It’s (past) time to put the customer first

In Cover magazine’s recent Masterclass, Embedded Insurance: the next big wave, Global Choices CEO Wimpie Van Der Merwe articulates the value of using design thinking to reconfigure insurance for the modern era, by building its offerings around the customer experience, first and foremost. Design thinking, he emphasises, defies conformity whilst “Conventional wisdom gives a false sense of security … just ask Kodak.”

Van Der Merwe states that “The biggest challenge for the insurance industry right now is legacy platforms.” Twinned with this, a widespread reluctance to let go of the old way of doing things – if it ain’t broke, don’t fix it. Only insurance is broken, and steadily becoming more so.

The fundamental take-out is that all insurance vendors simply must evolve if they hope to stay relevant into the future. To do so requires collaboration with innovative technology solution providers outside of the industry – called insurtechs.

With the broader industry context set by Van Der Merwe, Daniel Guasco then hones in on a specific iteration of insurance in which the true opportunity sits – embedded insurance. 

What do we mean by embedded insurance?

Embedded insurance involves abstracting insurance functionality into technology so that third-party organisations, like retailers, can seamlessly incorporate attractive insurance solutions into their customer journeys, be that buying a laptop online, ordering a new fleet of delivery vehicles or taking out a funeral policy. It literally means embedding the insurance offering into the purchase, in one seamless journey.

What are the drawbacks if we stick with insurance as is?

Guasco points out five flaws in the way insurance is currently engineered:

  • Lack of personalisation – which is at odds with customers’ experience in other sectors, from streaming services to travel portals.  
  • Expensive distribution – mainly due to high broker and call centre costs.
  • The risk of a substandard customer experience when dealing with call centers.
  • The inefficiency of having the insurance journey removed from the very product or service it needs to cover.
  • Insurance has always been an afterthought; an inconvenience – resulting in lack of protection take-up estimated to be over $1 trillion globally.  

How embedded insurance evolves insurance

Transformation in four areas is critical:  

  • Channel of distribution from in-person to call centre, to self-service, to embedded – “where we can design insurance products that are so relevant to the customer, in-situ, that they just take it, because it’s adding real value to whatever they are buying”.  
  • Administration from paper and pen, to Excel, to on-prem servers, to Cloud apps.
  • Data visibility from unmanageable, to unsustainable, to manageable, to real-time.
  • Innovation from rigid (not possible) to having data accessibility, to using apps/mobile/QR codes et al. 

The first point is key, because you’re effectively transforming insurance for the customer from a case of I should pursue insurance at some point but then think about it for a bit to here is the perfect insurance I need with no effort on my part, and I don’t need to think about it – I’ll take it.

Real-world use cases of embedded insurance

To unpack how embedded insurance works at a practical level, let’s map out the journey of a customer buying a laptop on an eCommerce platform. The customer selects their laptop, and moves through to check-out, where they are offered and accept an extended warranty/embedded insurance, which is built into the final purchase price in seconds.

eCommerce companies are particularly well-positioned to implement embedded insurance, since they already control four critical pieces of the insurance current challenges, in our digital world: customer UX, data, communication and trust.

That said, it’s not just eCommerce giants that can play in the embedded insurance space. There are numerous possible applications, from high-ticket purchases to small items needing only modest cover:

  • Vehicle sales from luxury cars to lorries, trucks and industrial machinery.
  • Small business offerings from solar geysers to security systems.
  • Fitness trackers and other fitness technology.
  • Cameras, video cameras and telescopes.
  • Audio-visual technology.
  • Luxury watches and jewellery.
  • A pet food company could distribute bags of dog food with QR codes on them. The customer buys a bag, scans the QR code and gets a month’s free pet insurance –  which they are happy to pay for after that.
  • Let’s say a person is taking a bus ride. On an ad on the back of the seat in front of them, quick-click travel insurance is offered.
  • Specific to the South African context, a major bank recently had great success offering funeral policies via a cellphone app. Such policies may carry very low premiums – but when the take-up is high, the returns can be significant.

Is embedded insurance gaining traction?

That’s an understatement. Embedded insurance is a $3 trillion opportunity globally (Simon Torrance) and locally, the embedded insurance opportunity is worth almost R4 billion per year. 

I’m convinced. What next? 

Three parties need to come together in order to launch embedded insurance – the affinity partner (your eCommerce brand, traditional retailer, telco, auto trader et al.); the insurer (a company with an insurance license) that can match its offerings to the affinity partner’s products or services), and the right technology partner to enable this arrangement through SaaS technology. 

The three come together to ensure that their vision is aligned, define which partner is responsible for which part of the value chain and map out a roadmap for implementation.

This is a R4 billion opportunity in South Africa alone. The question is, who will seize it first, who will trail behind – and who will fall away? It’s time for insurance to insure its future.

Click here to view the full Masterclass.