Consumers and companies alike are buried in mountains of data every day. As a result, employing sophisticated data analytics to target in-market buyers at the right time is key. This is true not only for large purchases but is becoming common practice on a smaller scale as well. Embedded insurance is an innovative technique taking over the insurance industry to scale coverage to smaller purchases. It is one of the most integrated ways to gain policy coverage for everything from new vehicle purchases to small electronics and even travels.
Data is king in the insurance world — and embedded insurance is no exception. Knowing how to leverage it correctly enhances both the transactional experience and process for buyers, as well as KPIs for providers.
What is embedded insurance?
Embedded insurance is a policy offering that is made during the product or service purchasing process.
It is an innovative way for businesses to present relevant and personalized insurance for that specific product. For digital online purchases, embedded insurance takes the guesswork out of choosing a carrier and policy type. Embedded insurance brings the right coverage to the consumer at the point of sale, making these offerings a massive opportunity for both carriers and retailers.
Strategies that allow insurers to meet the specific needs and preferences of individual consumers — even during the buying process — aren’t as complicated as they seem. Through personalized recommendations, embedded insurance sales utilize predictive consumer data in one of the primary ways. While this isn’t a new concept, insurers can analyze vast amounts of data collected from multiple sources in ways previously unavailable.
Who is Providing Embedded Insurance?
Companies with consumer goods offerings use embedded insurance options. A few of the early industry adopters are:
Online Retailers
This includes big box stores, general merchandise retailers, or retailers specializing in a specific niche (EX: sports goods).
Automotive
Auto, ATV, and boat Manufacturers. They have embraced embedded insurance strategies, perhaps making the sale less stressful for consumers who consider securing coverage as another “to-do.”
Travel
Travel insurance is nothing new, and it’s actually an excellent example of embedded insurance. It serves companies like airlines, cruise lines, resorts, rental car services, and more.
Entertainment
Unforeseen events may cause the buyer to lose all value without the opportunity of a “return,” resulting in missing experiences like concerts, sporting events, and theme parks.
Using Data to Impact the Buying Process Beginning to End
Connecting carriers to customers in the “click-to-buy” moment and in a streamlined, convenient way, takes the complexity out of the insurance buying process.
Due to the hassle of paperwork and feeling overwhelmed by questions and choices, most consumers don’t actively seek out coverage for everyday purchases. Despite this, more and more companies across industries are successfully using embedded options. This shows that although consumers are not willing to exert great effort to gain coverage, they are interested in gaining coverage if it’s easy. There are benefits for consumers, retailers, manufacturers, and carriers alike.
An example of embedded insurance
Let’s walk through a real-life example. An individual frequently engages in outdoor activities and buys multiple items from a retailer in that category.
The retailer captures and can leverage actual, historical purchase data to tailor the consumer’s online shopping experience.
Why not take it a step further and offer coverage options aligned with the consumer’s unique needs during the buying process? By working with an insurance partner with capabilities that can be embedded in the experience, a retailer could offer product protection against damages, travel cancellations, and even unexpected accidents or weather events.
Online retailers, car manufacturers, fintechs, and almost every electronic manufacturer now offer insurance without having to go through the traditional underwriting process. This is a game-changer for retailers for many reasons.
Benefits for Retailers
Increases consumer confidence in large purchases
Consumers making purchases may appreciate the peace of mind offered by having insurance provided for the product they are buying. Remove the concern of acquiring coverage from a separate vendor — for example: “Will my policy cover my exact model?”
Creates additional revenue stream
You have successfully won a conversion for your product. The cost per acquisition is complete, but you could still improve your ROI. An already-built eCommerce infrastructure makes embedded insurance a simple way to boost ROI. You can create a new revenue stream without compromising your existing business with minimal additional effort and research.
Building trust through personalization
Retailers and manufacturers can use existing first-party data from prior purchases and third-party data to fill in the gaps. This combined data set can power personalized experiences, only offering coverage when it will likely succeed. These factors could include price sensitivity, the product itself, and a consumer’s overall attitude to uncertainty.
Benefits for Insurers
New product purchase insights
Insurers now have a view of the motivations driving new product adoption and subsequent satisfaction.
It’s not just what customers are buying that has changed. The reasons behind purchasing product protection are also evolving. Insurance products designed around actual buying and usage patterns, and perceived levels of risk, have insurers offering more precise and dynamic offers.
Introduce new business models
Product sales channels are ever-changing and improving. The concept of selling insurance as a sales channel at the point of sale is not new. What is new is just how smooth the entire experience has become for all parties involved. Companies are now seamlessly embedding insurance offers into the customer journey in an integrated, smart way.
This level of integration positions the insurance offered as a value add rather than an upsell or additional purchase. Partnering with retailers, manufacturers, and travel and entertainment providers has never been more effective for insurance carriers.
Wider audience reach
Standard insurance offerings like auto, home, and life typically depend on a major lifestyle change or competitive churn by the competition to achieve growth. With embedded insurance, a much wider pool of prospects is now possible. The digitization of insurance offers aids in turning the concept of embedded insurance into consumer action. Across generations, consumers are already making online purchases of all sizes.
Airlines, hotels, concerts, and athletic tickets are all offering the option to protect their reservations. And online consumers, no matter their age, are open to purchasing insurance at the point of sale. This leaves insurers in an excellent position to reach a wider audience of potential customers.
How Consumer Data is Fueling Embedded Insurance Solutions
By placing the exact coverage a consumer needs at the point of sale, embedded insurance eliminates the need to understand coverage needs or compare policy options. Customers get the coverage they need for the risks they face, improving their confidence in their purchase.
Embedded insurance offers are based on limited data points available at the time of purchase.
This means the process can only operate as intended if the data behind it is accurate. AnalyticsIQ’s data can help fill the gaps to build a more robust set of data on which to base real-time decisions.
Our dataset is not only accurate but predictive. We blend cognitive psychology with data science to create data products that help data leaders understand why someone makes the decisions they do. This motivational data helps organizations efficiently acquire new customers, accelerate the sales cycle, unlock cross-sell/upsell opportunities, optimize pricing and product development, and more.
In the case of embedded insurance, data points must be available in real-time to scale without slowing down the customer experience.
Are you creating or optimizing an embedded insurance solution? Unique data points could be the asset that takes performance from meeting expectations to smashing KPIs. Check out our insurance page to learn more about how we are partnering with insurance providers every day to deliver better results with data.