Charlotte Koep, CEO of Root Platform.

The insurance industry is poised for a shakeup as consumers start taking a self-service approach to insuring themselves against theft, loss or damage to their valuable goods.

Major retailers are at the forefront of this transformative trend. The seamless integration of insurance policies into existing products and services is allowing them to branch out into new revenue streams and enhance value for their customers.

Embedded insurance - the real-time bundling of insurance with a purchase or at the point of sale – is not a new concept. Cellular service providers have enticed customers with limited, free insurance as part of cell phone upgrades for some time. These deals are often pitted against similar value-adds from competitors, like extended care plans for example.

“While there are many examples of embedded insurance in practice, these non-traditional channels will increasingly drive insurance-premium sales,” says Charlotte Koep, CEO of Root Platform. Deloitte forecasts that embedded sales of property and casualty insurance alone will reach US$700-billion globally by 2030.

Embedded insurance can also address the widening protection gap in South Africa. For this reason, the demand for embedded insurance will keep rising. Insight Survey’s short term insurance industry report notes that embedded options can reduce this gap by allowing consumers to purchase insurance at the point of sale. It also gives them immediate cover from their trusted brands.

“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 deal is in the details

Consumers are becoming more focused on value, convenience and the overall buying experience. This is driving adoption of embedded insurance deals and the rapid evolution of the embedded insurance landscape.

Retailers can access customer-focused insurance services relatively easily by partnering with technology providers that offer tailored technology solutions.

“These partnerships will allow retailers to quickly launch insurance products, streamline administrative tasks and comply with industry regulations,” Koep says. “Retail businesses can continue focusing on customer experiences, building brand loyalty and driving growth.”

She adds that technology service providers take the complexity out of integrating embedded services into retailers’ online or physical IT systems. In this way, they can benefit more quickly from additional, commission-based revenue streams and novel customer retention strategies.

Retailers also have a unique advantage in that they understand their customers' needs and preferences, allowing them to better tailor insurance solutions.

Digital insurance platforms can be rapidly customised to suit a given retailer's needs. “Consumer needs can be addressed by insurance products that suit the individual or a given product. This could vary quite wildly based on the way, say, a smartphone compared to a trailer is used,” Koep says.

If you can’t beat them…

Legacy insurers struggling to stay relevant in a rapidly evolving market are having to rethink their market landscape, business models and operating structures.

“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,” Koep notes.

Legacy insurers can capitalise on opportunities to partner with insurance technology providers as part of their strategic considerations and a new market approach. This will give them ‘cover’ against losses from dated, traditional models. It also opens new revenue streams, access to vast, relevant information about their markets, and potential savings through a shrinking need to advertise.

“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,” she concludes.