Why financial companies should embrace embedded insurance solutions to supercharge their business

Explore the vital role of bundled insurance offerings in mitigating financial risks for borrowers and increasing customer lifetime value.
Dr. Johannes BecherApril 3, 202418 min

According to a report carried out by Embedded Finance & Super App Strategies and InsureMO, the European embedded insurance market is set to reach 30% of P&C and 10% of Total Life Markets over the next decade.

The commercial potential for embedded insurance products for larger and more diverse non-insurance organisations across Europe has certainly risen and provides exciting opportunities for companies and customers alike.

Now, more than ever companies must adjust to keep up with rising demand from customers for flexible and affordable financial products and services.

Companies, regardless of the sector, are embracing technology to transform their ideas and generate new revenue streams. Insurtech is, to some degree still, the new kid on the block in this regard, and has emerged as an attractive proposition for companies looking to diversify their product offerings. Finance companies in particular can benefit from integrating embedded insurance options in their business. This article will explore why financial companies should embrace embedded insurance solutions to not only mitigate risk but also drive revenue growth, boost customer loyalty, and foster a competitive edge in the market.

Strengthens customer trust and loyalty

One of the most compelling reasons why financial businesses should adopt embedded insurance solutions is that it provides unparalleled value and a dynamic experience. Customer trust and loyalty are core values of insurance, and they tend to stay with their insurer for years and build a relationship in that time with their agent. Insurance can be very personal, particularly in medical cases, so fostering that relationship is key to providing a superior service. By integrating embedded insurance solutions, businesses can offer a personalised shopping experience that meets the customerā€™s needs and saves them the time and worry of going through multiple insurers.

The rise in demand for more personalised services and products, lends itself to embedded insurance, which can provide tailored coverage options that align closely with customers’ needs and preferences. Through data analytics and insights derived from customer behaviour, companies can customise insurance offerings to address specific risks or enhance the perceived value of their products or services, this tailored approach can retain existing customers and attract new ones.

Neobanks like Revolut have already embraced some forms of embedded insurance. For example, they offer travel, pet and purchase cover insurance products to their customers, starting at Ā£3.99 each month. However, there are vaster opportunities that non-financial companies can access and pull measurable results. Life insurance in particular presents a key opportunity for travel companies to capitalise on this growing trend and foster the trust of their customers. Accidents occur all the time on trips and people can fall ill and, in some cases, die when abroad. Covid-19 demonstrated just how valuable life and travel insurance is we donā€™t consider all the risks when travelling. However, businesses can encourage people to buy life insurance products when they are booking a flight or a lounge. Offering products at check-out prioritises convenience and simplifies options for busy travellers who canā€™t decide what to go with, and companies can tailor products based on data information provided by the customer. Making shopping and life, in general, easier and more personable has never been simpler to do when adopting embedded insurance.

Beyond CX: Channels Revenue Growth and Diversification

Beyond improving the customer experience (CX), embedded insurance presents significant opportunities for revenue growth and diversification. By leveraging their existing customer base and distribution channels, finance companies can capture additional revenue streams through insurance premiums. For borrowers, for example, life insurance is more than just a “nice to have”: if the main earner dies or falls ill during the term of the loan, families can find themselves in serious financial turmoil. Life insurance can mitigate this risk. Also, by bundling insurance with their core offerings, finance companies increase customer lifetime value, therefore enhancing their profit margins.

Another core reason why it should be integrated is that embedded insurance allows companies to tap into new markets and customer segments that may have been previously underserved or overlooked. For example, Mercedes-Benz offers an embedded insurance solution for its vehicles that includes theft protection and collision damage coverage. The policy is built into the monthly finance or lease payment for the vehicle and is automatically renewed each year. In addition, insurance from banks for example has a long successful history offline where it is known as bancassurance. Now, financial companies have the opportunity to make it available online and provide customers with a valuable asset at the point they need it.

Life insurance in particular can be a lucrative asset for companies wanting to expand and can open doors to new markets by appealing to digital nomads for example, who rely on neobanks to keep their money safe as they move from one destination to another. All of these examples demonstrate the versatility of embedded insurance and how any industry can re-capture its customer-base and grow exponentially.

Risk Mitigation and Financial Stability

From a strategic standpoint, embedded insurance offers finance companies a powerful tool for mitigating risk and enhancing financial stability. By transferring certain risks to insurance partners, companies can protect themselves against customer default accidents, sickness and other unforeseen events. This risk mitigation not only safeguards the company’s bottom line but also enhances investor confidence and resilience in the face of market uncertainties.

At its core, embedded insurance can provide companies with a competitive advantage by offering comprehensive coverage that goes beyond traditional warranties or guarantees. By providing customers with peace of mind and financial protection, companies can differentiate themselves from competitors and strengthen their brand reputation. In industries where trust and reliability are paramount, such as healthcare or financial services, embedded insurance can serve as a powerful differentiator that attracts and retains customers.

Game-Changing Data is King

Data is now the backbone of a companyā€™s customer service efforts and helps a business keep track of their preferences, habits, and behaviour. This secret weapon can be used to offer the right type of insurance and insurance amount to their customer at the appropriate time. Customers who have been with a company for a long time will have built up their profile and this can be translated into a curated experience that meets their needs before they even know they need it.

In conclusion, Insurtech is an exciting prospect for financial companies. It will continue to evolve as new-age technology comes in and give customers more reasons to stay loyal to their favourite brands. It is a challenging time for businesses, but by implementing embedded insurance solutions, more problems can be solved, and companies can continue to be creative and innovative. The advantage of such platforms is you can try before you buy, so take the opportunity to test the waters, and see what Insurtech can do for your business.

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Dr. Johannes Becher, Founder and CEO of Embea

Dr. Johannes Becher has a diverse work experience in the finance and insurance industry. Dr. Johannes is currently the Founder and CEO of Embea, a company focused on providing embedded insurance for life and health insurance to European families. Previously, they co-founded and served as the CEO of Getsurance, a digital life insurance company that was later acquired by NĆ¼rnberger Insurance Group. Dr. Johannes also worked at Rocket Internet SE as the Director of Global Venture Development, where they launched startups internationally and played an advisory role in improving the company building process. Prior to that, Dr. Becher served as the Head of Business Development at Lendico, a peer-to-peer lending platform, where they successfully launched the business model in multiple countries before the company was acquired by ING. Dr. Johannes Becher completed their education in a chronological order. Dr. Johannes began their academic journey by pursuing a Bachelor of Science degree in Business Administration at the University of Hamburg, where they enrolled in 2006 and completed their studies in 2009. Following this, they furthered their education at WHU ā€“ Otto Beisheim School of Management in 2009-2010, where they obtained a Master of Law and Business degree. Lastly, they pursued a PhD in Law and Economics at Bucerius Law School from 2010 to 2013.

Dr. Johannes Becher

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