Embedded insurance plays a major role in empowering FinTechs to capture user interest. And yet it's quite common to see some of the most successful FinTechs offering insurance products that provide limited value to their customers – and likely have little to no conversion. Here's how to harness the power of insurance for your business.
We understand that insurance is a complex subject, and that offering standalone 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'll fail.
For traditional banks, distributing these products is successful because they're 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 more targeted, but they're also offered at the most relevant time – considerably increasing the conversion rate.
Unlike traditional banks, neobanks don't offer these financial services (yet) and therefore lack the legitimacy to sell standalone insurance products successfully.
The conversion rate for this type of product is weak, as it's not suited to an addressable market for FinTechs.
Take home insurance for example. Out of 1 million users, how many people are inclined to change flats over the course of a year? Let's say 1%. Of this 1%, an even smaller percentage is likely to purchase home insurance via your marketplace. This leaves your user base with no major benefits and your bottom line with no impact.
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 for many, it's their first consideration.
The challenge is that B2C insurance regulation is very strict, and the degree of flexibility is very low.
The European Economic Area (EEA) is composed of 32 countries, and therefore 32 different jurisdictions. This leaves very little wiggle room. FinTechs are thereby constrained to offering insurance products that are hardly advantageous and show very low conversion rates.
If – despite everything we've said up until this point – you still intend to offer insurance to your customers on a B2C model, then 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 to your audience.
Let's take an example. Unlike home insurance, your users can take advantage of travel and cancellation insurance more regularly. 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 booking. In this scenario, the probability of purchasing insurance is much higher.
Why? Simply because the insurance is targeted, personalised, relevant and available at the right time.
Although this option sounds attractive, the real question is: where do FinTechs fit into this value chain?
Many booking websites already offer travel or cancellation insurance. If your users buy insurance from this website, it's already too late. And if they don't purchase insurance directly from the hotel provider, why would they buy it from you?
Strategic insurance is much more than transactional products. It's about stimulating consumer interest and behaviours through targeted, high value-added products, as well as creating awareness, a superior user experience and ensuring competitive pricing. So, if B2C selling isn't all that attractive, then what’s the best option for FinTechs when it comes to insurance? This is where things get interesting.
Embedded insurance is a must to capture user interest – plus, it has major advantages. At Qover, we use our unique expertise in this field to help high-growth businesses adopt the right strategies to open up new market opportunities.
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’ behaviours. 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's 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 can create value for its customers and its business.
In a B2B contract, FinTechs can leverage targeted insurance products that become an integral part of paid accounts. This solution provides numerous benefits to your users, including reducing their personal insurance budget.
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 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 get peace of mind, while you increase the amount of banking transactions.
Embedded insurance is also a very powerful in converting 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.
Beyond strategy, it's essential to work with a partner that can bridge the complex world of insurance and technology. At Qover, we're proud to deliver the best of both worlds with an open API-first approach. Our innovative solutions cover over 800,000 people in Europe and support renowned partners such as Revolut, Deliveroo, Wolt, Decathlon and Cowboy.
In conclusion, only a solid insurance strategy can achieve the desired results. There are plenty of options, but your audience should always be the main focus. Interested in learning more? Backed by our proven track record and 95% customer satisfaction rate, we help high-growth businesses deploy innovative insurance solutions in 32 countries across Europe.
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