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Buy, build, partner: the best way for companies to create an embedded insurance program

Creating a successful embedded insurance program, especially for non-insurance companies, can seem like a daunting task. Building it yourself might require too many resources, but partnering might also seem risky. So which is the best option: buy, build or partner?
Words by
Alex Vickery
Time to read
7 minutes
Last updated
October 28, 2022
In a nutshell
  • Non-insurance teams can learn a lot about embedded insurance by creating their own programs, but regional complexities make it difficult to roll out an insurance program at scale.
  • Companies can benefit from the tech capabilities, speed and insurance expertise of insurtechs specialising in embedded insurance.
  • Risk carriers can also work with insurtech companies to meet the evolving needs of their customers.

Qover’s CEO & Co-founder Quentin Colmant had a super interesting conversation with two insurance experts, Rob Moore from financial wellbeing platform Wagestream and Stefano Bison of insurance giant Generali. 

The three – who each represent different parts of the insurance value chain – weighed in on how embedded insurance is shaking up the industry, including the challenges that many companies face when creating an embedded insurance program and what they think is the best path forward.

Watch the full conversation here → 

Building an insurance program can foster internal knowledge

Often, digital companies opt to keep things internal by building their own insurance program. 

‘Every tech company believes they can build better than anyone else,’ Rob Moore, Insurance Strategy Director at Wagestream, says. So they often think ‘why should we buy’? Particularly when coming from the fintech world, which already works with various regulations. 

‘At a certain level, there is a view that insurance is about moving money around,’ Rob says. ‘That’s 90% true, but the last 10% – whether it’s the intricacies of the control processes, country specifics, etc. – is enough to drive you almost to the edge of insanity. Don’t underestimate the last 10% of insurance because it is challenging.’

That being said, Rob likes the idea of trying to do things differently, rather than ‘accepting what happens to be on the insurance industry shelf’. 

In creating an insurance program from scratch, he says, non-insurance teams can ‘learn a lot about insurance, how it works, what’s good and what’s not’.

Check out 5 things fintechs should know about embedded insurance →

Embedded insurance involves a lot of regional complexity

On the risk carrier side, Stefano Bison, Group Head of Business Development & Innovation at Generali, agrees that insurance is complex – but twice as much as Rob gives it credit for.

‘I would have said 80/20’, he says. ‘Adding geographical complexity to that 10% is what makes insurance so hard to understand.’

Webinar attendees agreed: 70% said the most challenging part about launching a multi-country insurance program is different regulations per country.

When building an insurance product, non-insurance companies often fall into the trap of thinking all they need is a bit of data to work it out, Stefano adds.

‘This is a ridiculously complex sector’, Stefano says. ‘The profile of losses and earnings is so peculiar. Each sector and product is a completely different world – it’s so easy to screw it up.’

Rob agrees. ‘When you look at [insurance] from the view of a single market, you can get your head around the way it works’, he says. ‘But when you try to get around two or three, the 10%s add up quite quickly.’

‘When you’re trying to do embedded insurance at scale, the real question is how expensive would that central capability need to be that you’re building’, Rob adds. Hypothetically speaking, ‘partnering would be more sensible for us than buying or building.’

Insurance risk carriers need to adapt or risk being left behind

While regulation might work in favour of traditional risk carriers, it has also ‘slowed down the level of innovation in the sector, including the service model’, Stefano says.

Insurance incumbents like Generali are used to having complete control over their value chain, relying heavily on agents or brokers. 

But by focusing more and more on customers’ needs, it’s clear that people are looking for insurance in different ways than they used to, which is pushing risk carriers towards partnerships with insurtechs.

‘Sometimes, with embedded insurance, some of our customers are not ours,’ Stefano says. ‘Some customers might be better served in a different buying moment or through someone else. But in order to be their lifetime partner, you can’t avoid playing the intermediary game. We need to tackle this challenge in different ways, by breaking up the value chain and sharing it with different actors.’

In fact, Stefano expects the majority of Generali’s future growth to come from embedded insurance. So does this mean that traditional insurance companies and insurtechs can officially be friends? 

For the time being, insurtechs remain ‘frenemies or partners rather than a threat’, Stefano says.

‘Right now, traditional players are not fit for purpose, so there’s space for insurtechs’, he adds.

Like with other sectors, he predicts that the value chain will ultimately find its balance, leading to consolidation for insurtechs as bigger players start to develop their own platforms.

Tech, claims & more: What to look for in an embedded insurance partner

So if companies do opt to partner, what should they look for?

‘Tech capabilities at least as good as your own’, Rob says. ‘Especially for a tech business. We need everything to be easily understood, 100% digitally accessible and highly automated so that people can use it whenever they need it. We also need the products to be attuned so that it works for the customer base we’re targeting.’

Going back to the topic of legal complexity, Rob says that a good insurance partner should also be able ‘to adapt to local regulatory requirements and do local servicing.’

‘Embedded insurance doesn’t mean that you switch it on everywhere and it’s there automatically’, Rob adds. ‘The product needs might be different from one market to another. It’s not an easy task to organise and do in a way that delivers your strategy - and if it doesn’t work towards our mission then the whole purpose is lost.’

In addition to tech and regulations, ‘speed is the name of the game’, Stefano adds. ‘Building it yourself - even if you have the right people and money - will take years.’

From an insurtech point of view, there are two clients in an embedded insurance program: the company and the end customer.

For the company integrating embedded insurance, the insurtech partner needs to be transparent with data and show through their claims experience that they take care of the company’s customers.

Because at the end of the day, Quentin says, for Wagestream or any other company, working with an insurance partner means that they will ‘expose their own brand’ to the servicing of a third party.

‘So they need to make sure the partner they work with has the best product and treats their customers really well. Claims are not only pay outs but a service layer, which could be complicated for many partners to do locally.’

Here are the most popular insurance products for mobile banking apps → 

Embedded insurance should ultimately benefit end users

Although all three players come from different parts of the same ecosystem, they clearly agree that insurance is highly complex. But they also found common ground in how embedded insurance can make cover more accessible to more people.

‘Good embedded insurance is fundamental to us achieving our strategy’, Rob says. ‘Embedded insurance can give customers access to products they wouldn’t otherwise have access to.’

‘From a commercial perspective, embedded insurance should enable us to have better automation that reduces administration costs and better cost of acquisition,' he adds. 'And my job is to take those savings and put it into either price or cover and give that back to that population.’

‘With embedded insurance, you directly build a critical mass’, Quentin says. ‘You build a mutualisation of risk inside your own portfolio from day one. And with this volume, you’re able to really drive down the premium and actually accommodate very accessible products, not only in the product design but also from a pricing perspective’. 

In this way, brands can care for their customers and contribute to a global safety net that protects everyone, everywhere. 

‘Inclusivity becomes incredibly important’, Rob says. ‘There’s a lot of challenges in the use of data around insurance to make sure that inclusivity remains high in products. If, by embedding insurance, you can make it more inclusive across the whole of society, then I agree that it can provide a wider safety net – as long as it’s stable and sustainable’.

Interestingly enough, Generali has a foundation called a Human Safety Net, Stefano says. ‘And we are looking at – from an innovation point of view – social insurance opportunities to be sustainable for the gig economy and ways to close the protection gap.’

Because ultimately, embedded insurance is more than just a source of revenue or a way to reinforce brand value, it’s a way to create a more insurance-inclusive world.

As more non-insurance companies begin to grasp the power of embedded insurance, it will be interesting to see what approach they take when creating an embedded insurance program.

If you don’t want to do it alone, get in touch.

Read more about how embedded insurance is changing the insurance landscape →