There has been much discussion over the scope for embedded insurance in lines such as motor and gadget insurance, but what are the wider applications - and critically, the benefits to customers? Shreyas Vasanthkumar, Managing Director EMEA at Duck Creek Technologies, explores the potential for embedded pet insurance.
For insurers, the battle to stay differentiated, relevant and front-of-mind for customers is ongoing, and the applications of data and technology are constantly shifting the horizon of what is possible. Embedded insurance has attracted strong interest from leading insurance giants and insurtech start-ups alike as a new frontier expanding the reach of insurance.
The idea is to provide coverage as part of a product or service – for instance, a new car that comes with motor insurance included, or a new smart watch that is covered for theft or damage from the point of purchase.
And while it is currently still conceptual in many fields, the idea of embedded insurance has the prospect to be a tech-powered game-changer. This is because the key priorities for insurers are policy development and speedy distribution of new products – connecting innovative and relevant products with customers at exactly the right time in their buying journey.
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This is particularly important in today’s uncertain economic environment with the cost of household living increasingly impacting consumers. The key to optimum customer experience is having a ‘single view,’ simple, cost-effective bundled products and seamless interactions with their insurer where the customer can clearly see the value-add and benefits in order that they can make an informed decision about the product purchase.
At the same time, all types of insurance providers – from specialty risk, to commercial, motor and personal lines insurers – are driving to improve underwriting outcomes, and reacting nimbly to change is essential to profitable underwriting as well as growing market share.
Essentially, embedded insurance has the potential to address both these drivers of insurance business – connecting with customers on a grand scale and helping control underwriting outcomes. The secret ingredient is modern core systems architecture.
Data is key
The data a customer gives when they buy the product or service is linked to the insurance provider, and a personalised policy is generated and embedded in the product at a cost that is priced into the product at the point of sale. Technology can also be used to generate a simple and transparent claims trigger, without the need to file a claim or liaise with loss adjusters.
The potential spans many product lines and goes hand-in-hand with risk mitigation – for instance, cyber breach and data theft insurance could be included as standard on smartphones that have the highest level of security protection installed.
Imagine experiencing flooding at your business headquarters and receiving a business interruption or physical damage payout within 24 hours, without having to pick up the phone or lodge a claim. Similarly, if you bought a new smart watch and accidentally dropped it onto a concrete floor six months later – the watch would immediately register itself as damaged beyond repair, and its owner would receive the insurance claim value into their bank account within 24 hours without having to pick up the phone.
What is the potential for embedded pet insurance?
Embedded insurance has scope across insurance lines, but beyond cars and gadgets, pet insurance in particular has been identified as a market in sore need of a radical shake-up. Embedding insurance into pet services provided at veterinary clinics or rescue centres, for instance, or as part of the sale of products such as pet collars or even pet food subscriptions, could help revolutionise the fairness and relevance of insurance coverage for this market.
The pet insurance market is a rapidly growing industry. However, one of the biggest challenges pet insurers face in attracting customers is dissatisfaction with rising premium costs and lack of trust among consumers over the value that pet insurance actually brings.
So while the size of the UK pet market is projected to grow to £1.5 billion in gross written premium by 2025, with an estimated 3.4 million pet insurance buyers, at the moment 70% of dog and 84% of cat owners do not have insurance cover for their pets in the UK. And add to that the fact that 42% of pet owners feel that insurance is too expensive.
Insurers are under pressure to bring new, more relevant and affordable products to this growing market quickly, and optimise customer experiences. Insurance embedded in pet services such as registration with a veterinary clinic could support the end-to-end pet insurance lifecycle with a partner ecosystem offering vaccination plans, embedded smart collar device coverage, online veterinary support services, pet activity tracking and much more – offering a highly relevant and significantly more transparent customer experience.
The tech behind the scenes
Deploying Artificial Intelligence (AI) within underwriting, for example, can enable pricing for an individual pet to be based on historical factors for a similar risk at the time of quoting. For claims settling it can predict an accurate reserve based on type of illness, or even predict a possible litigation.
Low-code, cloud-based modern core systems architecture enables data-hungry applications like AI to run in the background, making data-powered decisions and drastically improving the efficiency of underwriting and administering high volumes of policies.
Cloud architecture enabling faster speed-to-market now makes it possible for insurers to launch new coverage within a few weeks and not months, using single product definition toolsets allow for quick additions or revisions to products using a single point of change for rating, rule, form and page modifications.
The benefits of getting it right at a central level are clear – allowing for a personalised customer experience on the front end while running a significantly higher volume of policy sales across the board, powered by streamlined workflows that have eliminated inconsistency, poor integration and lack of transparency.
A fairer world for consumers and their pets
A recent survey by Duck Creek Technologies of pet insurance buyers in the UK about their feelings on pet insurance pricing, availability, products and service offering showed a market under-delivering for its policyholders and their pets.
None of the pet insurance buyers we spoke to said that they were completely happy with the coverage they could get at a price point they could afford, leaving many to purchase a more basic plan than they would have preferred, which would only cover emergencies.
A more holistic approach is clearly needed, and it’s a need that embedded insurance has the potential to meet in a market where too many policyholders have become disillusioned with traditional insurance.
Using emerging technologies to automate processes provides a much more seamless, streamlined experience which today’s more discerning consumers not only prefer, but expect. While embedded insurance has been around as a concept for a while, in order to realise the full benefits requires a different way of selling, innovative new products and a closer, more personalised relationship with the customer.
What consumers want is a seamless service that covers all eventualities – not multiple products and touch points with their insurance provider. There is an abundance of opportunity for the application of low-code solutions and cloud technologies to transform the pet insurance market, and in turn open the door to the future of embedded insurance – connecting insurance with smart collars, vaccination and veterinary services, and customer information 24/7 to pet owners and agents.
Embedded insurance has the potential to deliver relevant coverage exactly when customers are most likely to recognise its value and the real-time experience it offers. Ultimately the big change in mindset for insurers is that it’s not about the process of selling standalone insurance to a customer, it’s about providing the customer with a seamless experience when they buy other products and services
There is a golden opportunity for insurers to use joined-up thinking powered by technology to reconnect with consumers and offer more relevant, fair and simple products backed by faster or even automated claims. And for insurers, the focus on joined up data can help improve underwriting and pricing accuracy enriched by pet information from industry sources and pricing based on analytics from pet activity.
Ultimately the big change in mindset for insurers is that it’s not about the process of selling standalone insurance to a customer, it’s about providing the customer with a seamless experience when they buy other products and services.
Check out our other content on embedded insurance:
Learn more about embedded insurance at Duck Creek Technologies.
Report: Making embedded insurance a profitable business model for insurers
Blog: Embedded Insurance and Cyber Security
Panel debate: Expand Your Ecosystem Partnerships To Increase Penetration And Win New Customers
Podcast: Embedded Insurance with Simon Torrance
This article was published by Fintech Finance News and is shared with the kind permission of the publisher.