Embedded insurance to capture user interest: 5 things fintechs should know
In a nutshell
- Insurance plays a major role in helping fintechs acquire and retain customers, particularly in an increasingly crowded field.
- Embedding insurance into user accounts is an easy way to differentiate your offer and build the legitimacy to offer insurance.
- In certain cases, transactional or standalone insurance products can bolster a fintech's embedded insurance strategy.
Embedded insurance plays a major role in empowering fintechs to stand out from the competition, satisfy their users and convert them to premium plans.
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 in 5 steps.
1. Starting with an embedded insurance strategy can build legitimacy
Embedding insurance into user plans is the most accessible way for fintech startups to offer insurance – and it has major advantages.
What does embedded mean in insurance?
Offering embedded insurance in a user’s account means that it’s included in a particular plan or payment card, so fintech customers are automatically covered when they use that card.
So let’s say a Revolut customer pays €2.99 a month for their Plus plan. Because this plan includes purchase, refund and ticket cancellation protection, purchases made with their Revolut card are already insured. Users don’t have to buy insurance separately.
And who would want to? Most people don’t (want to) think about insurance, but it can make a huge difference in someone’s life when things take an unexpected turn.
While most fintech add insurance to their premium plans as a way to convert users, you could also include insurance as part of a free plan to incentivise user loyalty, like Rewire does. When its remittance customers spend a certain amount with their accounts, they’re automatically covered.
Benefits of embedded insurance for fintechs
Tailored insurance products boost transactions
Unlike selling transactional or standalone insurance products in B2C retail (more on that later), insurance regulation is much more flexible in a B2B partnership.
This flexibility means you can develop insurance products that are tailored to your users’ unique behaviours and needs.
For example, European law prohibits joint offers (see article 24 on cross-selling) with 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 with the right partner, fintech companies have the power to significantly increase transactions.
A good example is the aforementioned purchase protection solution that we developed for Revolut, which allows the fintech giant to create value for its customers by protecting their everyday purchases – thus encouraging them to use their accounts more frequently.
The more they use their account, the more cover they get. It's a win-win: your customers get peace of mind, while you increase the amount of banking transactions.
Reduced cost and concern for your users
In a B2B contract, fintechs can leverage targeted insurance products as an integral part of paid accounts. This solution provides numerous benefits for your users, including reducing the cost of insurance.
Rather than paying a premium for specific cover, users pay a small monthly fee for one of your paid plans that comes with insurance – which is way more friendly on their wallet.
It’s such an easy way to be there for your users when something bad happens, which leads to positive, long-lasting customer relationships.
Stand out from the competition
For many traditional or digital banks, insurance is a must-have. But for fintechs such as neobanks and BNPL providers, the market is still maturing.
That means that insurance is a key way to differentiate your offering and stand out from the competition in order to acquire more users.
- Purchase protection
- Refund protection
- Delivery protection
- Extended warranty
- Ticket cancellation
- Mobile devices
- Income/bill protection
- Accident protection
- Travel insurance
With the right embedded insurance partner, you can decide which products add the most value for your users.
For Rewire, they decided that built-in accident protection was the best way to reassure their community of migrant workers. If the migrant is involved in an accident while they’re abroad and unable to work, their family back home will still be covered.
‘We see that providing customers with value over time comes from providing multiple services and bundles rather than just remittance – services that are not only unique, but also tailored to the specific needs of the target audience,’ said Rewire CEO & Co-founder Guy Kashtan. Offering insurance could solve the question of a unique value proposition.’
Another example is Monese. The money app, which largely caters to those with nontraditional work and income patterns, knew that its community was concerned about their ability to work at the height of the pandemic – so they partnered with us at Qover to help give their customers peace of mind.
‘The pandemic has drastically changed our behaviour, especially when it comes to finances,’ said Monese CEO Norris Koppel. ‘[It] has forced many people to think about their own financial security – making the protection offered by products like insurance very valuable to consumers.’
Monetise your user base
Insurance is also a way to increase buyer satisfaction and confidence, which leads to customer retention.
Think about it: when users know that their purchases, belongings or even their livelihoods are covered, their minds are more at ease and they’re more likely to purchase freely (and with you).
