Beyond distribution: where embedded insurance intermediaries fit in the insurance value chain
In a nutshell
- Embedded insurance orchestration is a technology-fueled InsurTech fabric that enables any company to orchestrate insurance experiences on a global scale.
- Embedded insurance intermediaries orchestrate the insurance value chain between the risk carrier and the company offering insurance, which can include cover and pricing, tech solutions, cross-border regulations and claims.
- More than just enabling distribution, embedded players should aim to enhance the value of the distributor’s product – making it a win-win for all.
There’s a lot of distribution talk in the insurance world – how it’s changing, how to do it right, how to do it wrong, etc. (And we should know, we just published a white paper on insurance distribution.)
As tech continues to transform the sector, there’s no shortage of embedded insurance intermediaries focused on digital insurance distribution. But there’s so much more to the insurance value chain – from regulation to product design to claims – aspects that insurers are no doubt familiar with, but that are invisible to many businesses looking to offer it.
While there are intermediaries providing these different elements, they often specialise in one area or take a full-stack approach. Few offer it in a modular way, which is the goal of embedded insurance orchestration.
In our latest webinar, we invited industry leaders from money app Monese, financial services firm Perella Weinberg Partners and Kamet Ventures to talk about the role embedded insurance intermediaries play in the value chain beyond distribution.
What is embedded insurance orchestration?
Embedded insurance orchestration is a technology-fueled InsurTech fabric that enables any company in any industry to orchestrate the insurance experiences they need on a global scale.
Through a flexible, modular framework, companies can pick and choose the elements they need – from the risk carrier setup to API integration to claims – meaning they can create an insurance program from scratch or upgrade their existing one to a digital-first experience.
Embedded insurance orchestration removes complexity and fragmentation from the insurance industry – making it simpler for businesses to offer insurance, more accessible and personalised for end users, and bringing the sector up to speed with the 21st century.
‘Embedded finance in the broader sense has been around for many decades’, says Timm Schipporeit, Partner at Perella Weinberg Partners. ‘But what is really different today is the technological sophistication, the modularity by which it can be provided and the ease of integration. It used to be very monolithic – companies were usually partnering with one large provider who could do all of that, but in a very inflexible way.’
‘What we’re seeing today is seamless integration between insurance and software platforms and marketplaces, thereby enabling minimum friction and ultimately a better proposition that drives customer experience, increases access to financial services and reduces the cost for the consumer.’
Read more about embedded insurance orchestration →
What do embedded insurance intermediaries do?
Embedded insurance intermediaries handle the part of the insurance value chain between a risk carrier and the company looking to offer insurance.
This can include developing the cover and pricing, providing the tech solutions behind the products, managing cross-border regulations and handling customer service and claims.
Why wouldn’t a company go directly with a risk carrier? For starters, traditional insurers are often bogged down by legacy infrastructure (aka the opposite of tech savvy), which could severely inhibit time to market. What’s more, companies are unlikely to get the best price or the most flexibility from working directly with a risk carrier.
‘There are many instances where you’re much better off having somebody who is able to provide risk capacity at scale and doesn’t really do anything else’, Timm says.
‘If you have companies like Monese or Tesla, who have their customers’ trust, then the bridge to also trust them with the insurance part is very small. That’s why I think embedded insurance will be a big sector’, Timm adds. ‘Ultimately the risk carrier role and the trust element can be quite distinct, so there’s space for the middle layer to run all the other processes in a very bespoke and flexible way.’
For digital businesses, partnering with an insurance expert who has similar tech DNA can make orchestrating an insurance experience less of a headache.
‘A lot of FinTechs aren’t built to do insurance; it’s an add-on product’, says Atul Choudrie, Chief Commercial Officer & Managing Director of BaaS at Monese. ’It’s something you launch on the basis that you think there’s a market need for it, but you don’t know that [until after you launch the program]. So the investment you have to make in a product like that is constrained.’
