Why The Future of Distribution is Embedded

Insurance is sold not bought, goes the saying. With this in mind, is an embedded approach to insurance a game-changer for the Asia Pacific market?

The model, which bundles cover within the purchase of a product or service, can help reach new and underserved markets and increase insurance penetration where protection is most needed.

Crucially, it is a way of getting customers comfortable with the idea of insurance, while generating claims data that can be used to service them better over time.

The embedded insurance market is forecast to grow to $722 billion in GWP by 2030, more than six times its current size. China will be one of the biggest drivers of this growth, with the country's Ping An Insurance Group currently the largest embedded insurance provider globally.

"Embedded insurance in particular is really picking up pace globally and it's not hard to see why," says Rob Schimek, Group Chief Executive Officer at bolttech. "It offers opportunities for all the parties involved, the potential being a high margin, high growth product."

"We would pair that with the fact the insurance market continues to be underpenetrated on a global basis and it's a recipe for success. That is particularly true here in Asia where the protection gap is so huge."

"The opportunity is getting bigger and the demand will grow faster in Asia than in many other parts of the world. The embedded insurance mindset is one that is moving pretty fast here in the Asian marketplace."

Examples of embedded insurance include products that are bundled into a service (eg vehicle rental) or new purchases (eg mobile phones) through to microinsurance schemes. Such solutions support changing customer lifestyles, including the growth of the sharing economy.

The aim is to provide more affordable, relevant, straightforward and personalised insurance to people when and where they need it most, and to use trusted brands for distribution.

From an insurtech perspective, embedded insurance ticks all the right boxes. Success depends upon the leveraging different types of data, distribution platforms, cloud technology and advanced analytics while providing simple and satisfying customer journeys.

And for incumbents, there is the opportunity to reach new customers. Crucially, for Asia's most underserved markets, it is also what they want.

Research by Cover Genius found that 95% of Indian consumers are highly interested in bank-embedded insurance offerings, followed by 76% in Indonesia and 72% in Thailand. This compares to a global average of 70%.

Demand for embedded solutions is primarily driven by the need for convenience and trust, according to Arijit Chakraborty, Managing Director, APAC for Cover Genius.

"With the advent of new technologies championed by insurtechs, distribution channels and processes are being remodelled," he says. "They are also being made more relevant through embedded insurance solutions, which are convenient, highly-personalised and trustworthy."

In today's highly-digitised world, where consumers have become accustomed to buying what they want, when they want it at the click of a button, insurance providers and distributors must be able to offer such a journey.

"New expectations have emerged," says Chakraborty. "Customers now want any online experience to be a seamless and to address their individual needs."

"The traditional 'one size fits all' approach to insurance has become obsolete, simply because it is no longer relevant or convenient," he adds.

Powering the growth of embedded insurance are APIs, modular software and AI, as well as the emergence of new insurtech distribution partners.

For industry incumbents ready to collaborate with insurtechs and distribution platforms to provide embedded solutions, there is also the potential to capture a new customer base and to do their part to close the region's vast protection gap.

"Embedded insurance is really about getting a huge chunk of the population aware of insurance as a product to offset the inconvenient of a certain calamity happening," says Shawn Lau, vice president, partnership solutions at Swiss Re.

"By embedding it into product experiences, it has to be bite sized and affordable so that it can blend into the existing customer experience or use case that it is tacked onto."

With predictions that over one billion Asians will join the global middle class by 2030, there is also the opportunity to grow with the customer.

"Insurance and reinsurance carriers are all sitting up and thinking of this phenomenon," says Lau. "We are at the early stage and product quantum might be small, but it is a high volume game. We are essentially leveraging this initial rollout of products to learn more about the customers."

"This gives us insights that leads to better pricing, better distribution and a more simplified journey as we sharpen this. In the interim phase it is going to be bite sized, but then we will gain confidence to push this segment of customers into standalone offerings on the respective platforms that they are engaging with."

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