FSI Predictions 2023: Embedded insurance is poised for exponential growth

Among the emerging trends on the financial services horizon, embedded finance may end up having the biggest impact on the industry’s makeup and infrastructure. Embedding large-scale insurance and banking products or services at the point of sale could not only disrupt long time distribution channels over the rest of this decade, but may also result in the creation of an entirely new set of alliances with nonfinancial services partners.

Embedded insurance as a concept is nothing new. For years, tourists have routinely added travel insurance when purchasing airfare, while consumers have added warranty coverage when buying major appliances. In China, we have seen some InsurTech firms already started to partner up with new distribution platforms such as WeChat and embed their insurance products into the apps, such as food delivery, transportation, and early parenthood complications, etc.

What’s likely to change rapidly is the volume of insurance premiums for major lines built into another type of third-party transaction. For example, auto or homeowners’ insurance — with the sale of a vehicle or residence — would bypass traditional sellers such as insurance agents, upend direct-to-consumer sales from insurers, or even exclude legacy carriers altogether.

One way to avoid disintermediation is for traditional insurers to consider cross-sector collaboration in order to integrate the sale of their coverages into the initial transaction process.

It is an exciting market for embedded insurance, and insurers should be ready for the potential obstacles and practical challenges to effectively identify and maintain their alliances and partnerships – such as, regulatory compliance, data and privacy protection, consumer complaints handling, customer relationships management, sales training, etc.

Given the huge growth potential of the embedded market, “playing it safe” by not engaging early on could end up being the riskiest ove of all. Watch the video to find out more.

Click here to access the full article by Deloitte Insights.