Around the world, major companies from automotive to wholesale are increasingly keen to add Embedded Insurance offers to their business model. Although estimates vary between different market observers, it is expected that global gross written premiums (GWP) generated with Embedded Insurance in the property and casualty (P&C) segment will be around EUR 0.5tr by 2030. To put this figure into context: the global GWP volume in P&C across all distribution channels amounted to EUR 1.8tr in 2022 according to the Allianz Global Insurance Report 20231. This underlines the high potential of Embedded Insurance for the whole insurance industry. But what is the motivation for companies whose primary and traditional focus is selling cars or wholesale products to engage in the insurance sphere?
This is not only to strengthen customer loyalty and enrich their consumer data, but also to create new and diversified sources of income. Through the mostly commission-based cooperation model with insurance companies, the adjacent revenue stream of Embedded Insurance offerings comes with low fixed costs – an apparent sure-fire strategy.
In this rapidly expanding global market, companies are trying to find the right approach to provide a holistic value proposition including insurance offerings to their customers while making the right strategic choices in the selection of their insurance partners. However, a purely opportunistic approach will limit the Embedded Insurance potential from the start. Only with the right strategy, differentiation from competitors and alignment with the company’s brand and value proposition, corporates will be able to unfold the full potential of an insurance offering.
We have identified five key capabilities as critical to success in Embedded Insurance partnerships:
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1. Brand and trust
A strong, trusted brand, defined as the accumulation of generated customer value, is the entry ticket to sell insurance products. Recent customer survey data shows that confidence in and loyalty to brands are the main drivers of willingness to buy insurance through non-Financial Services companies. The stronger the dedicated brand positioning, the more targeted the insurance offering can be to capture the customer’s interest.
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2. Core business proximity
Proximity between product or service offering and insurance solutions makes it easier to access the market. Add-on products in line with their own value proposition, such as the classical example of OEMs providing car insurance, reinforce the consumer’s trust in the insurance offering.
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3. Customer insights
Insight into consumer purchasing behavior significantly helps to integrate insurance offerings successfully and seamlessly. This means setting the right triggers at the right time during the customer journey, fueled by existing knowledge of consumer behavior.
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4. Market reach
Broad market reach and frequent customer interaction build a strong foundation to first generate awareness and ultimately covert it into sales. This holds especially true when online and offline touchpoints are used in a complementary way in the insurance sales journey.
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5. Strong partner
A strong, experienced insurance partner not only taking responsibility for establishing and operating the insurance infrastructure as well as claims handling, but also to invest in a partner-specific, targeted insurance offering.
How companies can leverage the five key Embedded Insurance capabilities
As mentioned earlier, a recent survey among German consumers showed that a trusted brand serves as a main driver for willingness to buy insurance products through non-financial services companies.
The survey also showed that established players with a loyal customer base and a differentiated brand positioning are especially well placed to sell Embedded Insurance because they can provide targeted insurance offerings that are highly relevant for their customers and fit to their expectations.
Leading companies around the world already demonstrate how Embedded Insurance can be successfully integrated within their product portfolio, in line with the companies’ core value proposition. Generally, a non-financial services company can offer three different categories of insurances, descending in their level of business proximity:
- Directly product-related insurances are embedded in the company’s core offering. By seamlessly integrating the coverage in the core product’s sales journey and offering an easy purchase option, corporates can further increase the conversion rate. One traditional example is the travel protection embedded in an airline or cruise operator sales process
- Indirect product-related insurances are insurances with an indirect reference to the company’s core business and with high relevance for its customers. This category of insurance leverages the high number of customer touchpoints and brand awareness. In the health and personal care industry for example, customers can be directed towards supplementary health or special dental insurance plans
- Non-product-related insurances are easy-to-conclude insurances with comparably low monthly premiums and a high relevance for a broad range of customers. Although they are mostly not related to the company’s products, they still attract customers' attention, especially when they reflect the corporate’s brand characteristics. An example would be a personal liability insurance being embedded into a telecommunication provider’s online sales process
Leveraging the entire potential is a continuous path which typically starts with insurance products closely connected to the existing core offering.
