Insurance News: Counting the insurance costs from the 2022 hurricane season | Insurance Blog
Insurers and their customers in Florida may feel some relief with the end of this year’s hurricane season. But restoration from the damage left by Ian and Nicole is just beginning. And so are the questions about how the insurance industry will respond.
In this month’s Insurance News Analysis, Abbey Compton and I are joined by Jane Tutoki, an expert in Claims and a Director on the Boards of Sedgwick and Fortitude Reinsurance. Jane shares her perspective on how insurers responded as the massive toll of Ian was being assessed and Nicole was bearing down.
While a storm of Ian’s magnitude would test the preparedness and resilience of any business impacted, insurers are having a particularly difficult time helping customers with restoration. Inflation and supply chain delays are complicating the already daunting task of assessing the costs of repairs in areas that are difficult for claims adjusters to visit.
These challenges are not unique to Florida. Catastrophic events linked to climate change are also impacting other parts of the world with extreme weather and flood damage. Southeastern Australia is coping with flooding that may continue for months and has already led to record insurance claims in New South Wales.
As the costs are assessed, tough decisions will have to be made. Rates could become prohibitively expensive in communities on the coast and in other flood-prone areas. A concerted effort on the part of governments and the private sector will be needed to help customers protect their interests and avoid the retreat to higher ground.
Fuel the future of insurance: Technology modernization, such as AI and cloud-fueled data analytics, helps insurers deliver profitable growth both through growing revenues and cutting costs.
Get the latest insurance industry insights, news, and research delivered straight to your inbox.
Disclaimer: This content is provided for general information purposes and is not intended to be used in place of consultation with our professional advisors.
Disclaimer: This document refers to marks owned by third parties. All such third-party marks are the property of their respective owners. No sponsorship, endorsement or approval of this content by the owners of such marks is intended, expressed or implied.
Takeaways from InsureTech Connect 2022 | Insurance Blog
This year’s InsureTech Connect conference brought together an incredible group of carriers and some of the industry’s most innovative insurtechs to connect over the technology that’s transforming the insurance landscape. ITC provided an opportunity to understand what’s happening in the insurance community right now, what carriers are excited about and what’s next for the industry. I wanted to share a few insights from ITC, including how carriers can take action on the ideas and offerings they learned about at the conference.
AI has reached viable maturity and is rapidly becoming an industry standard
Everywhere you turned at ITC, someone was demonstrating their AI expertise. From unstructured data digitization, to streamlined claims processing, fraud detection and more, insurtechs are quickly scaling and diversifying AI to solve all kinds of business problems. As we mentioned in our recent report, Why AI in Insurance Claims and Underwriting?, AI has reached maturity and is no longer theoretical or futuristic. At the same time, the costs associated with AI development and implementation have come down significantly. The abundance of these solutions at ITC is further evidence that AI can meet the insurance industry where it’s at to deliver value. Widespread adoption of AI across the business isn’t just inevitable, it’s critical to stay competitive.
Excitement in the space is palpable, but the number of players can be overwhelming
The energy at ITC was inspiring. The conference had unprecedented attendance and the excitement among attendees was electric. It’s clear that carriers are passionate about transformation and what it means for their business. At the same time, there were so many companies showcasing their solutions that it will likely be a challenge for carriers to decide which ones make the most sense for their transformation journeys. We feel it’s most important to:
- Have a clear view of what capabilities you think you want to buy or partner for and what you prefer to build on your own. The sheer number of options is overwhelming and curating a more specific set of targets based on the category of capability or an aspect of the value chain is critical.
- Expect to do some of the lifting when it comes to integration and redesign. While innovation and creativity abound within the insurtech community, many only offer point solutions that serve a specific part of the value chain or line of business. You and your teams will need to think about integrating insurtech solutions into your ecosystem and processes.
- Keep your mind open to the different ways you and your business can get involved with AI adoption. You can invest in solutions, partner with insurtech providers to create new solutions or acquire a smaller organization. Determine what makes the most sense for your business’s long-term digital strategy.
