The three trends that will shape Embedded insurance in this decade

Trend#1: Continue expanding

In this decade Embedded insurance will continue achieving market share in the Personal Lines market, and will use this momentum to grow in the Commercial Lines market as well. A new Accenture research which surveyed approximately 2,500 SMEs in 10 markets confirms that the largest global digital platforms are integrating SMEs banking services for growth. The same research reveals that SMEs are particularly receptive to embedded finance. Interestingly, SMEs don’t see embedded finance propositions only as a low-cost alternative to traditional banking services: 47% of SMEs would be willing to pay the same or more for embedded finance compared to traditional banks. SMEs are open to pay a premium for availing of the benefits of having all their bank accounts in a single software, and of availing of the ease of use provided by the platforms they currently use for their daily activities. Is this opportunity realistic also for insurance? We are convinced it is. SMEs have already been used to conduct financial transactions inside of software applications (think to payments inside of Amazon Business). So if an SME is using let’s say a cloud accounting software to run their business, using that same software to get an analysis of their expenditure for insurance and to receive alternative insurance quotes is logical and more natural than going to an insurance agent or broker to do so. The relationships SMEs have with their platforms and softwares are durable and data-rich, which leads to smarter cross-sell, pre-qualification and massive risk reduction opportunities.

Trend #2: Leverage on Automation

Leveraging on APIs, AI, ML and Data Analytics, one-click underwriting will soon become reality. This will be a further step forward for embedded insurance: distribution Partners will be able to offer an insurance UX in line with those of their core offerings, which is exactly what customers are waiting for. One example: Nimbla, a London-based digital insurance platform designed to give small- and medium- sized businesses a flexible and affordable way to insure individual invoices, partnered with Codat, a member of the Observatory, to allow their small business customers to quickly and securely share their accounting data, and this enables Nimbla to offer a completely embedded and seamless invoice insurance experience. Here you can have a look at how the Codat-Nimbla collaboration works.

Trend #3: growing integration might lead to disintermediation

With Embedded insurance maturing we see for the coming years two dynamics:

  1. A growing number of distribution Partners directly integrating with insurance Providers. Kangaroo, an electronics company that provides simple home security systems (and a member of the Observatory), has launched a successful embedded insurance proposition. They directly integrate with insurance Providers. Their average integration time with their insurance partners is below one month.

  2. Distribution Partners becoming full-stack insurers. Tesla is at the same time an Embedded insurance Distributor and an Embedded insurance Enabler.