Consumer behaviour is shifting, and the pace of this change is accelerating. The human obsession with ownership of products has moved to one of sharing, the idea of borrowing to meet a need. This idea is not a new concept. However, in the last few years, the ‘Sharing Economy’ has expanded across the world through the introduction of a new broad range of ‘sharing’ services. The highest-profile of these is ‘ride-sharing’ such as Uber and Lyft.
What does this mean for insurance? Most importantly, it presents an opportunity for Embedded Insurance, a model where insurance is included in the subscription fee when a person borrows a product or shares a service. Industry analysts report that the Embedded Insurance market place will account for over $700 billion in Gross Written Premium by the end of this decade, representing 25% of the total Property and Casualty market worldwide.
Evidence of this growth is appearing across the world.
For example:
In Dublin, Toyota has launched their car-sharing service Yuko, https://www.yuko.ie/ where Toyota cars can be used for a short period starting at €9 per hour with insurance and taxes included.
In London, ‘Transport for London’ bicycles can be borrowed for 30-minute periods starting at £2 with liability insurance embedded in this price https://tfl.gov.uk/modes/cycling/santander-cycles.
In Paris, ‘escooters’ can be obtained on demand from companies such as Bird and Lime with embedded insurance included in the rental fee.
· Airbnb provides several embedded insurance options for their property hosts.
Embedded Insurance represents a significant opportunity for the industry. But if we are to profit from this shift in customer behaviour, we must think differently at both a business and technology level.
To win in the Embedded Insurance marketplace, we must adjust our business and technology delivery models so we can support the provision of insurance at the instance when the need exists. This approach means implementing business processes and technology platforms that support the provision of cover for a product or service for the duration when that product or service is in use, essentially ‘Insurance-On-Demand’. This requirement is very different to the system requirements needed to support the traditional ownership model, where longer-term policies are the norm and renewals occur annually. Embedded Insurance requires the use of automated, self-service systems that can manage short-term cover and can be embedded into ‘shared’ products and services. Technically, this means a digital cloud-based modular solution that supports API integration with service providers, existing systems and consumer mobile applications.
So, the key take ways are;
Embedded insurance is a significant growth area; it will not replace traditional insurance but rather complement it.
Technology is the critical enabler, specifically, the technical capability to support multiple distribution channels and integration with end consumer products and services.
To protect existing business, these new Digital Ecosystem Platforms required to support Embedded Insurance will need to integrate with existing legacy business applications and business processes.
Embedded Insurance is one of the new and exciting opportunities for insurance players; the future is bright, but we have to get ready to embrace it.