Despite the hype, there is still a lot of work to be done
While ITC attendees were clearly enthusiastic about transformation and that progress has been made to get technology ready for carriers and their teams, what we saw at the conference is just the beginning. There is still a lot of work to be done to get to where we want to go. Many of the sessions focused on the benefits of transformation, how to prioritize transformation initiatives and, simply, where carriers should even begin. This revealed that most carriers are still taking the first steps towards digital transformation and that there is still plenty of room for leading innovators to pull ahead.
It’s not surprising that insurers are more methodical in their approach to change than most industries. However, this year the momentum has definitely shifted away from talking about transformation and moved towards action.
Whether you attended ITC 2022 or not, I would love to connect with you about your organization’s digital transformation strategy and discuss how you can take the next steps with solutions like AI in your business. Feel free to reach out to me here.
Qorus-Accenture Innovation in Insurance Trends 2022: Our report highlights the key insurance innovation trends that are shaping the industry.
Get the latest insurance industry insights, news, and research delivered straight to your inbox.
Disclaimer: This content is provided for general information purposes and is not intended to be used in place of consultation with our professional advisors.
Disclaimer: This document refers to marks owned by third parties. All such third-party marks are the property of their respective owners. No sponsorship, endorsement or approval of this content by the owners of such marks is intended, expressed or implied.
Bringing insurance industry innovation to AWS re:Invent | Insurance Blog
A year ago at re:Invent, Accenture and AWS announced a joint investment to accelerate cloud migration and industry differentiation for our clients. Increasing demand in commercial underwriting made insurance the obvious industry to blaze the trail.
At AWS re:Invent 2022, Anand Premsundar and I will talk about how innovation transforms experiences, processes, and decision-making for the core insurance functions of underwriting and claims.
Across the insurance industry, we are seeing a great deal of progress in the use of cloud and AI in claims—especially in auto claims. IoT crash detection, APIs, and intelligent solutions are delivering the speed to settlement insurance customers want and enabling the operational transformations and structural cost reductions insurance companies need.
Underwriting is the next area in which major transformations are taking place. Many underwriting processes are still highly manual, particularly in lines of business that rely heavily on intermediary distribution through agents and brokers.
Workflows between insurance agents and underwriters typically involve manual creation of PDF files. Enabled with intelligent ingestion and automation tools, agents and underwriters can focus on generating revenue rather than losing time on administrative tasks.
Join us at re:Invent
Anand and I are delighted to be presenting at re:Invent and we hope you can join us either in-person or virtually. Register to attend virtually.
Why use AI in insurance underwriting and claims?
Tuesday, November 29, 2022 | 5 p.m. Pacific | PRT271 – WYN – BOLLINGER
Accenture and AWS build solutions that innovate to transform experiences, processes, and decision-making for the core insurance functions of underwriting and claims. Delivering powerful, industry-contextualized solutions embedded in AWS services, Accenture is opening up new sources of value for customers, agents, brokers, and carriers. In this session, learn how these co-developed solutions—all integrated into the underwriter desktop—deliver value by accelerating cycle times, enhancing digital experience and improving settlement accuracy in claims. Also discover how these solutions can help carriers and brokers at each phase of the high-volume underwriting funnel, from ingestion and triage to prioritization of quotes based on propensity to win.
Transforming claims and underwriting with AI: AI has emerged as the critical differentiator in the insurance industry when applied in tandem with humans.
Get the latest insurance industry insights, news, and research delivered straight to your inbox.
Disclaimer: This content is provided for general information purposes and is not intended to be used in place of consultation with our professional advisors.
Disclaimer: This document refers to marks owned by third parties. All such third-party marks are the property of their respective owners. No sponsorship, endorsement or approval of this content by the owners of such marks is intended, expressed or implied.
How to address the urgent insurance workforce gap with technology | Insurance Blog
The insurance industry is experiencing a growing talent shortage. While this challenge has been anticipated, much of the discussion on solutions is often generalized to the entire workforce. But not every job will be impacted in the same way. As insurers grow, some functions will need more support, while others will be better primed to use cognitive technology, like AI, RPA and more. This means some jobs will be replaced by technology, other jobs will be enhanced by technology and other jobs will require more humans (an area where people can shift to, if their job is replaced).
