Embedded insurance is currently a red-hot topic in the industry. It has permeated many of our recent conversations as clients evaluate how embedded currently impacts—or could impact—their distribution plans. The sense of urgency is compounded by disruptor companies like Tesla throwing their hat, in a meaningful way, into the insurance ring.
Some recent perspectives on embedded insurance have focused on the technology requirements for carriers to play in this space and the architecture required to embed their products. Others have a different take. For example, Coverager 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 the oft-forgotten insurance agent. Our view is that the agent continues to have a meaningful role in an embedded world.
First, we’d like to share our definition of embedded. We define embedded insurance as any insurance that can be purchased within the commercial transaction of another product or service. Embedded insurance isn’t a new innovation. Purchasing life insurance at the airport before a flight was “Version 1.0” of embedded—a model that turned into an incredibly profitable business.
Then, as consumers began to purchase more and increasingly expensive items, we arrived at “Version 2.0” of embedded, where customers could seamlessly add on insurance while they’re making a physical purchase. Think about the automotive finance provider at the car dealership who is also licensed to sell insurance, car rental insurance that’s sold at the counter or the ability for customers to buy an extended warranty when they buy an appliance.
With the evolution of technology and online commerce, we arrived at “Version 2.5,” which we consider web-enabled embedded insurance. This version of embedded allows customers to purchase insurance alongside “digital” products like concert or plane tickets. More recently this version of embedded also gives customers the ability to get car insurance through sites like Credit Karma, vehicle parts insurance from original equipment manufacturers (OEMs) or via online car sales sites.
Coverager has mentioned products that are designed to be in the background—including Volvo’s electric vehicle insurance in partnership with Allianz or Spot’s injury insurance being included in ski passes. We view this as a new protection paradigm, embedded 3.0, where the consumer doesn’t have the opportunity to choose their carrier, the level of protection or the cost. Customers need to have a high degree of trust that the vendor is giving them the right coverage, and the right deal.
Where agents fit into an embedded insurance experience
Through our research on the insurance consumer, we’ve learned that while customers are increasingly comfortable with learning about insurance and comparing options online, they are often not ready to make a purchase before consulting with a human agent. Most customers still pick up the phone to a call center. According to Accenture’s Insurance Consumer Study, 85% of consumers prefer to interact with a human when asking for advice on products or offerings and only 15% conduct their purchase solely online.
If consumers are looking for human touchpoints when purchasing just one insurance product, they increasingly need guidance when combining multiple, more complex products. As the risk of being wrong about the type of coverage they need multiplies, customers want to be able to rely on a single source of truth to help them sort out their exposure and figure out how to be adequately covered.
We are sure that agents still have a significant role to play even as some products move towards embedded 3.0. Specifically, we believe that role includes helping customers understand their risk profile and how the coverages and products they buy explicitly or implicitly cover them—including where there might be overlaps in coverage. We feel insurers should pay attention to the relationship between agent and embedded, and the implications for carriers, agents and embedded distributors.