Embedded Insurance and its Importance: Part 1



Embedded finance, and now embedded insurance, has become a buzzword. What’s behind this concept? Why is it gaining so much traction and what are the essential ingredients for success, are aspects insurers look to understand to engage in a movement that is set to proliferate and touch every digital interaction we have in the future.

Dennis Kang, CTO, ZhongAn – China’s first and largest online-only P&C digital insurer that has capitalised on the embedded insurance opportunity – defines it as:

The insurance product that is firmly integrated into all kinds of business scenarios where protection might be required. Tech is fully involved to make the customer experience very friendly and insurance low cost. It is selected and approved via a check box and is embedded in all products[1].

In insurance, context is key and often a trigger of purchase. Experiencing a change of context, due to a significant life event tends to heighten an individual’s awareness of potential risks, which will frequently spur a protection need. The birth of a child may stimulate the parent’s wish to protect his well-being via the subscription of a life insurance policy and a health insurance policy. The purchase of a house may lead to subscribing to home insurance to protect oneself against the risk of fire and other hazards. So will the purchase of a car, a piece of expensive jewellery or equipment, or a pet, for instance. Not having a direct and seamless route to obtaining coverage may lead to neglecting it and then later finding oneself in a regrettable situation if a loss occurs. This is where embedded insurance comes into play.

Embedded insurance fills the gap left by traditional insurance players. Today’s insurance market offers a wide array of coverage options, that is also large, complicated, and fragmented. Consumers get coverage from many types of providers, including carriers, brokers, banks and product manufacturers. Research shows, however, that traditional providers — insurance carriers and brokers — are not meeting the demand for coverage across the wide-ranging categories in which consumers are interested[2].

While the trust level of consumers in insurers varies from one country to another, consumers are open to offers made by brands they trust, that leverage data to offer insurance meeting their needs, when and where they need it.

Technology and our increasingly digital world turn the insurance purchase easy and convenient. The more digital touch points an institution or brand collects on a consumer, the better it will know his lifestyle and purchases to identify the most timely and relevant protection cover to propose and sell. Embedding this insurance offer in the customer journey makes it then easy and convenient to subscribe.

Dennis Kang identifies 5 key elements an insurer must master for a successful embedded strategy at scale.

1. Technology
Embedded insurance premiums vary and may start at a few cents[3]. It is often a high-volume, low-margin business where onboarding is challenging. Technology must optimize processes and computing power must be ensured. It also has to be agile to respond quickly to the competition when needed.

2. A customer-centric business model
To win customers’ preference and loyalty, the company must centre its attention and processes on providing the customer with an outstanding experience in all interactions, from onboarding to claims and renewal. This centricity may lead to selling a product with low to zero profitability in order to onboard the customer and sell other more profitable covers.

3. Ecosystem linkage management
Technology-related, but not only, an insurer must have the capability to connect and manage many ecosystem partners to set up products and integrate any scenario that requires a cover.

4. AI and data
Data collection and analysis is the centre of it all, hence AI too. All must be collected and analysed to detect emerging needs, segment the market, analyse responses given and minimize fraud.

5. Internet Knowledge
Insurance needs and opportunities may arise from any part of the internet; a marketplace, forum, social media, metaverse, web 3.0 … A good knowledge of the net is essential to leverage and attract clients in whichever channel they use.

Getting insurance coverage is very much context based. Important life events and purchases will raise awareness of the risks that may potentially harm, destroy or affect a new life event, investment, or purchase. While in the past one could neglect getting protection against those risks for not being offered adequate cover at the right time and place, technology is changing the scene. Closing the insurance gap, brands and institutions consumers trust are now embedding insurance products in their offers, making them readily and conveniently available to their customers.

The trend has only just started. More and more banks, online retailers, marketplaces, and ecosystems are looking for insurers with technological solutions and products to partner with. If you too are interested to know how IBA has helped renowned carriers embed insurance in a variety of retail chains and channels, please contact us here or click here for customer reviews.


[1] In TDI Talks! In conversation with Dennis Kang, CTO, ZhongAn – The embedded insurance opportunity, and key ingredients for success

[2] In: Embedded Insurance Report, Leveraging Transaction Data To Expand Coverage In A Digital-First Market, PYMNTS.com | Cover genius

[3] A return shipping cost reimbursement cover of a low-price good, for example