One of the world’s largest online API events – APIX – was recently organised and hosted by connectivity and integration expert, Sensedia. Run over three days, APIX attracted some of the world’s leading tech specialists and strategists, all keen to share their perspectives.
Here, Yuri Poletto, advisor on insurance innovation and founder of the Open and Embedded Insurance Observatory, discusses why in the future, every company can embed insurance and become an insurtech.
What is embedded insurance?
Embedded insurance is about intrinsically linking insurance products and services into the day-to-day flow of customers’ lives and working environments. In doing so, we create opportunities to provide commercial and personal insurance. By partnering with third parties, and selling insurance through non-insurance channels, we make insurance more accessible to all. This however, is nothing new.
The first attempt to reach customers through a non-traditional channel dates back to the 19th century when US insurance company Hartford (established 1810) enabled people who lived in an area where the company had no agency, to apply for insurance through the post office. This was unsuccessful; people were not ready to buy this new product through the mail.
Fast forward to today and we’re in a world of emerging digital tech companies who use a tech stack to build their business.
Reliant upon three pillars: the internet, for connectivity, the cloud, for intelligence and mobile apps for universal access, new businesses have increased their capability to embrace a fourth pillar – embedded insurance. Rather than viewing embedded insurance as a new distribution channel, they consider it a vital tool to enhance their value proposition. Today every company can be an insurtech, as demonstrated by invoice insurance company Nimbla, which embeds its insurance into the SME sector.
Why would every company want to become an insurtech?
There are four good reasons:
● Insurance is a fundamental element of our social and economic environment; nothing moves without it, we need it to protect our family, assets and businesses.
● A growing number of non-insurance businesses embed insurance into their portfolio, confident it will be as successful as embedded finance. With embedded finance, it’s common to use and purchase financial services via e-commerce marketplaces, from non-financial brands we trust, for example when making payments, taking out loans and accessing buy now pay later options etc. Accessing insurance through software we use everyday is a natural progression. ● Insurance in its current format has not fully delivered its promise. Swiss Re estimates the global protection gap hit a $1.4t high in 2020. Embedded insurance can help reduce this gap, making insurance available from several channels and differing environments.
● It’s a strategic priority. Open and Embedded Insurance Observatory research shows 50% of insurers and reinsurers recognise embedded insurance is the model they need to adopt to grow their business, and 35% agree the model will be a priority in the coming years.
Embedded insurance today
Swiss Re estimates the size of the global insurance market is $5.5t with a gap of $1.4t. The embedded insurance market size is $1.8t (split between bancassurance, travel, affinity, product protection and other minor lines of business), the non-embedded sector is valued at $3.7trn.
Several studies predict around 20% of non-embedded insurance GWP will migrate across to embedded – some $0.7trn – over the next few years. We predict embedded insurance can also take around $0.5trn GWP from the $1.4trn protection gap, meaning those who embrace this new business model can potentially access £1.2trn GWP.
With this much potential why wouldn’t you want to become an insurtech?
The Embedded and Open Insurance Observatory
Launched in 2021, The Open and Embedded Insurance Observatory undertakes global research and market intelligence on open and embedded insurance, and guides its members in pursuing these models. The Observatory has over 40 corporate members from 20 countries and four continents. www.openinsuranceobs.com
Sensedia helps companies become more digital, connected and open through its technology platform and expertise in APIs and Microservices. Whether integrating channels or creating ecosystems and modern multi-cloud/hybrid architectures, innovative enterprises rely on Sensedia as a partner in API management, Microservices, Service-Mesh and Open Banking, and for rapid legacy integration.
Sensedia is present in Brazil, the UK, Ireland, Peru, Colombia, Mexico, Germany, Spain, Switzerland and Lithuania. www.sensedia.com
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