The fact is that insurance operations are changing, and people are the center of that change. The question isn’t, “How do we address this workforce gap?” The question is, “How will claims, underwriting and sales be impacted by this workforce gap, and how can we leverage technology to address each one to improve our operations holistically?” That’s what I’ll be exploring here.
Urgency needed to address the growing workforce gap in insurance
In June 2021, the US Chamber of Commerce released the The America Works Report with alarming statistics:
- Less than 25% of the insurance industry is under 35 years old.
- In the last 10 years, insurance professionals aged 55 and older increased by 74%.
- The Bureau of Labor Statistics estimates that over the next 15 years, 50% of the current insurance workforce will retire.
- There will be more than 400,000 open positions unfilled over the next decade.
These statistics paint a startling picture—and one that requires an urgent response. But an aging workforce isn’t the only concern:
- Insurance companies are also trying to grow, meaning they either need a larger workforce or the ability to scale with the current size workforce.
- Many times, there is a skills mismatch where the current insurance workforce lack the skills needed to operate in an automated and data centric environment.
- While insurance companies don’t always need hundreds of elite tech engineers, they do need their fair share of foundational and complimentary technical specialists, especially as the focus on AI/ML and the cloud continues to increase. This can create talent competition with big tech companies that offer higher salaries, more perks and more innovative work.
Tackling the workforce gap holistically
Realistically, the industry will not be able to replace 400,000 open positions one-to-one. And even if it did, the amount of knowledge loss with 50% of the workforce retiring is enormous. This is where cognitive technology comes in as part of the solution.
It’s important to emphasize that technology is only part of the workforce gap solution. While more administrative, redundant tasks can be automated, other functions may need more people (like sales-related areas, which I’ll explore in detail later).
Insurers need to do two contradictory things at the same time: Look at their workforce individually and holistically. Decision makers need to know the impact of the workforce gap and the supporting technologies for each individual job function. But since jobs don’t operate in silos (at least, they shouldn’t), insurers also need to have a holistic understanding of how changes will impact the way different functions interact with and support each other. Ultimately, there is no one-size-fits-all solution. But there are important insights for all insurers to consider.
Cognitive technology is changing the insurance workforce
Cognitive technology will impact different jobs in different ways. Some jobs will be replaced by automation; others will be augmented by technology; and other jobs will need to grow the human workforce in tandem with technology.
Before jumping into specific job functions, it’s important to understand the types of technology that are becoming more and more ubiquitous. The following table highlights the technology P&C insurers are focusing on in 2022.
Clearly, AI, data and RPA are major areas of focus. Chatbots are also being used more often to improve customer service, while cloud and data remain key areas for operational efficiencies and insights. Each of these technologies will impact jobs in different ways. Let’s explore.
The importance of partnerships
A quick note on the importance of partnerships: You’ll notice throughout the examples below that almost every one of them is accomplished via a partnership. With tech talent becoming harder to find, partnerships will be a key strategy to bridge the talent gap and implement complex technology at scale—and quickly.
The future of claims: Replace and augment
To address the workforce gap in claims, technology will be used to both replace and augment employees, though the scale of this impact will be different between personal and commercial lines.
Personal:
Personal claims is the most prone to automation, especially for simple claims. A small parking lot car accident is a perfect example of an easy type of claim that AI can handle—with human spot-checking, of course.
Real-life tech example: Hippo recently partnered with Claimatic and Five Sigma to use automation to process homeowners’ claims faster and manage them end-to-end. From a customer perspective, this offers a single point of contact, faster response times and easier claims tracking. From an operations perspective, this automation reduces back-end friction and ensures accuracy by identifying the severity of a claim and flagging when a loss is identified.
Employee impact: There will likely be an employee scale-down of the claims workforce as automation manages more of the claims process. At the same time, remaining employees will be augmented with technology to help them to manage claims faster and more accurately. Looking at the Hippo example, part of its new automation technology is to match claimants with adjusters—a typically manual, time-consuming process. This augments the claims workforce so that they can avoid these types of administrative tasks and focus on what matters: the customer.
Commercial:
Like personal lines, commercial claims departments will be both replaced and augmented by cognitive technology, but at a different rate. Commercial claims are often more complex, so there will be more augmentation versus replacement, compared to personal lines.
