Insurance best practices for FinTechs to capture user interest

5 minutes to read
In a nutshell

As the industry is becoming increasingly mature, FinTechs must implement new strategies to remain competitive, especially in the current context. Driven by the pandemic, consumers' expectations and needs are being pushed deeper into the digital realm, opening up huge opportunities for FinTechs to position their products and services on the market.

Embedded insurance has a major role to play in empowering FinTechs to capture user interest. And yet it's quite common to see some of the most successful FinTechs on the planet offering insurance products that provide limited value to their customers, and likely have little or no conversion. In this article, we offer our best advice on how to unlock the potential of insurance for your business.

Driven by the pandemic, consumers' expectations and needs are being pushed deeper into the digital realm

A common mistake in the FinTech world is to offer stand-alone insurance products such as car or home insurance.

FinTechs have no legitimacy to sell insurance

We fully understand that insurance is a complex subject and that offering stand-alone products via your marketplace may seem like a good idea when you have millions of users. But let us save you time and money: don't do it, we guarantee it will fail.

In traditional banks, the distribution of such products is successful because they are offered as ancillary products to other key financial services. For example, when a traditional bank offers credit for a car, it also offers car insurance. The same applies to a mortgage loan and mortgage insurance. So not only are the products better targeted, but they're also offered at the most relevant time, which considerably increases the conversion rate.

Unlike traditional banks, neobanks do not (yet) offer these financial services and therefore lack the legitimacy to sell stand-alone insurance products successfully.

Conversions rates of stand-alone products are very low

The conversion rate for this type of product is weak, as not suited to an addressable market for FinTechs.

Consider the example of home insurance. On a basis of 1 million users, how many people are inclined to change flats over the course of a year? Let's imagine that 1%. Of this 1%, a very small proportion of people is likely to purchase home insurance via your marketplace. This simply leaves your user base with no major benefits and your bottom line with no impact.

Retail distribution involves complying with all local laws

Looking to distribute insurance globally? Don’t underestimate the complexity of local laws. B2C retail is the wrong way to go for FinTechs, and yet it's their first consideration.

The challenge is that B2C insurance regulation is very strict, and the degree of flexibility is very low.

For example:

  • In France, did you know that there is a legal obligation to give a complete overview of the contract before the user buys it? Did you also know that it is mandatory to collect the policyholder's place of birth?
  • In Belgium, did you know that there is an obligation of price transparency which means that you have to display the structure of your insurance premium, including the acquisition cost, before the customer buys the contract?
  • In Spain, did you know that you are obliged by law to collect the client's identity number (i.e. the NIF)?

You name it: the European Economic Area (EEA) is composed of 32 countries, and therefore 32 different jurisdictions. This leaves very little room for manoeuvre. FinTechs are thereby constrained to offer insurance products that are hardly advantageous and show very low conversion rates.

Still considering selling insurance? Transactional insurance is a better option for marketplaces.

If despite everything, you still intend to offer insurance to your customers on a B2C model, transactional insurance is your best asset. At Qover, our expertise enables us to scale insurance on a pan-European level for high-growth partners.

Transactional insurance is an effective way of offering targeted products to your audience. However, it involves reflecting on the value chain upfront and identifying a set of transactions that are relevant for your audience.

Let's take an example. Unlike home insurance, travel and cancellation insurance can be used by your users on a more regular basis. When your clients book a hotel online, the purchase transactions are visible on their accounts. By building a smart environment, your system could push a travel or cancellation insurance immediately after their booking. In this scenario, the probability that your users will purchase insurance is much higher. Why is this? Simply because the insurance is targeted, personalised, relevant and available at the right time.

Transactional insurance is targeted, personalised, relevant and available at the right time

However, although this option sounds attractive, the real question is: where do FinTechs fit into this value chain? It’s very likely that the booking website also offers travel or cancellation insurance.If your users buy insurance from this website, it's already too late. If they don't, If your users don't purchase insurance directly from the hotel provider, why would they take it from you?

Strategic insurance is much more than transactional products. It's about creating awareness, stimulating consumer interest and behaviours through targeted, high value-added products, superior user experience and competitive pricing. So, if B2C selling is not that attractive, what’s the best option for FinTechs when it comes to insurance? This is when things get interesting.

Embedding insurance in paid accounts, the golden formula for success.

Embedded insurance is a must to capture the interest of your users and it has major advantages. At Qover, we have developed unique expertise in this field and help high-growth businesses adopt the right strategies to open up new market opportunities.

Flexible insurance regulation

Unlike in B2C retail, insurance regulation is much more flexible in a B2B partnership. This flexibility makes it possible to develop insurance products that are tailored to your users’ behaviors. For example, European law prohibits joint offers (see article 24 on cross-selling). There is however one exception: a joint offer is allowed when it is linked to a paid bank account.

This is a game changer! By identifying the right insurance products, FinTechs have the power to significantly increase their transactions. A good example is the solution we developed for Revolut: with embedded insurance, Revolut is able to create value for its customers and its business.

By identifying the right insurance products, FinTechs have the power to significantly increase their transactions

Reduced insurance costs for your users

In a B2B contract, FinTechs leverage targeted insurance products that become an integral part of paid accounts. This solution provides numerous benefits for your users, including the reduction of their personal insurance budget.

An environment that stimulates consumer behaviours

Embedded insurance opens up a world of opportunities for FinTechs. A variety of insurance products can play a role in revenue expansion and customer acquisition strategies. However, the subject of insurance must be approached strategically and globally. That's why at Qover we systematically conduct a business case to identify the best solutions for our partners. In our approach, we define the products that can best convert free plans into paid plans, boost bank transactions and increase buyer satisfaction and confidence.

For example, a product such as Purchase protection encourages your users to use their bank account to protect their purchases. The more they use their account, the more coverage they get. It's a win-win! Your customers enjoy peace of mind, while you increase the volume of banking transactions.

Embedded insurance is also a very powerful leverage to convert free plans into paid plans, thus generating additional revenues. In designing and identifying smart insurance products for your user base, you have the power to capture their interest and boost your bottom line.

A digital partner that can keep pace

Beyond strategy, it's essential to work with a partner that can bridge the complex world of insurance and technology. At Qover, we are proud to deliver the best of both worlds with an Open API-first approach. Our innovative solutions cover over 800,000 people in Europe today and support renowned partners such as Revolut, Deliveroo, Wolt, Decathlon and Cowboy.

In conclusion, only a solid insurance strategy can achieve the desired results. The options are diverse, yet your audience must be the focus of the process. Interested in more insights? Backed by our proven track record, we help high-growth businesses deploy innovative insurance solutions in 32 countries across Europe.

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