digital selling is an imperative. And, according to Penni.io’s most recent Embedded Insurance Index, customers don’t just want to purchase products digitally – they don’t even want to have to go looking for them. Embedded insurance has been a frenzied topic of debate among insurers for a while now, but consumers are perhaps better acquainted with it than they’re given credit for. After all, from British Airways to Ryanair, the travel industry has been offering insurance, bundled into flights, since long before the pandemic.
So, fully integrating insurance into the user experience is not as big a behavioural leap for them as it is, perhaps, for the industry. Simply put, embedding products is a tool that insurers can use to directly hack into someone else’s established customer base, from car buyers to jet-setters. In the automotive sector, manufacturers are already teaming up with insurers to provide usage-based driver cover, making use of onboard connected vehicle technology; and you can now find end-to-end product warranties embedded with purchases of general consumer goods over e-commerce platforms such as Amazon. It is a consequential innovation for the digital consumer’s needs. But, the challenge for carriers and brokers is how to develop this new sales model while not surrendering their relationship with the insured at point-of-sale – the kiss and dismiss scenario.
“If you’re only looking at the point-of- sale, you are only looking at a transaction between a partner, or embedder, and an end-customer, where you only have one shot at selling the insurance,” says Bentholm. “Rather, it’s about looking at the extended value chain of the product and saying ‘what are the digital touchpoints around that?’.”
Penni.io’s embedded distribution solution for insurers helps to address that issue by putting insurance clients in control of the way their services are integrated into other providers’ channels, and in such a way that they don’t lose their identity and can capture the client for the longer term. The data-backed Penni Connect platform uses customisable widgets and built-in plugs; its API-driven and Cloud-native architecture creating an ecosystem for personalised insurance integration, designed to future-proof clients against what might otherwise be one of the perils of open finance – creeping disintermediation – while at the same time maximising the opportunities.
“With embedded insurance, presentation and customer needs are key; if they cannot buy insurance tactfully and digitally, they are less likely to engage with the product at all,” says Bentholm. Understanding why consumers decline insurance is as important as gathering data on those who select it, and the Penni Connect Studio tool does both. Insurance is all about context, says Bentholm.“So, it’s about what it’s connected to, where it’s placed, what it’s embedded with. Banks already know that it is hard to sell a bank loan. It’s a lot easier for the one selling the car to sell the car loan because nobody wants a loan, but they want the car,” he adds.
THE NUMBERS GAME
While, according to last year’s Accenture Insurance Consumer Study, the traditional insurance agent will always have a higher conversion rate because customers are more likely to buy a complex product from a trusted advisor, ‘that single agent is extremely expensive and not scalable’, observes Bentholm.“With embedded insurance, you can hit millions of consumers a day for the same cost of one agent, and, while you may have a lower conversion rate, the numbers are higher.”
There’s good evidence that these customers are highly sensitised to the product, too. A2021 report, The Global Risk Landscape AfterCOVID-19: What Role For Insurance?, published by the Geneva Association, found that 40per cent of retail customers considered life and health insurance more important now, while 50 per cent of business owners place higher value on having business interruption cover, group life and health and liability insurance. Meanwhile, a 600 per cent post-COVID increase in cyber attacks has sparked a surge in the cyber insurance market, from $5.25billionin 2019 to $11.09billion in 2022,according to Global Data.
Bentholm points out: “Embedded insurance is the only distribution methodology where the costs are diminishing for the next policy… the only distribution methodology where your impact on the result will be more than just your top line because you’re looking at cutting five, 10, and in some of our cases, 15 per cent off the cost of sale.”
In other words, insurers can expand their reach by surfacing a whole new segment of customers who are sensitised to protecting their investment at key moments in someone else’s customer experience journey, then replicating that with multiple distribution partners without changing the IT or the underwriting process – and at a lower cost of customer acquisition. Partnerships with third-party providers like Pennio.io are becoming increasingly attractive in the insurance industry.
In February this year, US insurer Travelers acquired the assets of the insurtech and embedded insurance provider Trōv; the following month, another embedder, INSHUR, expanded its partnership with Cloud-native CMS provider Five Sigma to handle its claims operations. While all the indications are that the industry thrives and innovates when such partnerships are formed, Penni.io’s report also revealed that the success of a partnership with an embedder is heavily determined by the input of the insurer. Insurance companies cannot enter partnerships with the burden of antiquated legacy systems holding everyone back.
“Insurers must go into it with a digital mindset, one where the top found numbers are most important; maintaining partnerships on a scale that is one-to-many rather than one-to-one,” says Bentholm. That embedded insurance is becoming increasingly popular with retail customers is beyond doubt. The 2021EmbeddedInsurance Report from Cover Genius, found that, globally, 70 per cent of bank customers are interested in bank-embedded insurance, based on transactional data. With the market projected to be worth $722billion by2030, it’s is likely to become a standard touchpoint for all online buyers’ journeys. The end-goal is not to make people hyper-aware of insurance with every transaction, as that would do more to irritate than reassure them, but to be visible to people where there is a perception of risk, says Bentholm.“It’s about saying ‘here, I give you peace of mind. Go live your life’.”