Real-life tech example: Protective insurance partnered with Roots Automation to scale its trucking and commercial auto insurance claims. In only four months, Protective introduced two “digital co-workers” called Roxy (for sending letters to claimants) and Rex (for indexing claims documents). Both bots were able to complete 95% of tasks without human intervention.
Employee impact: Most claims employees working in commercial lines will be augmented by cognitive technology. The Protective insurance example shows how bots can be leveraged to manage the most time-consuming tasks, like indexing documents. This frees up employees to focus on more important tasks or handle more claims. This is especially important for the underserved small-to-medium business (SME) market. By streamlining commercial claims as much as possible, the SME market could look more attractive to insurers.
The future of underwriting: Augment
Underwriting encompasses both risk assessment and product development. This will continue to be a key area for insurers to remain modern and competitive, so headcount will likely not be cut. However, people are retiring. Insurers must ask themselves: Do we replace retiring workers or use technology to scale up our current workforce? With the current talent gap, that latter is more realistic. This means underwriting is moving into a world of semi-automation, both for personal and commercial lines. And that means re/upskilling.
Real-life tech example (personal): Product development is a huge part of underwriting, and a lot of insurers are leveraging cognitive technology to make the right products at the right time. Arbol partnered with RealTimeRental to offer real-time parametric weather protection for vacation rentals using AI, analytics and third-party data. AXA Life & Health Reinsurance Solutions uses a white-labeled version of Verisk’s Health Risk Rating Tool they’ve branded as the Intelligent Medical Acceptance Tool (IMPACT) to automate parts of the health insurance underwriting process to enable better coverage for customers with pre-existing conditions.
Real-life tech example (commercial): On the commercial side, risk is the core theme for cognitive technology. Allianz SE partnered with Cytora to tap into AI-based risk processing for its commercial lines business, allowing underwriters to focus on value-adding tasks. Another example is insurtech Neptune Flood, which developed an AI-based rating and quoting platform for automated risk assessment. With this technology, Neptune saw 400% growth and is now the largest private flood MGU in the US.
Employee impact: Technology is already changing underwriting, especially from a product development and risk assessment standpoint. Reskilling the workforce will be critical. Technology, in particular the ability to ingest third-party data leveraging the force of the cloud, can make product development fast and nimble. Workers will need to feel comfortable trusting new data sources and AI to drive innovation. Looking at risk assessment, a human perspective will always be important. But underwriters can be informed and supported by AI and other cognitive technology to improve accuracy and make better decisions. Employees will need to be reskilled to modernize their approach and take advantage of the large-scale analysis offered by AI and other technologies.
The future of sales: Augment and grow
It’s not surprising that sales and its associated functions, like marketing, will need to scale with digital tech. Sales will have to get more innovative as competition grows and customers demand a seamless experience. New areas, such as embedded insurance, will leverage technology and strategy in a way the industry has never done before. To support this rapid shift and growth, sales functions will need to expand while also being augmented with technology.
Real-life tech example (personal): Direct Auto & Life Insurance chose Marketing Evolution’s customer journey tracking solution. This persona-based marketing measurement and optimization platform will provide insights into the touchpoints customers engage with along their path to purchase. These insights will help Direct Auto & Life Insurance to better understand its customers, deliver a personalized experience and critically—how to link behavior to sales.
Real-life tech example (commercial): Nationwide expanded its relationship with Amazon Web Services to innovate and deploy innovative products while they also streamlined internal operations. From a sales commercial perspective, this partnership helped Nationwide build a Small Business Advisory platform that uses machine learning to tailor personalized insurance policy recommendations to small business customers in minutes.
Employee impact: Sales, marketing and customer engagement are critical for growth. Employees in these areas will be augmented with technology, while teams expand headcount. To remain competitive, insurers will need to innovate and build a business development ecosystem. Technology by itself won’t do this. Like underwriting, cognitive technology will offer the tools for creative salespeople to innovate—and the customer insights to make data-driven decisions and promote growth.
