Part 2: Leveraging stronger brands: the siren song of embedded insurance
If insurance brands are irredeemably weak, there may be an obvious fix – sell insurance through stronger brands. “Not only does the customer benefit, but also the insurance company,” argues Vass, a large digital consulting company. “New touchpoints with their customers emerge, new data can be collected for personalized pricing, the perception of value for customers is positive, and this is only the beginning to future services.” Boston Consulting Group has estimated that embedded insurance could be a $58 billion market in Europe by 2035, accounting for a quarter of all
new insurance sold. 5 Auto insurance sold through OEMs and user-car platforms is perceived as the largest single opportunity. But for insurers, the picture may not be quite so rosy. Embedded insurance does have the potential to stimulate demand for insurance and enhance the customer experience, but it is not clear that insurers will be the main beneficiaries. Brokers, with whom insurers have partnered for decades, are usually out of the picture and in their place are far larger and more powerful partners.
Moreover, while embedded insurance strategies may be very successful for certain products, they have significant limitations and drawbacks:
They are generally confined to insurance products that complement the sponsor’s products or services. The consumer is invited to ‘protect’ 6 the main purchase they are making, be it a watch, a smartphone, or a vacation. They are generally only suited to simple insurance products that can be purchased online with a few clicks (or, ideally, with a single click). They may prove expensive to distribute. A popular travel and accommodation booking platform can attract visitors on a scale unimaginable to an insurance company, but may charge insurers handsomely (in excess of 50% of premiums) for the opportunity to access this customer base. 7 This can result in a downward spiral in which the insurer reduces the value of the product (in terms of claims service and payments) to cover the costs of distribution.
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5. Boston Consulting Group, What happens when every company is an insurer?, January 2024. 6. The words ‘insure’ and ‘insurance’ are often avoided as they have been found to discourage purchases. 7. https://www.battleface.com/en-gb/embedded-insurance-is-broken-here-is-how-to-fix-it/
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