By Daren Rudd, Head of Strategy, Innovation and Architecture, Vice President Consulting Expert CGI.

Embedded insurance is enhancing the customer buying experience, becoming a powerhouse in the transformation of the industry. The fast and easy buying process appeals to consumers who are often pressed for time and would rather avoid a lengthy buying process provided by traditional insurance.

Technology is helping insurance providers and retailers deliver insurance products at the point of need, simplifying the buying process and helping to close potential gaps in insurance coverage. However, insurers need to be careful that in the race to increase sales by embedding insurance they don’t forget about what that means for the customer’s claims experience, and whether they can deliver the same seamless claims experience.

The Customer Journey

If we are honest, no one wakes up in the morning and looks forward to buying insurance. It can be time-consuming, regularly requires answering lengthy forms, and often asks questions that only an insurance expert would understand. But when your phone meets the concrete floor and that beautiful hi-res screen shatters, people are glad that they took the time to find the right insurance product. This is where embedded insurance comes in, this new way of selling insurance is transforming the consumer journey making the process of buying insurance frictionless.

So how is it frictionless? Rather than the consumer completing long forms, data already collected as part of the sales journey is shared with the insurer to provide an option to purchase the relevant insurance product at the checkout. Sharing this information helps the insurer to identify the right product for what the consumer is buying right there and then, whether that be a camera, a flight or a marquee for an event. Buying the insurance at the same time as the product puts the insurance into context for the end consumer, and when the embedded insurance product is designed well, it ensures consumers get the right level of cover, with minimum effort.

The nature of embedded insurance

A key benefit of embedded insurance, beyond the frictionless sale, is that the product can be fine-tuned to the consumer’s specific need, based on the information being shared between the product seller and the insurer. However, this does need the insurer to think about the insurance product they are providing and will most likely require new product and rating approaches to ensure the product can be tailored to the person, as opposed to purely bolting on generic policies behind a slick selling process. Without the extra work in designing new products to take advantage of the personalisation that the embedded insurance sales model allows, insurers risk simply selling a digitised version of bog standard insurance policy add-ons that have been sold for years.

A further word of caution for those insurers considering an embedded insurance model is to not only create a frictionless experience during the sales process but to also think about how they need to transform the whole customer journey, right through to the claims stage. A seamless sales process will by definition be a very light touch process, so the consumer may not even be aware of who is providing their insurance. Even today, ask most people whom they are insured with, and you will more often than not get an answer that involves meerkats or opera singers. Embedded insurance will only do more to further distance the insurer’s brand from the customer.

Organisations need to focus on the entire customer journey to deliver the same slick service, beyond just the initial sale and more to when the product is most vital, at the point of a claim. Thinking beyond the point of sale for embedded insurance is a vital step for insurers to avoid disappointing consumers with clunky manual claims processes. It is difficult to talk about the benefits of embedded insurance if the industry continues to rely on a claims journey where the customer is handed off between multiple third parties who ask for the same information repeatedly. It is the claims process where the insurer’s brand will be at the forefront of a consumer’s mind.

Moving Beyond Sales

By looking beyond just the point of sale, considering a longer-term view on what the data-sharing ability embedded insurance offers to both consumers and insurers, will help insurers to think about offering new types of services or insurance throughout the whole product lifecycle.

As a result, embedded insurance offers insurers a way to rethink not just the basic products on offer, but to become more personalised, and consider the entire value proposition of insurance. Depending on the type of insurance being bought, embedded insurance offers the chance to adapt the coverage offered as further data is shared between the consumer, the sales channel and the insurer. This would be especially true when we consider smart things (IOT-enabled assets which can share data on an ongoing basis). When we add this into the overall thinking, things can start to get really interesting on how we can rethink the future of embedded insurance.

There are however some risks in both the way embedded insurance is sold and how the consumer will manage all these individual insurances. The first concern is to ensure customers are being treated fairly, and they are not buying too many individual policies, that an overall policy could cover more cost-effectively. This is something the industry needs to consider as the regulator may take a dim view of consumers being oversold unnecessary policies. The second will be how the consumer will keep track of all these embedded products, and how they will know who they need to contact when making a claim – another reason why it will be so important for insurers to think about the whole customer journey when building new embedded insurance products.

For embedded insurance to work and thrive it must empower consumers to get the best possible product, and not just drive more sales. Insurers will need robust product structures and thinking in place across the whole product lifecycle for this to be a success. Embedded insurance offers insurers an exciting way to create a new frictionless way to provide the right cover at the right time, and to help consumers find the best-personalised cover to meet their needs. However, we risk perpetuating the same poor view of insurance, if we fail to consider the whole customer experience. It will be a real shame if we neglect the most important part of insurance, the claims process, when we build out the embedded insurance business model.