Roadmap to the future: A cross-functional perspective
As I mentioned before, job functions don’t operate in silos. So, this breakdown gets more complicated when we look at how each function interacts with each other. For example: Claims and underwriting are intertwined. Modernizing claims to better leverage the data used in underwriting and vice versa is more important than ever. Breaking down these silos will drive an enterprise level change in behaviors and collaboration.
That’s why insurance companies need to take a cross-functional perspective when determining how technology will change their workforce. And this should not be a theoretical strategy.
How to use tech to close the insurance workforce gap
Insurers should put together a concrete workforce roadmap. The roadmap should be modular, outlining which areas will need new hires versus reskilling. It should consider the interaction between functions and how changing one will impact the other. It should also indicate where people can be moved around to capitalize on your current workforce and the knowledge and experience that they have.
Another key element of evolving your workforce is early inclusion. Employees deserve transparency when it comes to how their jobs will change. Early involvement will help employees feel like they are a part of that change—and minimize replacement fears. Because all the roadmaps in the world won’t help if employees feel threatened and reject change. Insurance companies can avoid this by being supportive, honest and by listening.
While a roadmap and transparency are important from an employee perspective, the technology side is its own domain. This blog looked at the product and service side of the insurance workforce, but implementing cognitive technologies requires a talented, motivated IT team. Insurers will need to marry a tech roadmap that aligns with its workforce vision using agile methodologies to allow for flexibility and pivots, if needed. Critically, executives need to be able to communicate this holistic vision across the organization—including tech partners.
The insurance industry has a tough road ahead when it comes to talent. Decades’ worth of knowledge is about to be lost to high retirements, and younger generations aren’t banging down the door to work in insurance. Carriers will need to get creative using a mix of technology and a reskilled human workforce to close this gap and drive future growth. The time for this transition is now, or else you risk falling behind. Just remember that employees are people—treat them with respect and compassion, and they will rise to your expectations. As we say at Accenture: Innovation happens where technology meets human ingenuity. The insurance industry will need both to succeed in the future.
Transforming claims and underwriting with AI: AI has emerged as the critical differentiator in the insurance industry when applied in tandem with humans.
Get the latest insurance industry insights, news, and research delivered straight to your inbox.
Disclaimer: This content is provided for general information purposes and is not intended to be used in place of consultation with our professional advisors.
Disclaimer: This document refers to marks owned by third parties. All such third-party marks are the property of their respective owners. No sponsorship, endorsement or approval of this content by the owners of such marks is intended, expressed or implied.
How insurers can channel the power of Web3 | Insurance Blog
As technology closes the gap between the real and the virtual, it has become more important than ever for carriers to consider how customer needs – and their ability to meet them – are going to evolve. In our recent Accenture Insurance Technology Vision 2022 we outline how the metaverse continuum will impact the industry over the next decade.
One of the key trends that arises when we talk about the metaverse is the advancement of Web3. This term might be new, but it encompasses a great deal of the technological advancement and activity that is already naturally occurring on the internet. Web3 refers to an iteration of the World Wide Web where decentralization, blockchain technologies, and token-based economics build new, secure ways of connection and commerce.
This new vision for the internet includes the creation of immersive virtual worlds, blurring lines between digital and physical, and may create the largest shift we have seen in digital technology since the inception of the big tech platforms such as Facebook.
What unique challenges and opportunities does the metaverse hold for insurers?
Essentially, insurers are faced with the daunting and exciting challenge of insuring a changing world. A person can just as easily get injured in a game of VR golf as he/she can on a physical course. A customer can lose their physical possessions in an armed robbery, or lose money in their account through identity fraud.
Aviva, the UK’s largest insurance company, revealed in recent research that claims on accidents caused by Metaverse and virtual reality (VR) gadgets increased by 31 percent in the past year. They identified metaverse-related risks that included physical harm to their surroundings while wearing headsets; avatar identity theft and anonymity-based crimes; violations of metaverse etiquette and privacy risks through data breaches and leaks; and exploitation of user biometrics and online behavioral data. The horizon for what constitutes risk is changing. Insurers face the daunting but exciting task of building new platforms, products, and services; securing technology; and identifying the use cases and business models.
