Embedded Insurance – The Future of Insurtech

ITC Asia 2021 recap - Bill Song, CEO of ZA Tech and Anupam Sahay, a senior partner at BCG discussed the opportunities of embedded insurance, plus a report launch on Southeast Asia digital insurance distribution.

Across Asia an opportunity is ripe for embedded insurance to help close the protection gap, providing a “win, win, win” situation for consumers, insurance companies and technology firms. That is the message from two leading insurtech experts, Bill Song, CEO, ZA Tech and Anupam Sahay, managing director and senior partner, Boston Consulting Group (BCG).

Song underlined the scale of Asia’s protection gap as “an $83 trillion business opportunity”. This represents an “honorable mission” for insurtech to provide financial inclusion to under-insured communities, he emphasized.

Three recent success stories provided examples of insurtech’s “honorable mission” to provide financial inclusion to under-insured communities, he emphasized. Each example was based on one of three factors that Song described as crucial: invisible and hassle-free distribution; getting the products right; and building long-term trust.

His first example came from Singapore. Grab has launched a critical illness product for its taxi drivers, offering a prime example of new distribution to reach previously uninsured gig economy customers.

“When Grab lent their data from their platform on their customers’ daily activity and made this a pay-per-trip product, it greatly reduced the entry barrier to reach an untouched market. I really believe this is a win-win-win,” said Song.

Song’s second example was a Shanghai success story, a health insurance product bought by more than 5.5 million of the city’s residents. The joint venture to provide supplementary product on top of the national protection scheme was agreed between government, the insurance sector and technology firms, endorsed by the regulator and sold by at least nine local insurers.

“This is a true demonstration of the value of the right product – thirty percent of the whole population of Shanghai bought this product within the space of one month,” said Song. “Shanghai is such a developed mega-city, the insurance penetration rate is already high, so this is an amazing thing.”

Snack, his third example, is a micro-insurance solution from Singapore’s NTUC Income, a cooperative insurer. It illustrates the need to build long-term trust in embedded insurance relationships, he said, by interacting with customers more frequently and in ways previously unknown to insurers.

Targeted at millennials, Snack allows them to pay small sums tied to routine activities to provide insurance on a daily basis, so that consumers pay tiny increments for life, critical illness or personal accident protection.

“This is my favorite. I think this was the most brilliant product I’ve seen in the past five years. Using the app creates a totally different customer journey and embeds insurance into daily life, when you take the metro, when you take a bus, when you buy food, or eat a meal – whatever you want. I think this creates a totally different trust level,” he added.

Sahay followed this presentation by launching a new report on which BCG has partnered with ZA Tech, focused on Southeast Asia’s “$10 billion opportunity” for digital partnerships.

Three themes emerged from the study, Sahay summarized: the opportunity is big and rapidly accelerating from a small base; the future is an open architecture world; and this will need new ways of working to realize.

“Already we’ve seen in China a real acceleration in these partnerships between digital players and insurers,” said Sahay. “This is a win-win-win situation: the customer gets a value-added product embedded into the journey; from the digital player’s standpoint this is additional revenue as well as value-add to existing customers; and for insurers this is an additional distributional channel plus an opportunity to engage with customers and gather data.”

Insurers will need to adapt their partnership relationships to succeed in an open architecture world, he suggested.

The digital world has three key partner roles, he explained: the customer-owner interface with the consumer; second, a “backbone” provided by a technology platform; and thirdly, product and service providers. “Traditionally that could all be same entity, but in the digital world that could be one, two, five or even 100 players,” he said.

Lastly, Sahay outlined three new ways of working for insurers. The first of these is organizational for their insurtech partnerships.

“One of the most frequently heard complaints from the digital world is that it’s hard to know who is accountable from an insurance organisation,” he said. “There needs to be a single point of contact so that the partnership is shielded from the complexity of the inside of insurance organisations, and instead runs much more simply and nimbly.”

Secondly, a product development overhaul is needed from the traditional back office actuarial driven model, to a model in which products are tailored to the digital environment.

“Often they are more modular, often they are smaller ticket,” said Sahay. “There’s a need to accelerate the pace of product development, so there’s testing of product features and pricing until you get it right.”

Thirdly, insurers should focus on getting the customer journey right, rather than make it fit around previous generations of products that create a bumpy ride for consumers. “Insurers will need to plug into the seamless customer journeys that digital players are striving to provide,” he added.

Back to Insights

This website uses cookies to ensure you get the best experience on our website. Learn more

Got It!