The insurtech sector is no stranger to buzzwords that come and go with sometimes disarming alacrity. However, for many working within the industry, there’s little doubt that the opportunities presented by embedded insurance are slowly coming into their own amid the evolution of insurance technologies and changing customer behaviours.
Speaking with Insurance Business at Insurtech Insights Europe, Andrew How (pictured), senior national sales director at Duck Creek Technologies, shared his insights into where the embedded insurance market currently stands regarding size and scale. While some players are starting to perform exceptionally well, embedded insurance uptake is really still in its infancy, accounting for about 1% of direct written premiums (DWP).
“Over the next 10 years, or by around 2030, this is expected to be anything from around 10% to 15% - even up to 25% of the market,” he said. “But even if it hits just 5%, that represents a seismic shift. And it’s all about buyer behaviour. Embedded insurance isn’t new, it has been around for 40-50 years. More recently, with the emergence of the neobanks, the concept of buying insurance via a bank – whether that’s your commercial business accounts or personal accounts or travel insurance, etc. – has become more normalised.”
Several factors have traditionally impeded the development and uptake of embedded insurance solutions – with technology playing an integral role. Embedded insurance works on the premise of efficiently and effectively integrating into an existing channel, he said, and without the right technology behind the scenes, that isn’t possible.
In addition, he said, it’s worth noting that the evolving way insurers look at the market has been a game-changer. Often embedded insurance involves new products and new product developments, which require a customer-centric approach rather than an insurer-centric approach. Taking a genuinely customer-centric approach means bringing customers along as part of the journey and keeping their needs and wants in mind when developing new solutions rather than retrofitting an existing insurance offering to match them.
How noted that among the key milestones in the recent evolution of embedded insurance is the increased willingness of intermediaries to identify and seize the opportunities it can bring. From an insurer's perspective, he said, embedded insurance sees your customer become your partner – and that’s not necessarily the end customer, but also the intermediaries you form links with.
“So, if your intermediary is selling a core set of products, it becomes about what benefits you give them and their customers,” he said. “It’s not about you anymore. I think the real sea-change is people opening their eyes to the market and identifying how COVID forced people to think about and buy insurance differently.
“And ultimately, the money stops with reinsurers. You’ve got agile MGAs and their intermediaries, you’ve got the likes of Amazon and Tesla with their insurance efforts – so you have to be very careful that issuers don’t get left out where a reinsurer can go direct to an MGA and, through them, to the intermediary. Insurers have to face up to these new entrants, to open their eyes and accept that the world is changing, and they have to change with it if they don’t want to become irrelevant.”
Relevance is the name of the game for every player across the insurance market today, How said, and it’s won or lost by having the proper support technologies that enable a firm to work with these markets, new products, and new customer expectations.
There is a wealth of opportunity in the embedded insurance space for those market players willing to do things differently, though How also cautioned on the need for a considered and measured approach to growth, given the implications of mis-selling embedded insurance. Those looking for growth need to recognise that technology can either work as an inhibitor or as a catalyst for growth.
“I think that’s where Duck Creek sits,” he said. “It flips the script so that rather than being dictated to by the technology, you can use it to support your aspirations. It’s straightforward to create, build and integrate no-code,
From speaking with players across the insurance ecosystem, How noted the pressure on companies to release new products or variants to that speed. This is particularly when you’re working in niche markets, he said - if you wait too long, that niche product has become mainstream and you’ve lost your edge. Duck Creek specialises in enabling customers to create accessible, fit-for-purpose solutions and deliver them quickly, allowing them to gain market share and quickly scale up.
“Having the right partnerships is more critical than ever,” he said. “And the right partnership is one where you grow together and have joint goals. Having a shared vision is so important because it allows you to work together, find new opportunities to broaden your horizons and try new business lines. It’s all about trial and error, making this an exciting space.”
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