Whilst not new, Embedded insurance has become an increasingly adopted approach towards seamlessly integrating insurance products into non-insurance platforms. Many companies can benefit from this approach and financial service providers are no exception as it can create opportunities for enhancing customer experience, increasing revenue streams, and solidifying market positioning.
We’ll explore how financial service providers can leverage this effectively and by using real-world examples, it will give some inspiration for applying it.What is Embedded Insurance?Embedded insurance involves the integration of insurance products into the purchase process of other services or goods, typically within digital platforms. Instead of directing customers to a separate platform to buy insurance, financial providers can offer or embed it directly at the point of need, ensuring a smoother and more intuitive customer journey.Benefits of Embedded Insurance for Fintech Companies1 Increased Revenue StreamsOne of the primary benefits of embedded insurance is the potential for additional revenue. Companies can earn extra income by collecting commissions on insurance products sold or provisioned through their platforms which can add a new revenue stream to their existing services. Example: Revolut, a global financial superapp, has integrated travel insurance into its premium accounts. Customers who take Revouts Metal and Ultra account plans are automatically provided with embedded travel insurance as part of the additional services and benefits provided with their premium account. There are no additional costs of fees for the cover. This not only provides convenience to their customers but it has also created a commission-based revenue stream for Revolut.2 Enhanced Customer ExperienceEmbedded insurance can significantly improve the customer experience by providing relevant coverage at the right moment. This approach reduces friction, as customers no longer need to search for separate insurance providers. Example: Klarna, a FinTech providing payment processing services for the e-commerce industry and known for its buy-now-pay-later (BNPL) services, offers their clients the ability to provide purchase protection insurance embedded in its payment process to their customers. Therefore giving their clients’ customers peace of mind by protecting their purchases, making their overall shopping experience better.3 Increased Customer Loyalty and Retention Offering embedded insurance can help Financial Services Providers build deeper relationships with their customers which offer relevant and timely insurance products, leading to higher retention rates. Example: Paytm, an Indian digital payment platform, offers insurance products such as health and life insurance directly within its app. They have been able to retain customers within its ecosystem, reducing churn and enhancing customer lifetime value.4 Data-Driven PersonalisationFinancial Services companies are often rich in customer data, which can be leveraged to offer highly personalised insurance products which can lead to higher conversion rates, as customers are more likely to purchase insurance that meets their specific needs. Example: Lemonade, a digital insurance company, uses AI to offer personalised insurance policies based on their customer data. Lemonade’s approach serves as an excellent example of how companies can use data to tailor embedded insurance offerings.5 Streamlined Operations and Lower CostsThey can streamline operations and reduce costs associated with customer acquisition and retention by integrating insurance products directly into their platforms . This efficiency can improve profit margins and make the company more competitive in the market. Example: N26, a digital bank, has embedded mobile phone insurance into its premium accounts. This integration not only offers more value to customers but also eases the administrative burden of handling insurance separately.
Key Considerations for Implementing Embedded Insurance1 Choosing the Right Insurance PartnerFinancial Service Providers need to collaborate with insurance providers, such as EIP that align with their values and customer needs as a strong partnership can ensure the insurance products offered are relevant, affordable, and easy to understand.2 Regulatory ComplianceInsurance is a heavily regulated industry, and companies must ensure they comply with all relevant regulations when offering embedded insurance. It will be important to consider things such as licensing, data protection, and transparency requirements when considering your options.3 User Experience IntegrationThe success of embedded insurance depends largely on how well it is integrated into the existing user experience. The process should be smooth, requiring minimal steps for the customer.Marketing and EducationFinancial Service Providers should invest in educating their customers about the benefits of embedded insurance using clear and simple communication. This can make insurance products easier to understand and encourage more people to use them.Whether it’s through enhanced customer loyalty, increased revenue, or streamlined operations, the benefits of embedded insurance are clear—and the time to act is now.