And happy customers are not only loyal customers, but also more willing to pay for better benefits.
Embedded insurance is a very powerful tool for converting free users into paid users, thus generating additional revenue. In designing and identifying smart insurance products for your user base, you have the power to maximise customer retention and boost your bottom line.
2. Successful transactional insurance requires the right strategy and triggers
Some fintechs try to cross-sell transactional insurance products, but unless they have a solid sales trigger and a high transaction volume, this strategy likely won’t convert.
Let’s consider travel insurance. When one of your users books a hotel online, the transaction is visible in their account. By building a smart digital ecosystem, you could push travel or cancellation insurance immediately after booking.
In this scenario, a user is more likely to purchase insurance rather than seek out a standalone product since it’s targeted and available at the right time.
However, many booking websites already offer travel insurance. If your users buy insurance elsewhere, it's already too late. And if they don't purchase insurance directly from the hotel provider, why would they buy it from you?
Offering embedded insurance is a much easier way to establish the legitimacy to sell insurance. After all, the distribution method is just as important as the product itself.
By including the insurance in user plans first, you introduce your customers to the idea of getting insurance through you, which can be leveraged to cross-sell transactional products later on.
For some fintech companies, like BNPL or lending platforms, transactional products could make sense since they have a good trigger for cross-selling insurance. Credit protection, for example, would cover the face value of the loan or credit line if something happens to the borrower. But again, the conversion rate for this type of product is typically low.
3. Standalone products should be reserved for more advanced financial services platforms
A common mistake in the fintech world is selling standalone insurance products such as car or home insurance.
Pushing additional products might seem like a good idea when you have a strong user base, but we don’t recommend approaching insurance this way – at least not at first.
Why? Fintechs lack the legitimacy to sell insurance; they simply don’t have the brand recognition, portfolio or experience to do so.
Traditional banks – even those that are pushing more digital services – can successfully distribute standalone products to support other key financial services. For example, when a traditional bank offers credit for a car, it can also offer car insurance. The same applies to a mortgage loan and mortgage insurance.
Essentially, the service you provide needs to be strongly linked to the insurance product. For instance, a B2B neobank could offer cyber insurance or key protection insurance to its SME user base.
Unlike traditional banks and more targeted neobanks however, most fintech startups don't offer these financial services (yet) and therefore lack the legitimacy to sell standalone insurance products successfully. In other words, you’re not the first place customers turn to for insurance.
More mature fintechs could successfully incorporate standalone products in the future, especially as they pursue super app strategies.
4. Distributing cross-border insurance means complying with local laws
Looking to distribute insurance globally? Don’t underestimate the complexity of local laws.
B2C insurance regulation is very strict, and navigating this stuff alone can eat into a business’s precious time and resources.
- In France, did you know that company’s have a legal obligation to give a complete overview of the contract before the user buys it? Did you also know that it's mandatory to collect the policyholder's place of birth?
- In Belgium, did you know that there's 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're obliged by law to collect the client's identity number (i.e. their NIF)?
These are just some of the laws across different European countries, but imagine dealing with all 32 jurisdictions – that leaves very little wiggle room.
Due to this complexity, some fintechs make the mistake of selling insurance products that have little benefit for their users or their business. There’s always room to consider selling standalone or transactional insurance later on, but it shouldn’t be the core of your strategy.
So then what’s the best option for fintech companies when it comes to insurance? Embedding it.
Strategic insurance is much more than the product itself. It's about stimulating consumer interest through valuable, relevant solutions – and offering them in the right way.
5. A digital insurance partner can help craft the right strategy
At the end of the day, the essence of insurance is to provide financial stability and peace of mind for your users; it’s a way to show your community you care.
Which is why – beyond having the right embedded insurance strategy – it's essential to work with a digital partner that can keep pace.
‘Speed is the name of the game’, says Stefano Bison, Group Head of Business Development & Innovation at Generali. ‘Building it yourself - even if you have the right people and money - will take years.’
At Qover, we bridge the complex world of insurance and technology through embedded insurance orchestration.
From integrating directly into your user flow to providing a seamless digital claims process, we provide tt