Embedded Insurance and Insurtech: benefits and challenges

The concept of integrated insurance is gaining increasing popularity and is often described as a major trend, but what does really lie behind this term?

Integrated insurance, also known as Embedded Insurance, represents a new approach in the insurance field that allows companies to incorporate insurance services directly into their own products and services. This approach offers them the opportunity to integrate insurance products within their product or service range, thus providing their customers with simpler and faster access to the insurance benefits they need.

Through API connections or plug-in solutions, insurance is seamlessly integrated into the customer journey. Insurance is offered directly as a complement to the product or service, providing coverage perfectly tailored and relevant to the situation.

Why ride the wave of Embedded Insurance?

In Europe, the Embedded Insurance industry is expected to steadily grow, recording a CAGR of 19.4% by 2029. Embedded Insurance revenues are projected to increase from $10.782 million in 2022 to $28.525.5 million in 2029.

The landscape of Embedded Insurance is booming in Europe, with countries like the UK, Germany, and France contributing significantly to the business growth in the region.

To remain competitive in the market and keep pace with constantly evolving customer requirements, insurance companies in Europe are changing their business models and seeking to enhance their distribution channels. Furthermore, with the increasing number of new entries in the region, such as insurtech startups, the European Embedded Insurance market is thriving.

Currently, the insurtech sector continues to experience significant growth, with promising projections for the future. According to a Business Research report, the global insurtech market is expected to reach a value of over $11.300 trillion by 2028, with a CAGR of 12.7% during this forecast period. This notable increase is driven by the growing adoption of innovative technologies in the insurance sector, such as artificial intelligence, data analytics, and blockchain, which are revolutionizing insurance processes and enhancing the customer experience.

Automotive: a segment in revolution

Currently, the automotive sector is significantly leveraging insurtech, with pay-as-you-drive (PAYD) auto insurance emerging as an innovative and promising insurance model. According to a Statista report, the PAYD insurance market is expected to grow globally to $15.6 million by 2028. This insurance model relies on the installation of telematics devices in vehicles that monitor driving behavior, such as speed, braking, and acceleration, to assess risk more accurately. This allows insurance companies to adjust rates based on actual driver behavior, promoting safer driving.

According to a Deloitte report, PAYD insurance can lead to a 20-30% reduction in road accidents and a 10-30% decrease in miles driven. These data highlight how these solutions not only offer financial benefits to drivers but also help reduce risks and costs for insurance companies.

What are the benefits and challenges?

With the concept of integrated insurance, traditional insurance characterized by rigid products, traditional technologies, and a lack of innovation now belong to the past. The benefits of this new approach are plenty:

• Personalization of insurance policies tailored to the specific needs of customers.
• Automation of processes that allow companies to reduce processing times and improve operational efficiency.
• Improved customer experience: digital solutions make it easier for customers to purchase policies, file claims, and interact with insurance companies, thereby enhancing the overall customer experience.
• Cost reduction: insurtech can help reduce operational costs through process automation and more efficient claims management.
• Product innovation: innovation in the insurance sector leads to the creation of new products and services that better meet customer needs.
• Access to broader markets: digital platforms allow insurance companies to tap into new markets and customers that would otherwise be difficult to reach through traditional channels.

On the other hand, there are still challenges that often discourage its adoption:

• Often unprepared IT infrastructure for development
• The challenge of maintaining customer trust when sharing their data

Open Finance serving the insurance sector

The solution to these problems is certainly an actor capable of offering a range of products tailored to the needs of individuals and businesses. To meet these needs, Fabrick has leveraged the opportunities of Open Finance and developed products such as PSD2-compliant payment orchestration, or technological solutions for fraud prevention, which make it possible to manage processes automatically and securely along the supply chain, guaranteeing:

• Access to a variety of payment methods and providers, online and offline, through payment orchestration.
• Reduced time required for administrative activities and optimization of financial management processes through automatic payment reconciliation and splitting among the involved parties.
• Simplified access to account operations via Open Banking, allowing insurance companies and their distribution intermediaries to access accounts.
• Reduction of manual errors, costs, and time required for process management through automatic reconciliation between receipts and bank credits and payment distribution in the sales process.
• Creation of new insurance propositions and guarantee of high security standards through technological solutions and fraud prevention tools.

Implementation of customizable value-added services through a comprehensive suite of APIs, which can be easily integrated into processes to optimize the customer experience.

Guarantee of payment process security through innovative fraud prevention solutions before and after authorization.

Conclusion

Embedded Insurance represents a major shift for the insurance industries, and while challenges remain, the future looks promising for this emerging trend. As Embedded Insurance gains popularity among consumers, we can anticipate further partnerships between other ecosystem players offering a variety of services bundled under one roof. Many companies are already exploring ways to leverage their existing platforms to offer Embedded Insurance products.