How embedded insurance is cutting out the middleman

INSURTECH: EMBEDDED INSURANCE How embedded insurance is cutting out the middleman

Without third-party providers in the picture, insurance is made more affordable by boring down on a specific need.

As a businessman with several offices in different countries, Alex was a frequent flyer—and things like flight delays due to weather and health risks are something he would like to avoid. Sometimes, Alex has to contact several insurers just to get health insurance because they do not cater to the specific country he has to visit. But what if insurance was sold as a set that came with the plane ticket he was buying?

That is what embedded insurance is about.

Chatting with Insurance Asia, Arijit Chakraborty, the Cover Genius’ Managing Director for Asia Pacific, described embedded insurance as a cover that is bundled together with another product.

“It’s like buying an aeroplane ticket, [at the same time], I am sold an insurance, not only the conventional travel insurance, I’m also sold a COVID-19 protection insurance, and a flight delay insurance. In one click, I can buy that and it’s a more seamless and convenient journey than going to a third-party website and buying the same cover,” Arijit said.

It is a model that anticipates the customers’ needs by offering tailormade and relevant coverages at the point of sale.

Customer demand

Arijit believes that demand for embedded insurance, especially in Asia, has increased because customers are looking for more hyper-relevant, contextual, and honest pricing in their insurance products. In fact, earlier this year, Cover Genius sold more than 10 million insurance policies and saw a whopping 1,900% increase insurance in policies sold for retail partners such as Shopee and Flipkart, with a 430% increase in Asia alone.

This demand is the reason that Arijit believes that the future of insurance distribution lies in embedded insurance.

In his experience as part of senior management in various insurance

Arijit Chakraborty

In embedded insurance, there is no intermediary in the picture

agencies in previous jobs, Arijit said that because most insurance products get distributed by intermediaries, products are mostly sold on the basis of commissions.

“[In embedded insurance], there is no intermediary in the picture. Let’s say you are buying something and you want to protect yourself from contingencies. With embedded insurance, when you are making the purchase you are getting protection with a simple, straightforward policy. And this is disrupting the conventional way of insurance distribution,” Arijit said.

This is another point on why embedded insurance is believed to be the future of distribution. According to a study done by Cover Genius, 60% of customers prefer to buy protection from their favourite online brands.

One platform

Leveraging on the increasing demand for embedded insurance, Cover Genius used its global distribution platform, XCover, to further help businesses add protection coverage as part of their product offerings for their clients and customers.

XCover has an end-to-end value chain of insurance. Using XCover, partners can have Cover Genius do the heavy lifting such as risk management, pricing, underwriting, issuance of policies, operations, and claims management. It is an all-inone tool for their partners. They also work with partners to design products to offer customers.

But how does this help the partners of Cover Genius solidify their brand’s position?

Arijit said that with embedded insurance, businesses can assure that their customers are protected all the time. This gives customers peace of mind when dealing with the brand, increasing trust between the two, as well as securing another revenue stream for their businesses.

Second, it increases brand value. Including covers for products and services will imprint in the minds of consumers, making them associate that brand with protection.

The third is product differentiation. By embedding insurance in another product, businesses can be differentiated from their competitors.

“For example, you are buying a laptop on Shopee. You can see that they are offering insurance for that laptop but don’t see it from other e-commerce platforms. You may tend to buy the same laptop from Shopee because you’re getting a chance to buy the protection,” Arijit explained.

In another study by Cover Genius, approximately 66% of consumers say that having the option to get insurance at the checkout would entice them to spend more, and even buy a higher volume of goods. Once insurance is bought, there is a high chance of insurance being repurchased again in the future, with 82% of people who bought insurance from a retailer saying they would buy it again in the same way in the future.