By enhancing accessibility, streamlining processes and catering to underserved markets, embedded insurance is poised to revolutionise insurtech sector
As one of the largest and fastest-growing economies in the world, India has a lot of potential in both general and commercial insurance sectors. Even though the coverage of life and health insurance in India has been consistently increasing, there is a significant gap in terms of commercial insurance, as around 95 per cent of SMEs in the country are uninsured. However, this gap can be bridged by the emergence of embedded insurance, which has disrupted the Insurtech sector.
Unlike traditional models, where customers actively seek out policies, embedded insurance offers coverage at the point of sale—whether purchasing a smartphone, booking a flight, or subscribing to a service. Embedded insurance is quite popular among retail and individual customers. At the same time, its role will be extremely critical in the commercial insurance segment.
What is Embedded Insurance: Embedded insurance refers to integrating insurance products with the journey of non-insurance products and services. It is different from conventional insurance processes where customers look for policies. Here, insurance is offered as an integral part of a transaction and is often tailored to the buyer’s needs.
The model is based on leveraging the latest technologies, such as APIs, that help in providing instant coverage at the point of sale. One such example is travel insurance offered by airline companies, railways, and bus operators offered to travellers when booking tickets. The concept is a bit different in the context of commercial insurance. Here, embedded solutions are gaining traction through partnerships with supply chain platforms and B2B marketplaces.
Some examples include cargo insurance, business liability coverage and other protections that help companies protect their assets.
Driving the Growth of Insurtech: The convenience and accessibility offered by embedded insurance are quite significant. Since it is integrated with different services, various aspects, including customer KYC, are often not required. Policies are generated and applicable at the point of sale.
This enhances the scope of insurance and ensures that overall customer experience is improved drastically. The overall level of customer experience and trust in the core service and the insurance offered improves due to this integration. It also enables insurers to reach underpenetrated markets like Tier-2 and Tier-3 cities in India, where digital platforms accelerate adoption.
With digitalisation and an increase in the number of internet users (and smartphones), this trend will continue in the future as well. Impact on the Indian Insurtech SectorEmbedded insurance can provide a much-needed boost to the Insurtech sector by devising the development of personalized, on-demand products tailored to customer needs.
Since the demand for different types of digital services such as e-commerce, fintech apps, and ride-sharing platforms, is increasing, insurance companies have an excellent chance to enhance user convenience and relevance by integrating their services. This trend has led to increased partnerships between legacy insurance players and start-ups.
Even the existing service providers (besides insurance companies) have tried embedded insurance to ensure scalability and operational efficiency. As there is significant scope for bridging the underinsured in India, this can be an excellent tool through which insurance companies can reach untapped markets and deliver high returns. Embedded insurance can be critical in bridging the insurance gap and fostering financial inclusion.
Challenges and Opportunities: However, despite the increase in overall popularity and usage, embedded insurance faces numerous challenges in India.
First, there are regulatory issues, as integrating insurance with non-insurance products demands compliance with stringent industry norms and approvals. There can be challenges relating to filing insurance claims.
There are also privacy-related issues, as embedded insurance depends on leveraging customer data for personalised offers. However, despite these limitations, there are numerous opportunities to cover a large proportion of the uninsured population. As different sectors and industries are digitised at a good pace, the future of embedded insurance has immense potential for customised and micro-insurance products catering to diverse consumer needs.
Summing Up
Embedded insurance has redefined the delivery of insurance services through integration in daily transactions. In the Indian context, the overall increase in the number of digital users and rapid transformation of industries gives an excellent opportunity for insurance companies to bridge the existing insurance gap; the opportunities in this field will be immense.
(The writer is the founder of Alwrite; views are personal)
