Embedded Insurance -- Both Old and New

Embedded insurance has been around for a long while in the form of affinity groups, but it still creates opportunities that smart agents will exploit.

You may have heard of all the wondrous new possibilities afforded by embedded coverage, with hints of ominous implications for insurance agents. But before any agents start polishing up their resumes, hear me out: Embedded insurance is nothing new. It’s been around for a long while in the form of affinity groups. And embedded insurance will increase opportunity for intermediaries, not eliminate it -- so long as they know how to use it to their advantage. 

What exactly is an affinity group? Essentially, it is a group of people who share some trait that makes them a desirable market. An affinity relationship is symbiotic: The carrier provides discounts or other benefits to group members (conferring benefit onto the organization itself, as well, as it can boast this additional membership value). The group provides the insurer with a pool of potential customers and built-in marketing. Everybody wins. 

So, is embedded insurance actually the “new affinity?” Not exactly; there are some important distinctions. In both instances, you’re targeting a specific group with a coverage offer because they share some trait that makes them desirable. The distinction is that embedded insurance is more like a tool that agents and carriers can use to be more creative about the affinity groups they target. It allows them to target adjacencies that might not have been viable in the past: For instance, by partnering with a large property rental company, carriers can offer embedded renters insurance as an applicant is about to click “submit” on their lease paperwork -- at the precise moment the risk is top of mind and the offer is most relevant to the consumer. Not so long ago, that consumer would turn in their lease documents, think to themselves that they should look into renters insurance and then get busy with moving priorities and maybe eventually forget to secure a policy at all -- and the carrier’s distribution costs in attempting to market renters insurance to the right audience were often impractical. By increasing relevance and convenience through embedded marketing, carriers have the opportunity to create massive new revenue streams. Embedded insurance comprises the tools and technology that will allow affinity to scale, and the sky’s the limit. 

So what should carriers and intermediaries be doing right now to ensure that they are equipped to ride this wave, instead of being capsized by it? 

  • Make sure you’re able to meet your customers wherever they want to interact with your brand. In recent years, statements like this have become synonymous with investment in sleeker digital capabilities, and that remains paramount -- customers absolutely expect an intuitive and functional website, an accessible customer portal, mobile applications, and chatbots, and all of those investments inarguably improve the customer journey. But just as importantly, customers expect a high level of responsiveness and accessibility when they want to speak to an actual human. In fact, in Bindable’s recent survey of 100 independent insurance agents, 91 said they had noticed an increase in customers wanting to speak to their agent when they had questions -- not the other way around. Policy specifications can seem complex to the consumer, and an explanation requires the human factor. This is what will continue to prove the value proposition of intermediaries even as neo-insurers and digital embedding provide consumers with increasingly direct access to product: the level of service. Move toward a bionic distribution model by investing in an interactive website, a mobile portal, chatbots, application programming interfaces (APIs), call and click tracking and hybrid phone support, and keep up with innovations to make the customer journey as seamless as possible. Make sure you’re prepared to interact with your customers on their terms -- or someone else will. 
  • Work in the data whenever possible. Also abundant in insurance media are articles about the AI-enabled future of insurance, in which every category of insurance automatically adjusts policies and costs according to real-time risk. Unfortunately, this glorious future is caught up in a bit of red tape when it comes to who actually owns all this real-time data and can grant permission to access it. Many information privacy regulations were written for a pre-digital age and need to catch up to modern life, so admittedly there are obstacles standing in the way of the true potential of using real-time metrics to determine risk. But consumer expectations are shifting, and their patience with one-size-fits-all insurance solutions is rapidly dwindling, so make sure you stay abreast of current and coming capabilities. Using telematics and third-party data sources for now is a good option if it has relevance to your vertical. 
  • Don’t be limited by traditional frameworks. I already said that embedded insurance will increase opportunity for intermediaries, but, in addition to that, it will create an entirely new class of intermediaries: Fintech apps, automotive dealers and manufacturers, retailers and any other entity that has a data-rich relationship with its users should be thinking about entering the embedded insurance market. The opportunity is significant, and there is room for entrepreneurs of all types in the space. 

See also: Building Your Digital Sales Arsenal

So next time you read about how embedded insurance is going to make you obsolete, remember that a tool can’t be used to clobber you if you’re the one wielding it. Embedded insurance will create boundless opportunities for a wide variety of businesses over the next decade, so seize them. There are a million ways to make this model work for you and not against you -- the only wrong move is to do nothing.

Bill Suneson

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Bill Suneson

Bill Suneson is the co-founder and CEO of Bindable, a national leader in digital insurance and alternative distribution technology. He also co-founded and serves on the board of Next Generation Insurance Group, which operates GradGuard.


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