• Embedded insurance offered at point of sale is a major trend in the sector.
• Through embedded insurance, customers who traditionally couldn’t afford to insure expensive items now can.
• This of course is a threat to traditional insurers who are reluctant to evolve.

Embedded insurance is offered to a buyer at the point of sale. Not only does this make insurance more accessible, it has the benefit of bringing more customers to the sector, driving it forward. Unfortunately for traditional insurers, it’s also a major threat to their business model.

According to Insight Survey, embedded insurance is a global and local trend that is gaining momentum.

“In South Africa, embedded insurance is becoming a major trend, and an opportunity to bridge the current insurance gap in the country, by providing insurance at the point of sale, and allowing consumers to get immediate coverage for goods and services,” the research company wrote in November.

Businesses such as Hello Group, Tiger Wheel & Tyre, and Chery have all launched some form of embedded insurance in partnership with insurtech companies and traditional insurers.

According to Root Platform’s chief executive officer, Charlotte Koep (pictured), non-traditional insurance channels will increasingly drive insurance-premium sales.

“Embedded insurance offers underinsured markets the convenience of access to insurance right where people typically make their purchases. These channels increasingly include retailers’ websites and apps due to the widespread use of connected devices. Consumers are also more likely to opt for bundled insurance offers when dealing with a trusted brand. Suggesting cover as customers make high-value purchases is a great way to keep insurance top-of-mind and add value,” says Koep.

“Insurance is an important but often a neglected after-thought. When it’s included in the purchase, the decision becomes a no-brainer for many consumers. In this way, a more streamlined approach to the insurance process will attract customers,” the CEO adds.

As much as it may be a grudge purchase, with the price of appliances, electronics and pretty much everything on a sharp upward trajectory, insuring these items is incredibly important. Unfortunately, insuring an entire household may prove too costly for most and embedded insurance offers a convenient gap filler.

However, as outlined in an article penned by former vice president and head of digital distribution at Ventures and Partnerships, Jacqui Wassenaar, embedded insurance isn’t something businesses should half-bake.

“Given the simplicity required for the products, the size of coverage for embedded policies is typically small. For that reason, viable, successful embedded offerings need the ability to scale. Without scalability, the low premiums of embedded products will not sufficiently offset the costs incurred by insurers and their partners to launch the offering,” the former VP writes.

One major pitfall of embedded insurance worth highlighting is a misunderstanding by customers as to the scope of the coverage. This causes frustrations for the customer while also impeding claim assessment.

Of course, embedded insurance is a threat to traditional insurers who don’t move with the times. The ability to insure just the items that represent the biggest risk or are too costly to replace rather than an entire household is very attractive in a constrained economy and that’s bad news for the stalwarts in the sector.

“Embedded insurance is both a growth opportunity and a potential threat. For these players, however, the dynamic is no different: it’s a matter of meeting customer needs as well as the growing expectations of value and personalisation,” says Koep.

The CEO argues that traditional insurers should invest in insurtech solutions as these open up new revenue streams and the growth in the sector is immense with forecasts putting the global insurtech market at a value of $39.4 billion by 2027.

“Overall, the changing technology and social context provides an incentive for legacy insurers and retailers to attract new customers through convenient, integrated insurance solutions. Advanced technology platforms can unlock the full potential of digital insurance distribution and embedded solutions to stay a step ahead,” concludes Koep.