The methods customers use to buy insurance have changed dramatically. Established carriers once relied on traditional media to attract new customers, but new approaches are needed for the turn of the 2020s.
Embedded insurance offers insurance buyers exactly what they need, when they need it. Carriers are pushed to stay up to date on developing models of selling insurance, especially when it comes to buyers who are in the market to purchase.
WaterStreet Company is here to help inform insurers of ongoing P&C insurance industry trends. We are a provider of P&C Policy Administration Software, supporting insurers through policy and claims administration, document management, third-party connections and more.
What is Embedded P&C Insurance?
Embedded P&C insurance is when policy coverage is offered to a new customer at the exact moment they are purchasing the property to insure.
The most common embedded P&C insurance is offered when a buyer is purchasing homeowners insurance through their mortgage. The lender of the mortgage may embed the cost of insurance into the mortgage, simplifying the buyer’s search for insurance, and offering a policy to match their home the moment they need it. This is enabled through internal partnerships the lender may have with various home insurance carriers.
Why is Embedded Insurance so Popular?
A main complaint from insurance buyers over time has been the confusing nature of what their insurance exactly covers. Brokers and agents are the experts to help guide individuals towards the proper insurance.
With the rise of online sales in the digital age, customers have gained awareness on how to buy insurance themselves from a mobile device and in a matter of minutes, without having to communicate directly with an agent. Auto insurance is ahead with the trend of allowing the purchase of auto insurance online compared to home insurance due to the complexity of assessing risk for real estate properties.
With embedded insurance, the insured purchases both the asset and the insurance at the same time, allowing them to clearly understand the terms of the insurance and are insured in the present moment. The cost to insure is also combined with the cost of the asset, and in their mind, helps the insured prepare financially for both at once.
The Future of Embedded Insurance
Embedded insurance provides the ultimate simplification of the insurance buying process. In the past, carriers have reached new customers through brand awareness methods such as direct mail, television commercials, radio commercials or direct buys, such as placements in publications. These methods have evolved with the digital age through targeted paid search advertising and paid social advertising, among many omnichannel marketing approaches.
The concept of embedded P&C insurance is alluring for many customers who struggle to choose on their own. Comparative rating sites have helped enable customers to compare quotes and follow through with filling applications for insurance with chosen carriers. This method of comparing insurers may one day evolve again into an online marketplace for P&C insurance, likely starting with auto insurance and followed by homeowners insurance.
Alternatively, rather than the customer taking on the burden of finding and selecting their P&C insurance, embedded insurance simplifies the decision by offering insurance at the point of purchasing the property. Insurance for self-driving cars has become a present-day challenge, and embedded insurance may help shift liability from the driver to the manufacturer. The manufacturer’s product is responsible in the case of car accidents if the driver has no responsibility to take control of the vehicle. Liability in this case is shifted to the manufacturer, and so the manufacturer is responsible for personal liability insurance. In order for manufacturers to offset this cost, embedded insurance may be offered to include the cost to insure in the cost of the self-driving vehicle.
How Carriers can Leverage Embedded Insurance
The priority for insurers with the aim to take advantage of embedded insurance offerings is to forge partnerships with lenders and auto manufacturers.
The insurer does not have direct contact with the customer at the point of sale through embedded insurance, and so it is up to the quality of the relationship between the insurer and the third-party administrator to prioritize the carrier’s policies offered to the new customer. This may depend on many factors, such as if the carrier offers a policy to match the customer or if discounts are available for the customer’s unique property. The possibility of rapid, efficient communication between the carrier and the third-party administrator is vital.
Policies offered today are unlike those of the past. With the rise of ride sharing, AirBnB, and many aspects of our gig economy, policyholders are requesting new ways to gain insurance coverage to meet their unique lifestyles.
Expect this trend to continue as customers seek simplified ways to purchase insurance for their complex needs. Carriers are challenged to think creatively and invest digitally in order to keep up with higher expectations.
About WaterStreet Company
WaterStreet Company is dedicated to serving all facets of the Property & Casualty Insurance Sector. We understand the importance for carriers and MGAs to adapt to market changes.
WaterStreet Company’s cloud-based Policy Administration Software is built with an advanced API, allowing carriers to connect to any number of third-party solution vendors to make these data sharing enhancements possible.
Reach out to WaterStreet Company today to request a consultation and demo of our solutions.