Embedded Life Insurance: The Next Frontier

Offerings in unexpected places can increase distribution and decrease the coverage gap

By Bryan Padgette | May 25, 2021

If you’re a life insurer who has implemented a digital platform, congratulations!  You are far ahead of the industry in general. Being able to digitally acquire and engage customers and allow self-service are still works in progress for most insurers , especially in an industry historically slow to embrace change. 

Now, as new APIs and data sources emerge (along with AI/ML to evaluate and utilize the information), a potential new path is being formed. Simplified products with shorter applications, instant decisions and coverage with customized pricing will open new ways to sell life insurance. Unexpected partnerships that leverage customized life, accident, disability or other insurance offers at the exact minute that the product is needed will give carriers new channels for distribution, and can allow them to protect more Americans affordably and easily.

Welcome to the world of embedded insurance. 

As the name suggests, integrating the appropriate insurance purchase into the sale of a complementary (in most cases) product is at the core of the embedded concept. The basic premise is to find relevant places to offer life insurance (e.g., an online mortgage transaction, crib purchase, college savings plan sign-up, student loan application — and parents co-signing for these loans) and then partner with the companies and platforms that offer such purchases to create a simple, digital offering at point of sale. With sophisticated APIs and decision algorithms available to seamlessly and invisibly (to the end user) enable such a transaction with few questions and no medical tests, insurers have the opportunity to be at exactly the right place at the right time with the right message and the right product.

Industries closely related to life insurance have already seen success through embedding products with unexpected partners. Acorns, a popular modern investing app, now makes insurance recommendations to Acorns customers and walks them through a questionnaire to determine the right product and company for them. Ladder Life is among their partners. Acorns earns a referral fee from the insurer for the lead generation.

Simon Torrance, a well-known expert and speaker on digital business models, summed up the concept in a recent LinkedIn article: “Specifically, embedded insurance means abstracting insurance functionality into technology to enable any third-party product or service provider or developer in any sector to seamlessly integrate innovative insurance solutions into their customer propositions and experiences, either as complementary add-ons to their core offerings or as new native components.”

The benefits of embedding life insurance are many. Insurers will be able to offer products for little additional distribution expense through new partners. The partners will be able to extend customer lifetime value by meeting a critical need at exactly the right time. The buyer will walk away from a transaction feeling satisfied because he or she was covered by insurance provided simply, affordably and at the time when it was needed.

Customers are ready for the possibilities. Accenture found that “Customers are increasingly willing to consider insurance purchases while shopping for other needs. Some 40 percent would consider buying insurance from a car dealer, for instance, while 30 percent might choose a retailer or supermarket, and 29 percent would consider online service providers.” This applies across all insurance products, including auto, home and life.

Additionally, LIMRA research finds that there are an estimated 60 million uninsured and underinsured American households. Embedding insurance could be a way to begin to remedy that troubling statistic. Enabled by APIs and driven by immense amounts of relevant, usable data, the embedding of insurance into new and unexpected places could change the landscape of life insurance dramatically. Imagine the exponential number of distribution outlets that are possible in an embedded environment!

Historically, embedding life insurance has been clunky and limited in scope. You might remember the days of mortgage protection insurance. It was offered at the right time right at the point of sale in a bank but it lacked one crucial element: affordability (because underwriting was much more cumbersome back in the day.)

Even MetLife and Walmart teamed up back in 2012 (eons ago in insurtech years!) in a “quasi-embedded” life insurance program. MetLife offered a “life insurance in a box” product that allowed buyers to pay $69 for a limited amount of life insurance as part of their overall product check-out at the store. The concept was to make a commitment, then go home and call to lock in your preferred amount of coverage. What a novel idea – distribution literally out of the box! The concept was not successful because it required that additional step and coverage could not be locked-in at purchase.

Today, it’s entirely possible not just to lock in a price, but to lock in an individual price based on data. That’s what makes embedded insurance a viable concept for the insurer of 2021.

Narrowing in on the right customers – targeted via 3rd parties –  allows a whole new range of offerings – shorter term and persona-based products chief among them. Accident protection insurance for skiers for a single day, available at the ski lift? It’s been done! And if that can be done, how many other possibilities exist?

The concept itself challenges the life insurance industry to re-think what is offered — and how it is offered. But for those seeking new distribution methods and more advanced possibilities for offering coverage, the time is right to start taking some important steps. It is time to look toward becoming what Deloitte calls an exponential insurer – a company “moving beyond the insurance value chain to conquer new markets by leveraging efficient external partnerships and being part of winning ecosystems.”

Embedding insurance will require several things of insurers:

  • Ability to create products that can be offered via instant decision underwriting capability, utilizing real-time data, analyzed in seconds
  • Digital, white label capabilities to make the embedding of the insurance offer easy and seamless
  • Capability to leverage all possible 3rd party risk data synthesized to make pricing decisions immediately at point of sale.
  • The flexibility to offer real time policy delivery and electronic payment options.
  • A support model for this concept as a separate distribution, to build partnerships and a repeatable, rapid implementation process
  • The creation of a “bundling interface” that can integrate the cost of life insurance into the price of an item being purchased
  • The creation of partnerships with insurtech platforms that can connect you with the vast world of APIs· 

Collaborating strategically with distribution partners including online brokers, travel booking sites, wedding and baby registries and other logical point-of-sale shopping experiences can allow insurers to gain access to an exponentially larger market more efficiently and effectively than current distribution methods. Many insurtech companies can give you the guidance and tools you need to build partnerships, develop products and pricing, and delve into the digital possibilities of embedded insurance. Sureify’s Lifetime platform can help insurers seamlessly integrate offers across various selling environments, enabling insurers to make an embedded offer that, when appropriate, mirrors the look, feel and branding of partner sites.

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