Embedded insurance is becoming increasingly ubiquitous. But it is important to remember the concept isn’t exactly new, nor is it likely to be fleeting, according to an industry expert.
“It’s definitely a trend today,” said Caribou Honig, a partner with SemperVirens Venture Capital, during Carrier Management‘s debut Strategy Sessions webinar on Aug. 17. “Is it at risk of being just a fad? … I think my answer to that is no. And part of that because it has been around for decades.”
Some examples of embedded insurance have been around for some time, such as the option to buy travel insurance when customers purchase airplane tickets, a service that Allianz helped pioneer, Honig said.
“Kudos to Allianz for innovating around embedded insurance years ago, right?” Honig said.
There’s also tuition insurance for college, a product designed to cover tuition if a student has to drop out during the year, a consumer choice that Hoenig describes as “an old product.”
What’s different now? Honig, co-founder of the InsureTech Connect annual industry conference, said that COVID-19 and advances from InsurTech and other technologies have made all the difference, creating embedded coverage possibilities for more than just the few larger insurers that blazed the trail.
“COVID accelerated it at least a little bit,” Honig said, with the pandemic also propelling a broader quest for digital consumer options. In addition, another key element propelling embedded insurance has been the advance of technologies such as application programming interface, or API, which allows for two applications to talk to each other.
“Have your computer talk to my computer, and then we’ll do lunch,” is how Honig describes API.
API started to make itself known a few years ago but it is now very widespread, making embedded insurance easier for companies of all sizes, Honig explained.
“Once I provide my product by API, that just takes all the friction down. It takes all the barriers down to that product being offered by someone else,” Honig said. “You can be small and I can be small, and it’s OK, because if the level of effort required to integrate, to embed this insurance product into your customer experience is just barely more than a snap, well, then, that’s great, we can do it.”
Honig said API will accelerate the proliferation of embedded insurance even more, providing more opportunities for insurance products even in niche areas, allowing them to be embedded and distributed.
One example – Honig noted he’s involved with a company named Buddy Insurance, which provides accident insurance for things like triathlons and motor sports.
“It starts with a very specific image, a very specific need,” Honig said. “And it’s taking out the effort, taking out the transaction cost and the friction to doing that embedding, right? Which opens the door to it happening with much smaller partners …”
Honig said embedded insurance will become much more common over time with non-insurance offerings, such as the availability of auto insurance through manufacturers, or the option to buy homeowners insurance directly through realtors, mortgage companies, mortgage servicers or home security system sellers. This won’t happen just yet, however.
“I think that’s a ways of, in part because these broad insurance needs and these broad insurance products are so relevant to so many people,” Honig said. “There is a very robust agent and broker network to provide those. It’s possible [broader use of embedded insurance will take place in home and auto coverage] but it’s not inevitable that they go embedded.”
Honig covered many other areas involving embedded insurance during the interview. Click on this link to sign up for a free replay of the hour-long webinar.
*Strategy Sessions Episode 2 will focus on digitization, in an interview with Chetan Kandhari, Nationwide’s Chief Digital Officer. The event will be on Tuesday, Sept. 21, 2021, starting at 1 p.m. Eastern time. Sign up at this link.