Embeds Get Hot

You’ve just moved to Cover Genius from Munich Re Digital Partners, which has been a huge driver in insurtech. What are the top trends you’re seeing now?

One of the main reasons I joined Cover Genius is that the notion of embedded insurance is really interesting to me. It hasn’t exploded yet, but it is something that the market is poised to deliver, and it’s going to get bigger over the next few years.

I see a great movement of [insurtechs]—as shown by the evolution of Next Insurance and a number of others—toward actually owning their own balance sheets and owning more of the insurance value chain. I do believe this trend will continue.

You’re also seeing that the line is really blurring between the insurtechs, the more traditional agents and brokers, and the traditional insurance carriers. They realized that doing business the way we’ve been doing in the past is just not sustainable. Munich Re was ahead of the curve, and that’s why we had the money to invest in the emerging technology. Some of the large brokers are also buying insurtechs to offer a percentage of their portfolio to the customers who prefer to buy insurance digitally.

What does embedded insurance mean?

We’re talking insurance that, at the highest level, can be embedded at the point of sale. It can be sold to businesses; it can be sold to consumers. For instance, if you’re buying a lot of your things online, like many of us did—and still do—during the pandemic, you can not only buy your product, but you can also add, for a very low fee, an insurance offering or a warranty coverage for that particular thing. For example, if you’re booking a trip and need rental cover for your lodging, why not also make sure other aspects are covered at the same time? Instead of going to another place, it’s all embedded in the process in the consumer’s or the business’s value chain. It can be done at almost any transactional level covering any potential product or service offering.

Where are the opportunities in commercial insurance?

There are a number of opportunities in commercial insurance for embedded offerings. For example, if you think of proptechs [property technology firms in real estate], they may have a whole host of buildings, rental units or office spaces, and, at the point where they are setting up the leasing terms, wouldn’t it be great if they could offer additional coverage that would cover their [lessee’s] liability? In this example, embedded insurance acts like a business owners policy of sorts.

When you think about other small businesses, for instance a wedding photographer, you need to have a certain license and insurance to cover the photographer during the days they are going to be photographing the wedding and everything related to it. Historically, a wedding photographer would have to go to multiple places to get coverage for the equipment, the lighting, and then the certificate for when they do a particular event. With embedded insurance, it’s done right there. Embedded insurance, at the point of sale, covering X, Y and Z, will make sure their risks are properly managed.

Amazon has already started doing this for small businesses. Business Prime customers are offered a number of commercial coverages. In some cases, business owners are not as savvy with insurance and don’t even realize that they are exposed. Embedded insurance is a nice service for them, as it protects them from risks they might not even realize they are exposed to.

Is it mainly about consumer and small commercial, or is there potential to move up the value chain to larger companies?

Absolutely. We talked about how large companies, like Amazon, are already dabbling in embedded insurance. At Cover Genius, we can go to any geography in the world. We can offer Amazon customers protection around the globe—in the U.S., Latin America, Canada and Europe, as well as Australia, India and other countries in Southeast Asia. Cover Genius can partner with any of the big-box retailers, travel agencies, fintechs, banks, logistics companies, gig economy, and others.

Personally, I’m seeing companies in the auto space embed insurance. My wife just purchased a Ford, and as we were going through the process, sure enough, there was something that came up for Ford insurance coverage. If Ford is doing it, you know every other manufacturer will—not just the Teslas of the world. Embedded insurance is going to be more mainstream and will continue to be adopted across different verticals.

How will this impact agents and brokers?

There is still a percentage of the population that wants to buy insurance in a more traditional way. We’ll never get 100% away from that. However, as more millennials get into the mix, there are going to be more people who want to purchase insurance digitally. Embedded insurance helps companies reach these digital-savvy audiences with relevant and simple offerings at the right place and time.

Embedded insurance is going to be a possible competitor, but, at the same time, if the brokers embrace the technology that insurtechs are bringing to the table—and they don’t have to invest the money and technology to create a digital offering—I think that can move their business forward in ways that couldn’t be imagined 15 or 20 years ago.

If they do, they can access more markets, provide more risk mitigating coverage for their clients, and they could provide additional coverages for different lines of insurance to mitigate more of their customers’ risks. For instance, for a small business, an agent or broker could offer cyber coverage along with a commercial general liability policy.

With this technology, providers will be viewed as having more of an expertise about the whole market and its products versus the traditional way of doing it, where it’s very standardized coverage and pricing, without any variability or flexibility, and done over the phone.

A recent Cover Genius survey showed digital consumers are very open to embedded insurance offers from banks. Should brokers expect competition from digital banks or other new entrants?

I would say, yes. But again, they could also pivot and go with a company like ours and approach the bank in the same way with an offering that would service the bank’s clients. The bankers want to get into this “embedded seamless insurance.” They want to make it easy for their clients to make purchase decisions and to manage their risks and drive more revenue streams. I’ve worked with a lot of the more traditional brokers; they have many relationships with banks, selling a whole host of different things, whether it’s credit, life and disability, whether it’s your more traditional homeowners policy. If we can make this a more digital play, that is something brokers can take to their banking clients and—at a very minimal investment on the broker side—be able to integrate that. It’s driving more revenue streams for the brokers. If they want to maximize their agency, that’s the next logical step for the industry.