Zurich | Designing result-driven embedded insurance propositions

September 12 2023

Embedded insurance — a term you’ve likely come across numerous times if you’re navigating the intersecting worlds of insurance and digital technology. Its potential is widely touted in many publications, reports, and discussions, particularly with the growing interest in embedded finance. Yet, it’s worth pausing to question whether the industry’s current efforts truly maximise its potential.

Is a simple toggle or tick in the customer journey enough for businesses to get it right? Are companies fully aware of the nuances of implementing an embedded insurance model? How can businesses ensure their embedded insurance offerings remain relevant and competitive in a rapidly evolving market? What strategies can be used to educate consumers about the value and benefits of embedded insurance? And why are regulators in certain markets not wholly convinced of the concept?

To answer these questions, going deeper into a successful embedded insurance strategy and the potential challenges businesses may encounter while shaping their propositions is essential.

Embedded insurance is more than just a tick in the box. It calls for a hands-on approach involving careful examination of each step, thoughtful consideration of customer value, and an innovative twist to traditional offerings.

Placement & trigger of offering. The insurance offering should be thoughtfully integrated and triggered within the platform or service, ensuring a seamless and non-intrusive user experience. One example is the travel industry, where airlines and OTAs have provided embedded travel insurance for many years. And yet, there remains a significant difference in the placement and conversion rate of customers choosing to include travel insurance.

Articulation of the core benefit or pain point it’s solving. The embedded insurance offering should clearly communicate its value by addressing the customer’s specific need or pain point. Often this entails ‘KYC’ — not in terms of regulations, but rather in terms of gaining insight into customers’ preferences, requirements, and challenges, which enables businesses to communicate with them in a way that makes them feel heard.

Striking the right balance of insurance premium with the cost of the underlying transaction. The insurance premium should be set at a reasonable level compared to the cost of the underlying transaction, making it a compelling choice for customers. Pricing mechanisms such as a percentage of the underlying item, tiered pricing, or even a fixed premium (if the cost of the underlying transaction has minimal variation) can strike the right balance.

Service offering beyond insurance coverage. Claims are generally an infrequent event that customers cannot immediately relate to. Adding other standout features to your embedded proposition beyond insurance coverage can make the overall offering more appealing and relevant to the customer’s needs. This also enables adding extra moments and touchpoints, thus extending the proposition beyond ‘traditional insurance’ to a more holistic services-oriented offering.

Ensuring a consistent user experience throughout claims and servicing. Embedded insurance’s appeal lies in its user experience’s simplicity. However, many offerings focus solely on this aspect and fail to stand out. To truly set themselves apart, providers should dedicate equal effort to making the claims process seamless and convenient, creating a consistent and exceptional user experience across all touchpoints.

The next phase of embedded insurance offerings is likely to merge with another significant trend — the application of generative AI and ML for customisation and personalisation. This innovative approach could add a fresh spin to the standard embedded offerings currently in the market.

Partnering with a reputable insurer. Teaming up with a well-established and trustworthy insurance brand can bolster customer trust and assurance in the embedded insurance offering. This is especially relevant when the partner is relatively new and needs to establish trust and loyalty. Collaborating with a reputable insurer lends credibility to customers and supports the partner in building their brand collaboratively.

Steering through regulatory compliance focusing on customer value: Some markets have regulatory concerns about embedded products, often due to transparency or cost-value balance issues. While navigating this regulatory landscape is crucial, so is addressing these concerns for your program’s longevity and customer loyalty. A clear focus on customer value, creating transparent journeys and balanced cost-value can enhance the overall experience and provide benefits that are as clear as they are valuable.

Choosing your approach to embedded insurance
Like baking the perfect chocolate chip cookie, crafting a successful embedded insurance proposition requires a dash of insight, a sprinkle of innovation, and a hearty spoonful of collaboration. Knowing the ingredients is just the start — the real magic lies in the mix and bake.

Embedded insurance is that perfect chocolate chip that elevates the cookie from good to irresistible.

As insurers and partners concoct their embedded insurance offerings, they aim to create a proposition so seamlessly integrated — so delightfully essential — that customers feel compelled, not obligated, to take a bite.

Roopa Malhotra

Head of Customer & Digital, Asia Pacific, Zurich

Email: [email protected]

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