Embedded insurance provides coverage or protection within or alongside the purchase of a product, service, or platform. In a nutshell, it means that the car you buy comes with motor insurance included, your laptop is covered for theft and damage right out of the box, and the platform you use to run your small business includes cyber protection.
It’s the “would you like fries with that?” approach to insurance. Never the hero product – the hamburger, if you will – insurance instead becomes something that complements and enriches the purchase experience of the hero product.
Here’s how the automotive industry can capitalise on embedded distribution models that are tightly integrated with the psychology of decision-making to unlock huge, untapped market potential…
Why consumers need embedded insurance
Having appropriate insurance in place to cover different aspects of your life seems like common sense – yet in practice underinsurance or even complete absence of cover is commonplace. Some of this is likely due to a lack of trust in the industry. Consumers often believe insurers look for excuses not to pay out claims, while insurers can scrutinise customers, who they believe may look to inflate claims or commit fraud. But there is also a far more straightforward explanation: it’s just not front of mind. The fact is, it’s hard for people to get motivated to purchase a product that they hope they never actually have to use.
Why embedded insurance works for automotive brands and insurers
To effect change you need motivation, ability and a trigger, according to Professor BJ Fogg’s model of behaviour. The motivation to protect something you own is at its highest at the moment of purchase – when consumers exchange their hard-earned money for a shiny new product, they are most highly motivated to protect it. Embedded insurance capitalises on this peak in motivation.
Ability, meanwhile, comes from the frictionless digital insurance experiences that enable customers to get cover without having to suffer through a lengthy Q&A process. By leveraging integrations and enrichment, insurance can involve few questions but still yield maximum insight. This use of data and technology helps to drastically simplify and accelerate the purchase process and create the digital-first experience consumers want. Products are more straightforward, digital experiences are better and form filling is kept to a minimum, streamlining the experience for everyone.
Embedded insurance looks to capitalise on key moments-of-truth that bring the protection of a purchase front of mind. The trigger event is often the asset purchase itself. This could be buying a car or a home, for example. The moment at which a person considers a value exchange of their hard-earned cash for an asset is the time they are most likely to consider protecting their investment. This asset purchase trigger can then be further amplified using tailored offers and/or incentives that help draw customer attention to the protection, as well as purchase of the asset. By integrating with the systems and processes that control these events, it can surface key protection products at the time of need.
When motivation, ability and trigger align, customers are far more likely to commit to a purchase decision.
Future-proofing your customer relationships
The embedded opportunity presents much more than just a new way of buying and selling insurance. It has the potential to be transformative in the industry – creating entirely new product classes, pricing opportunities and customer experiences. Done right, embedded insurance could change the way we sell insurance globally. That’s because it opens the door to the customer relationship by providing a simple and targeted product at the point of need.
Brands and OEMs can then build on this relationship and grow with the customer as their life and protection needs change, adding value whilst continuing to build trust and growing share-of-wallet.
Customers favour building relationships with brands they recognise and trust. In the embedded world, this is almost always the hero brand that customers associate with their asset purchase.
This is why the embedded model thrives in the B2B2C environment. Integrations allow insurers to offer the right protection products, in the right place at the right time, by embedding them straight into platforms or ecosystems that enable the purchase of the hero asset. In doing so, insurers are able to target large new customer cohorts and offer them relevant and tailored insurance products at the point of sale or at other appropriate triggers within the customer life cycle.
Embedded insurance in action: the automotive industry
Great companies like BMW, Jaguar Land Rover, Ford, Renault and Volkswagen are sitting on decades of brand history, engineering innovation and consumer loyalty. But to secure and grow market share, the industry must find new ways to capitalise on these assets, in a market that’s in the midst of an unfolding energy transition, a shift to new drive technologies, the rise of automated vehicles, and rapidly changing consumer attitudes to mobility and vehicle ownership.
Embedded insurance, supplied by Wrisk, offers more than just the potential to increase conversion rates and build loyalty today – it also provides a way for automotive brands to start the process of future-proofing their business against developing trends in mobility by:
- Building and nurturing customer relationships in a market that will soon be characterised by buying ‘mobility’ rather than a car.
- Providing infrastructure that allows them to make changes to pricing, or policy details instantly. This sets them up to cater for the real-time liability shifts required in the autonomous era, as vehicle control shifts back and forth between human and machine.
- Generating data that covers an extended period, so they can build products, promotions and insurance solutions that meet the changing needs and expectations of customers.
- Improving the claims experience for customers. Beyond simple claims notifications, deeper connections with repairer networks allow them to create efficiencies in assessing damage, scheduling repair work and identifying parts inventory, to get customers back on the road with minimal disruption. Smartphones, as well as the connected car, will have an increasing role to play here.
- Helping adapt to new ownership models, such as fleet and/or shared ownership, thanks to its greenfield platform infrastructure, which is unconstrained by legacy systems.
- Shifting from protection to prevention – real time connectivity and richer data will allow insurance companies to work more closely with motor manufacturers, to not just be there to help when something goes wrong, but to proactively work to prevent incidents occurring in the first place.