How Embedded Insurance May Close Coverage Gaps
André Dreyer, Vice President, Head of Ventures & Acquisitions, RGAX
Embedded insurance is a growing focus area of digital distribution across the insurance industry.
By making insurance available in conjunction with other products on existing online services, customers can easily add insurance protection that fits their needs and budget as part of a customer journey linked to an established need. Insurers, meanwhile, provide greater convenience and link insurance protection with brands that consumers know and trust. Most importantly, embedded insurance offers the opportunity to greatly expand the reach of insurance, educate customers and ensure financial protection for all.
Property and casualty insurers have successfully applied the concept of embedded insurance to their distribution channels for years. Examples of familiar P&C embedded products include the option to purchase insurance for a mobile device when purchasing a cell phone or a policy for collision insurance when renting a vehicle.
Looking to the life and health insurance space, embedded insurance has not yet reached that level of penetration, but carriers are increasingly uncovering new opportunities for embedding insurance to reach new audiences.
Partnerships are an integral part of embedded insurance solutions. By partnering with existing platforms and services that consumers already use and engage with, insurers can meet consumers where they are and provide coverage within a channel they are already comfortable using. Not only does this expand the potential customer base for insurers, it also enriches the platform’s value offering and makes insurance more accessible and ultimately helps close the protection gap.
For example, Inclusivity Solutions, a digital insurance provider based in Cape Town, South Africa, offers a real-world case study of the power of embedded insurance in action. The company started when its founding CEO Jeremy Leach approached RGA to help achieve his vision of providing coverage to underserved markets through mobile networks and alternative distribution models. The offerings represent a three-way relationship between Inclusivity Solutions, the insurer, and the mobile network operator. The products, offered through WhatsApp and through the Unstructured Supplementary Service Data (USSD) technology on all mobile phones, are available as either free loyalty cover or higher-value cover at a premium. The program also helps educate users about life insurance.
By spending as little as $1 per month on airtime, consumers can receive a cash payout for every night spent in a hospital if they are hospitalized for three nights or more. These payouts can greatly help low-income families alleviate the financial stress of medical bills as well as loss of income or other day-to-day expenses such as food or transport. A key to the success of Inclusivity Solutions has been the company’s attention to user experience, ensuring that its low-cost products were simple to use and easy-to-understand, and addressed consumer needs.
The relatively low insurance penetration in many emerging markets, including Africa, coupled with the ubiquity of mobile phones on the continent, has created one of the fastest-growing distribution channels for insurance, as well as significant opportunities to drive financial inclusion through innovative digital products, including embedded insurance.
The pace of innovation is quickly driving the industry forward, but the purpose of insurance must remain at the center of these developments. Providing financial protection for all is the ultimate goal, and to meet that goal, it is vital for insurers to reach consumers where they are. That includes not only using existing and insurance-adjacent distribution channels but also offering solutions and benefits at a price point that fits the target consumers’ lifestyles. By adding value without distracting from the customers’ main purchase, insurers can make buying insurance a more integral part of everyday life and bring financial protection to more people.