Insuring the metaverse
While the metaverse is still a new prospect, it offers insight on and opportunities for connection with clients. As this technology evolves, insurers can leverage research and listen to their customers to isolate, test and act on opportunities. For example, North American integrated financial services company IMA Financial Group launched their own IMA Web3Labs, which constitutes the metaverse’s first insurance and risk management research and development facility. The facility will be located in Decentraland, a virtual world based on blockchain technology. Funded by IMA’s investment arm, IMA Investments Inc., Web3Labs sets new industry expectations for exploring, testing and bringing to market risk and insurance strategies specific to the metaverse.
The importance of insurance partnerships in the metaverse
As we have discovered in other areas of insurance, strategic partnerships can help insurers to develop and scale solutions in new markets quickly, and lend them more agility than if they approached it on their own. This is no different in the case of Web3. In fact, the seamless, decentralized nature of Web3 makes the formulation of partnerships essential. Leading insurers will accelerate their cloud transformations, rebuild applications with microservices architectures, and deploy open application programming interfaces (APIs) to accommodate upstream and downstream data flows with ecosystem partners. Consider the case of Checksig, who has partnered with SATEC Specialist Underwriting to create bitcoin and crypto solutions for private and institutional investors. SATEC is the specialty underwriter of Cattolica Assicurazioni (Generali Group).
Conclusion
In conclusion, the metaverse offers the opportunity for insurers to engage with customers in a new dimension. While it may not be an urgent consumer trend, leading insurers should be proactive by staying up to date on the trends impacting the metaverse and actively seeking opportunities within this space that are a good brand fit. This is best achieved by using smart partnerships and metaverse accelerators.
Get in touch to discuss how your insurance business might use the metaverse to connect with new customers and opportunities.
Accenture Insurance Technology Vision: Find out how today’s metaverse innovations are becoming the building blocks of the insurance industry’s future.
Get the latest insurance industry insights, news, and research delivered straight to your inbox.
Disclaimer: This content is provided for general information purposes and is not intended to be used in place of consultation with our professional advisors.
Disclaimer: This document refers to marks owned by third parties. All such third-party marks are the property of their respective owners. No sponsorship, endorsement or approval of this content by the owners of such marks is intended, expressed or implied.
Putting agents first in embedded insurance | Insurance Blog
While product design—including technology and architecture capabilities—is foundational for carriers to play in the embedded insurance space, strategically leveraging the agent will exponentially increase the likelihood of an embedded product’s success. We believe agents could play a major role in embedded insurance distribution, driving sales and capturing opportunities to cross-sell and upsell.
In our last post, we provided an overview of the evolution of embedded insurance as it expanded from “version 1.0”—purchasing life insurance at the airport before a flight—through “version 2.0” and “version 2.5” in which technology and online commerce pushed embedded insurance towards its current iteration, “version 3.0.” We define “version 3.0” as insurance that is sold as part of another commercial transaction. Buying auto insurance from an OEM or home insurance through a real estate brokerage are examples we would consider to be embedded insurance 3.0.
In this post, we’ll highlight why we believe agents are critical to achieving more with embedded and outline the potential implications for carriers, embedded distributors and agents themselves.
The relationship between customers, agents and embedded
Within an embedded insurance transaction, there are two products present: the primary product, which is the original product or service that the consumer sought to purchase, and the attached product, which is the insurance product sold within the primary product or service transaction. Ideally, the customer interacts with both the primary and attached product through a single unified experience.
Currently, most embedded insurance transactions are conducted through digital/direct rather than agent-led distribution channels. We believe this is a result of three market dynamics:
- Consumers prefer to consult an agent as a trusted guide for a majority of personal lines products. Consumers worry about the “risk of being wrong” when it comes to the type or quality of coverage they purchased. Meta found that 65% of auto insurance and 71% of property insurance purchases are still happening over the phone or at an agent’s office. They also found that though 32% of buyers discovered auto insurance options online, 40% turned to an agent to determine which product was right for them.
- Embedded insurance has a larger share in lower-cost products, where agents don’t typically get involved. The more valuable the insured items are, the more customers want to consult with an agent who can provide personalized recommendations. Most embedded insurance offerings provide policies that don’t cost a lot and tend to cover things with limited value or come in where state-specific coverage includes some level of consumer protection.
