Why you need to consider embedded insurance

Embedded insurance not only enhances the customer experience but also provides greater access to data for insurers, speakers said during KPMG’s recent 2023 Insurance Conference in Toronto. 

“You unlock a lot of data that will change the way you do your underwriting right now, but also change the way you can conceptualize your product,” said Madeleine Roussel, executive director, management consulting with KPMG in Canada. 

In the more sophisticated versions of embedded insurance, insurers can take the data they receive from partners that they wouldn’t have otherwise had access to before.

“So, it gives you a broader view of who your client is,” Roussel said. “With all of this data, what you want to do is to be a little more creative, innovative in your product…”

The goal is that the embedded insurance product appears to the customer like the only solution.

Jonathan Weir, an advisory partner with KPMG in Canada, defines embedded insurance as something that has to seamlessly integrate coverage into a non-insurance product. “It really has to create more value for the customer than the traditional alternative,” Weir said during the session, The accelerating shift to embedded insurance. 

For example, a customer shopping for a mortgage could be prompted or provided with a home insurance offer, personalized based on their needs (using data from the partner’s platform). Or a customer can buy a plane ticket through Air Canada and receive a quote for travel insurance. 

Mortgages are an ideal use case, agreed Derek Szeto, founder of insurtech Walnut. “[Mortgage brokers] are not constrained by the same Bank Act regulations.”

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“Imagine you go to a mortgage broker, you get a commitment letter as part of a package, one of those pages tells you, ‘Hey, you need home insurance to be able to close your mortgage. Would you like to work with our partner to be able to facilitate that?’” 

Then with the customer’s permission to share personal property data from the home insurance application, the first discussion revolves around a quote, rather than repeating the question-and-answer process to obtain all the same data. 

“We often think about this as the customer actually does not want the mortgage, they don’t want the insurance,” Szeto said. “They just want to get into the home. How do we help them get to that end state?” 

There are more platforms, with more data, and more of an ability to share on a permission basis, Szeto explained.

“And that’s driving consumers to demand more customized experiences, to be able to demand more digital-first experiences so that they can do what they want to accomplish without going through some of the pain that they might associate with insurance.”

To capitalize on the opportunities, Weir recommends an embedded insurance strategy. This needs to consider the business model, capability and alignment of existing products and underwriting pricing ability, as well as partnerships or potential partners.

“Who you have access to as a partner defines the data that’s going to fuel this and defines the customer segment that you’re going to have access to,” he said. 

Next, look at technology capability. “You have to have a certain amount in-house… to be able to integrate with other partners,” Weir said. 

The third consideration revolves around the underwriting process, which needs to become more flexible; finally, customer-centricity needs to be at the heart of the value creation process. 

“This isn’t just a one-trick pony here… this is actually going to have an impact on a broader part of the business,” Weir said.

In fact, it may become the dominant form of insurance for some lines in the future. “It’s not hard to believe that all travel insurance, or the majority of it, will be purchased in an embedded way.” 

Feature image by iStock.com/Poca Wander Stock