Insurance can be a tough sell. It’s convoluted, related to a future risk that’s hard to imagine, expensive and seemingly needless. And on top of that, general public sentiment tells us consumers are increasingly distrusting of traditional carriers.

Needless to say, traditional approaches that rely on paperwork for claim forms and payments as well as legal jargon that alienates users have accelerated the adoption of alternative InsurTech programs to deliver seamless digital experiences in a post-COVID world.

Enter embedded insurance, the InsurTech world’s answer to hard-to-understand policies that are purchased as a disconnected afterthought, creating those clunky customer experiences that run rampant among incumbent insurance distribution programs. It’s the future-ready technology that’s poised to emerge on top in a digital-first world, allowing software companies to meet their global customers exactly where they’re at while giving carriers greater exposure to a class of risk that performs better than direct channels.

Insurance, When and Where Customers Need It Most

Embedded insurance bundles coverage within a product, service or platform. Instead of being sold as a standalone product, the insurance policy is provided as an integrated component—usually at the point of sale or point of signup, either as an add-on to an underlying item in the customer journey or as an inclusion that gives peace of mind to the user when they join. Examples may include warranty add-ons in the checkout of a retail storefront, integrated contractors insurance for a driver joining a gig economy service, homeowners and renters insurance for property management software providers, or commercial landlords insurance that’s tailored to suit the needs of a short-term rental site.

The beauty of this is that it allows companies to meet customers where they’re at in the digital ecosystem while offering crucial protection for major purchases that customers report a strong desire for. In fact, two recent studies by PYMNTS.com are startling. The first one found that 60 percent of consumers prefer to buy protection from their favorite online retailers and that 32 percent of customers would both buy more items and spend more on them if they were offered protection at the checkout. (The reality is that most customers never even get an offer.)

Meanwhile, a forthcoming survey showed that customers would rather get insurance from their primary financial institution rather than an insurer. Driven by convenience and trust, 70 percent of consumers who use digital banks are very or extremely interested in receiving insurance offers from them based on their transactional data, while 44 percent of traditional bank users are also interested. Embedding offers based on transactional data supports the idea that customers are expecting the brands that they already have deep relationships with to offer them protection for their purchases.

The value of embedded coverage is clear, but flipping hundreds of years of ingrained thinking is a difficult task. With embedded insurance distributed alongside the insurable asset or service, users reach peak convenience. Their willingness to engage in offers is conditional: The end-to-end process needs to respect their time, speak to their need for simplicity and user-centricity—all while feeling seamless. In a word, this is the InsurTech difference. And because the insurance product is offered via brands they already trust, the brand equity spreads to the tandem insurance product—meaning the book performs well and carriers get a win-win.

Digitization in a Post-COVID World

To understand why embedded insurance is a future-ready move, we should consider the recent past. Our economy has been trending toward digital. Just a few short years ago, the hot topic on the InsurTech conference circuit was the widespread move to digital experiences and the resulting need to build out technologies to meet customers in these new digital avenues. Speaking to customers in their preferred way, direct-to-consumer insurance brands have found success targeting millennials initially, while the market is pricing in a widening of their demographic reach.

With the move to digital, it became obvious that interoperability between the services and platforms in the digital ecosystems that support consumer lifestyles was a huge value add. Customers began seeking offerings that provided them with more holistic and integrated ways to achieve the life and business outcomes of greatest importance to them. In our industry, InsurTech platforms sprung up to deliver on this promise.

In the wake of COVID, the speed of digitization has accelerated many times what it was in a pre-pandemic world. Various new apps and innovation projects have popped up. Companies are being run remotely and supply-chains have been digitized. It amounts to a quantum leap in digital adoption by customers and companies alike. Future winners in the insurance game start at the front of the curve by building interoperable systems in what’s variously called the API Economy, or from a technical perspective, microservices architecture, leaving traditional insurers to chase that curve with a hand tied behind their back by monolithic architecture.

So, what’s the next future for insurance professionals to look toward? What will be the thing to watch as insurers ride the wave of digital acceleration brought on by shifting demographics and the post-COVID era?

While pure-play D2C InsurTechs will play a role going forward, we’ll also see the world’s largest technology companies start to occupy the insurance space that they command in other areas, confirming Marc Andreesen’s seminal thesis that software eats the world. Akin to their efforts to conveniently embed finance and payments into omnichannel experiences, the digital giants will embed insurance into underlying activities, where the offers are strengthened by datasets that ensure relevance. For a handful innovative companies, that new future is already here.

Defining and Meeting Customer Needs With Data and Dynamic Bundling

At Cover Genius, we’ve been capitalizing on embedded insurance for seven years to build soup-to-nuts integrations with partners that run the full length of the value chain, from licensing, filing, compliance and reporting to claims assessment and instant payments, in over 60 countries and every U.S. state. Our single API integration enables companies like Intuit Quickbooks, eBay, Wayfair, Booking Holdings (owner of Booking.com, Priceline and Kayak), Ola (the Indian ride hailing leader) and Shopee (the NYSE-listed online retailer conferred as South East Asia’s largest company) to sell tailored protection to their customers. Through the years, we’ve found the magic happens when embedded insurance and a dogged InsurTech mindset couples with a shared dedication to our mutual customers, meaning we’ve secured industry-leading NPS scores of 65-plus for over four years from our partners’ customers on insurance transactions.

We can’t talk about the benefits of embedded insurance without mentioning how important it is in collecting and leveraging customer data to make real-time product recommendations assisted and optimized by machine learning. Embedded insurance provides greater data access and allows for further product innovation, greater speed to market and customization. And as one may expect, conversion rates are critical and embedded offerings far outperform what a D2C insurer might otherwise judge a success.

See related sidebar: Leading Tech Brands That Embed Insurance Propositions for Their Customers

To determine the best insurance product for what’s going on, our API leverages real-time data to present any insurance policy for a customer—whether it be an agency portal enabling agents to supply one-click homeowners insurance, a property management system securing landlords and renters coverage, a digital freight forwarder bundling shipments with insurance, a vet management system adding pet insurance, or a retailer or POS maker issuing product warranties.

In some areas, there are opportunities to dynamically bundle a suite of individual “atomized” policies. This enables a partner like leading global travel marketplace Skyscanner to not only launch a first-of-its-kind COVID-19 cancellation protection but bundle it with free airline insolvency coverage and bespoke policies like cruise tickets and car rentals in accordance with the customer’s itinerary.

An unenlightened InsurTech approach sees a typical comprehensive travel policy as fertile ground for bundling but offers the same variety of standard coverages to all customers, regardless of background or what’s relevant to them. So, a customer heading to South Africa is going to see a few pages explaining snow sports benefits that have no application but are factored into the price all the same. If a 70-year-old is going on a bucket list vacation to see the pyramids and a 22-year-old is booking a trip to Florida during hurricane season, those two individuals will have very different coverage needs—even though both of their trips might be considered eligible for the same standard travel policy. This is where InsurTechs that dynamically spin out the right products to protect the purchasers under different circumstances set themselves apart.

The Future of Property and Casualty Insurance? Undoubtedly.

In this era of on-demand access to pretty much everything, it stands to reason that property/casualty insurance should meet the demand. Red tape, paperwork and outbound call center agents only serve to frustrate customers. With new innovations and technologies enabling point-of-sale and sign-up protection and leveraging data in real time, embedded insurance is the way of the future for optimizing the insurance sales journey.