- Primary product providers usually have a strong desire to control the customer experience. This tension between the primary product vendor and the carrier offering the attached products inevitably results in slower development of embedded offerings as changes to the attached product are negotiated or the primary product provider makes the decision to create their own insurance product. Primary product vendors have resolved this by developing their own insurance product (like Tesla) or forming an exclusive partnership to offer insurance to customers—as is the case with online used car marketplace Carvana’s insurance offering built with Root Insurance Company.
As carriers have pursued embedded strategies, these market forces have created barriers to adoption and successful activation of embedded insurance. These obstacles have also led to slow progress educating and upskilling agents to seize the opportunities embedded creates.
Understanding where agents fit in embedded distribution
Where the vendor of the primary product is focused on selling their offering and controlling their customer experience, the agent can act as an advocate for the attached insurance product, boosting conversions. A potential use case is renter’s insurance (the attached product) sold through the property rental process (the primary product). Leveraging embedded rental insurance has the potential to allow the carrier to capture additional customer segments and grow overall market share.
Rental insurance is a product that’s relatively simple in nature, with low costs and low margins. However, it interacts with other insurance products that the customer might own (e.g. auto or pet insurance). As an embedded product, it creates significant opportunities for cross-selling at any point in the customer journey. In this way, embedded rental insurance can act as a gateway for new customers—particularly a younger demographic who are more likely to rent—to learn about and purchase additional insurance products from the carrier.
While the embedded partner (the rental broker or property management company) may clearly have an incentive to market and sell the attached insurance product, it is at best adjacent to their core business. The carrier is then responsible for marketing the insurance product and ensuring sales are happening along a customer journey they may or may not be in control of. This is where the agent comes in.
We believe that inserting an agent within the primary product will lead to a more effective sales funnel. Because a product like renter’s insurance interacts with other products, it creates the need for advice around a complete risk profile: how the coverage will protect the customer and where there may be gaps or overlaps in coverage. The agent is uniquely positioned to capitalize on the interactions between various insurance products. Though the commissions on the attached product might be low (as would be the case with renter’s insurance), cross-selling and upselling potential would incentivize the agent to guide customers to buying a suite of products that meet their needs—which could ultimately lead to higher commissions overall.
The distribution strategy for embedded products is highly flexible and needs to be tailored to the primary product it’s attached to. It’s important for carriers to assess where and when it’s appropriate from the customer’s point of view and profitable for the business to leverage an agent.
For example, warranty and replacement insurance for a simple e-commerce product like a VR headset could be offered at the point of sale without agent assistance. Because the primary product is a straightforward purchase, customers also aren’t likely to need guidance from an agent and there are fewer cross- and upsell opportunities. Such a product might be marketed via digital channels and targeted at a digitally-native millennial audience. Carriers can take advantage of the retailer’s digital channels and partner with the retailer to create a seamless experience between the brands. We see this type of model as a defensive play with less of a focus on growth. With the right placement, carriers can reach new customers they may not otherwise have captured.
Key considerations for placing the agent in embedded
To see growth through the embedded insurance channel, carriers must pay attention to the relationship between agent and embedded as a core part of their strategy development. When determining where agents fit in the embedded strategy, key considerations include:
- Are your building embedded insurance products for defensive (growing share) or offensive (preventing share erosion) purposes?
- Do you understand customer purchase preferences for different types of products?
- Will customers need to understand how the product interacts with other insurance products they may own?
- What segments of the market is this new embedded product designed for and how does that fit with your current customer base?
- Will the product be marketed only to “new” opportunities at point of sale, or will existing customers of the primary product vendor be marketed to as well?
These considerations will help carriers determine where and how to deploy agents to support customer experience and sales through the embedded channel. Thinking about how the agent propels the customer journey from the get-go will enable carriers to develop embedded insurance experiences that truly stand out to customers.
If you’re looking to explore how to weave embedded insurance into your current distribution strategy, we’d love to speak with you. Get in touch with Bob Besio and Scott Stice.
Get the latest insurance industry insights, news, and research delivered straight to your inbox.