‘We’ve worked with underlying partners to give us regulatory coverage and advice on the type of cover; to make sure we don’t run afoul of any regulation; to make sure the whole process, from distributing the insurance to claims, is managed in the right way – that it doesn’t add too much complexity to our customer service, who aren’t insurance experts’, Atul adds.
‘There’s a massive opportunity for players to come in who make that whole journey, from us being a distributor all the way to underwriting, as seamless as possible.’
How do embedded insurance intermediaries work on a global scale?
‘We’re seeing a separation between regulated and licensed in embedded finance’, Timm says, ‘which means that there’s been the emergence of embedded players who are able to solve problems and integration for an international company that operates across many different countries by taking care of that in the background.’
‘As the point of sale, whether consumer goods or an online marketplace, I don’t need to contract directly and worry about carrier providers in 50 different countries’, Timm explains. ‘Ideally my embedded insurance provider has a panel of different carriers.’
Thanks to seamless tech integration between a company and insurer, as long as you have transparency for the end user – that it’s through the company, but the act of sale is performed by a third party – Michaël Niddam, Co-founder and Managing Director at Kamet Ventures, argues, ‘you eliminate a lot of the technical problems that emerge from this embeddedness that created a lot of limitations for affinity programs in the past due to regulation.’
That being said, ‘it’s a massive challenge for retailers/distributors and a big limiter of insurance penetrating the digital world’, Michaël adds. ‘Many distributors are organised in geographical platforms with global product management, global sourcing, etc. We can say insurance is the same everywhere, but that’s not true. Regulation is quite different, and price tolerance isn’t the same in every geography.’
Atul echoes that sentiment: ‘It is very difficult. We operate in 31 markets, and it’s the same as working in 31 markets in every aspect: customer behaviour is different; people’s understanding of what an insurance policy is; what matters to people varies; the amount of cover.’
‘There’s a need for an embedded player as an intermediary that can formalise the different regulations and simplify the interface between the distributor and the insurance world’, Michaël says. ‘It will remain a complex backend, but the objective for those players should be to have a clear value proposition and adapt the fine print based on geographical requirement.’
‘Even though there are critical differences, they don’t critically affect the value proposition to the customer. If we’re after a product that will make the sale happen, then those terms are not critical to the distributor and that’s where embedded players have a sweet spot.’
Why should intermediaries think beyond embedded insurance distribution?
Embedded insurance enables companies to offer insurance at the right place at the right time. But as we’ve mentioned before, nailing the distribution is only one part of making an insurance program a success.
‘Embedded insurance is taking the product and risk in the distribution, and looking at new ways to not only distribute, but to manufacture products and generate profitability’, says Michaël. ’A lot of the embedded players today see it as a pure distribution play, but insurers have been operating with affinity programs for a long time.’
The difference between pure affinity programs and embedded insurance, Michaël explains, is that embedded insurance players can create cover that’s more tailored to the end user. So it becomes so much more than added margin for the company; it actually enhances their entire customer experience and sales process – creating a win-win.
‘Suddenly you don’t need to increase the distribution margin that much’, Michaël explains. ‘What you need is a better product that will fulfil the strategic needs of the partner and a strategic interface, and that’s why there’s an opportunity in the market for new players to enter without damaging the margin of anyone else - which is very hard to understand from an insurer perspective.’
‘The real question is: what are the policies you need to make the sale happen? It’s in this sweet spot – when you’re making the sale happen – that you’re increasing the value of the distributor’s product, not of incremental products that come on the side’, he says. ‘You’re really entering into the premise of embedded insurance, which opens up a very different value pool.’
Which intermediaries do embedded insurance orchestration?
At Qover, we’re putting embedded insurance orchestration on the map.
Our modular infrastructure makes it easy for any business to embed insurance into its product or service.
Read stories about companies we’re already helping or get in touch with us to gain a deeper understanding of our platform’s capabilities.