Our inaugural InsurTech Summit NYC on June 16 featured leading VCs, emerging companies of all stages, as well as other key stakeholders. Below are key takeaways from the third panel, Embedded Insurance: The $3 Trillion Opportunity.
A panel led by McDermott Partner Michael Byrne covered what embedded insurance is, its evolution and potential forms of execution in the insurance industry across personal and commercial lines of business, the gig economy, software as a service (SaaS), artificial intelligence (AI), the Internet of Things (IoT) and more.
Embedded insurance is all about the customer—not just a cross sell but a relevant and meaningful offer based on what is known about the customer and their needs at the time.
During the Embedded Insurance panel, industry leaders discussed the high growth area of embedded insurance. The panelists covered the meaning of embedded insurance, the various forms of execution in the insurance industry across all different lines of business and the challenges and gray areas of 50-state insurance regulation.
1. The Meaning of Embedded Insurance
The panelists described embedded insurance as selling insurance along with another complementary product or service, creating a more accessible and frictionless experience for the customer. The panelists’ companies work with symbiotic partners to embed their insurance products inside of a platform (where customers already exist). The addition of insurance essentially completes the product/service that the customer was already purchasing during a relevant shopping moment. For example, Melanie Irvin, VP and head of Legal and Government Affairs at Branch, explained that, typically, when someone purchases a home, going through the process of purchasing a homeowner’s insurance policy is often a friction point for the customer. So instead, Branch partners with companies to integrate insurance at the point of sale of a home.
Rilwan Lawal, founder & CEO of GigEasy, discussed embedded insurance in the context of the gig economy. When someone takes a full-time job with an employer, that employee is offered a benefits package consisting of health, life and other insurances. However, benefits have not yet caught up in the gig economy, leaving gig workers in need of coverage. GigEasy is aimed at aggregating data to give potential customers an instant quote and reducing touchpoints from lengthy application forms to match user expectations in 2022. GigEasy offers its partners in the gig economy a higher likelihood of retention of gig workers by offering, for example, RentProtect (a disability and critical illness bundle) so that gig workers can ensure they will be able to continue paying their rent even if they are unable to work for a period of time.
In the smart home context, Vivint has 1.9 million subscribing smart homes with which they have eight interactions per day, on average, on their application. These homeowners have already hired Vivint to protect their homes via Vivint’s smart home security system, so it was a natural progression for the next step to include offering existing customers another form of home protection, in the form of homeowner’s insurance. Since Vivint already has the advantage of access to data from their customers’ devices, which provides insight as to behaviors and events in the home that can be correlated to, and prevent, losses, building out a managing general agent was a logical next phase of the business.
The distribution model of embedded insurance means that less money can be spent on acquiring customers, allowing for a cost advantage that results in lower premiums than those charged by non-embedded competitors. There are also more ways to be able to predict losses and guide underwriting decisions with embedded insurance, as more can be known about the customer than in a more standard sale of insurance. Another advantage of embedded insurance is the resulting unified and more efficient customer experience.
With insurance being regulated by each of the 50 states individually, it can be difficult to navigate the nuances when, for example, sharing revenues with unlicensed partners. or how a link for insurance can be embedded in the website of such a partner. Panelists expressed that it is essential to educate partners without an insurance background on the importance of complying with each state’s regulations, since, with the growing embedded insurance market, a lot of new tech companies are invited into the space. The panelists also explained that staffing the in-house operation with licensed individuals who can solicit the sale of insurance is key.