What we are witnessing today, after the consolidation of Fintech and the take-off of Insurtech, is the beginning of a completely new phase in the financial services industry, driven by the enormous opportunities opened by Embedded Finance. This new phase is leading to a deep transformation of the way new digital companies are created.
Ones insurance is digital, it do not necessarily have to exist only as a stand-alone product: it can be integrated and become a native feature of the products of non-insurance brands that have frequent and data-rich interactions with their customers. To figure out what is happening to insurance it’s worth having a look at what happened in the latest 30 years with the Internet, Cloud and Mobile. Thirty years ago, in the mid-90s, the commercial use of Internet started to rise. Initially businesses reacted to the rise of the Internet by developing online versions of their offline businesses. But in a matter of few years a new breed of businesses that had on the Internet the main building block started to emerge. The Internet became the first element of the new technological toolbox with which new companies like Facebook, Amazon, Google, and Alibaba had been founded. The Cloud had a similar progression. Software companies initially reacted to the Cloud by creating cloud versions of their software. With Salesforce it began the era of Cloud-native software, which marked the rapid take-off of software and business models designed around the Cloud. Cloud become the second element of the new tech toolbox together with the Internet. Then it was the turn of Mobile. Businesses reacted to the rise of Mobile similarly to how they reacted to the Internet 10 years before: by adapting to the format of smartphone screens websites and functionalities designed for computer screens. With the launch of the iPhone, Mobile become the building block of new businesses like Uber, Lyft and Revolut, establishing itself as the third building block of modern digital companies. Today, thanks to the digitalization of insurance functionalities driven by Insurtech companies, every non-insurance company can offer insurance products and services to their customers, in a seamless and frictionless manner. Embedded Insurance is part of the wider Embedded Finance revolution. All the companies that will be founded in the coming decades will have the opportunity to embed financial and insurance capabilities into their offerings. Based on a forecast of Bain Capital Ventures, one of the main Fintech investors, up to 40 percent of the payment industry and 20 percent of insurance can move to an embedded model in the next years.