The most successful companies are outstanding trackers of their customer’s buying behavior, utilizing the latest digital tools. Embedded Insurance provides an opportunity to use and broaden this understanding with targeted interventions along the customer journey. For example, a certain shopping pattern can indicate a new life situation which can be utilized for targeted marketing. Also vice versa the insurance sale may be used to generate new insights which may be used for targeted advertisement of the company’s core offerings. This effect can even be elevated when having a loyalty program in place that works as a glue between different business areas.
Besides the online presence, the physical store is still crucial to generate customer leads for many traditional store-based companies. Not only does it provide the opportunity to promote special insurance deals together with related core products, but also the chance to raise the consumer’s attention on insurance offerings that are not linked to the company’s core business. Key to success is in this case the transition from offline awareness generation to online purchase.
All the company’s existing online and offline market networks as well as customer touchpoints should be used to generate leads for Embedded Insurance products. Thus, companies should be at the point of sale of their customers. This means offering a fully hybrid customer journey through the successful combination of offline and online channels. The mix of offline and online channels, including the company’s own homepage and social media outlets, creates the necessary market reach.
Before agreeing to work together, non-financial services companies need to find the best operating model for them and – unless they want to set up an own insurance company – select the right partner. But how to find the “right one”? A proven track record in Embedded Insurance collaborations and an insurance portfolio that matches the considered products are two factors to put an eye on. But even more important is a commitment to jointly develop the insurance proposition which goes along with a readiness to also invest in the partnership. This requires that the insurer’s senior management shares the distributing company’s vision and ambition for the partnership.
Above all, the route to long-term success in Embedded Insurance is to create a win-win-win situation for the non-financial services company, the customers, and the insurer(s):
- 1For non-financial services companies: A targeted insurance offering with a comprehensive value proposition can contribute to the customers’ loyalty and can solidify the company’s brand positioning. Moreover, by incorporating commissions as an adjacent and supplementary revenue stream, there is significant potential for boosting overall revenue. In contrast to other potential service offerings, insurance has an especially promising revenue potential as companies are able to retain and profit from customers much longer due to the long-term orientation of insurance contracts
- 2For customers: Customers placing their trust in a company’s offering can expect a streamlined experience, minimizing their efforts in product search and information gathering. Addressing the need for convenience and simplicity, the "one-stop-shop" experience delivers an all-encompassing solution. Additionally, combining the strengths and attributes of the company and the insurer contributes to an overall increase in trust for the customers
- 3For insurers: Exploring growth opportunities beyond the mature and saturated traditional sales channels presents a valuable avenue for expansion. By leveraging existing capabilities in flexibility, standardization, and digitalization, insurers can effectively jump-start new partnerships. These collaborations allow insurers to benefit from the image and trustworthiness of their partner's brand, helping them overcome any negative perceptions. Moreover, insurers can benefit from being part of a much higher interaction frequency business compared to their traditional sales channels. This can lead to increased customer access, better data-backed customer understanding and media reach, amplifying the partner’s overall visibility
Embedded Insurance – a novel market waiting to be unlocked
As the market for Embedded Insurance continues to grow, more and more non-financial services players are joining this trend. Loyalty leaders are ideally positioned to provide insurance solutions for customers who are looking for straightforward, comprehensive, and convenient offers in an increasingly digital world.
However, the trail of loyalty leaders whose insurance partnerships do not fully live up to their potential shows that gaining a secure foothold in the market is challenging – not least because the non-financial services and insurance sectors are different. Acquiring and leveraging the five key capabilities we have identified and establishing a win-win-win situation is a promising path to success for non-financial services companies, especially for loyalty leaders.
Cindy Zhong, Julius Mehl and Annkatrin Manz also contributed to this article.
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