Insurance technology convergence is becoming increasingly fascinating, lucrative, and advantageous for all parties involved. According to FinTech Futures, embedded insurance is crucial to the creation of opportunities for more affordable, relevant, and personalized insurance for people when they most need it. It is part of a larger movement toward embedded finance.
According to the article, businesses that enable embedded insurance could be worth $3-5 trillion in ten years based on current valuation multiples of five to seven times gross written premium for leading insurtechs.
In property and casualty insurance alone, embedded insurance could account for over $700 billion in global gross written premiums by 2030, or 25% of the global market, according to the study. Additionally, embedded insurance may play a role in bridging the global insurance protection gap.
According to the report, "all players – insurers, banks, fintechs, investors, non-financial retailers, product manufacturers, service providers, digital platforms, and software companies – should carefully look at this fast-emerging space and define strategies of "where to play" and "how to win."
Neil Mitchell, an executive in the insurance industry and founder of insurtech, explained that people frequently have a love-hate relationship with insurance.
They are aware that they require it because, without it, they would be unable to finance the purchase of a car, obtain a mortgage for the purchase of a home, or pay for medical expenses incurred abroad. Nevertheless, it is frequently an afterthought or a necessary evil. He stated, "Everyone needs insurance, but most people don't realize they need it until it's too late."
The following is an explanation of the global insurance protection gap: The discrepancy between the amount of coverage that is actually purchased and the amount that is economically and socially beneficial to individuals, households, and businesses.
That gap has been significantly widening. According to the report, trends in "digitisation, urbanization, climate change, and lack of effective innovation" caused the gap to double between 2000 and 2022.
Worldwide, the gap in private pensions alone is estimated to be over $20 trillion, according to the Geneva Association, a global think tank: The majority of people cannot afford to age in peace.
The majority of humanity would be unable to meet its financial obligations and maintain their standard of living if the primary breadwinner of the family died today. According to the report, the COVID crisis has brought this situation to light and made it even worse.
According to Mitchell, a lot of people in the insurance industry have known for some time that the future is bleak. The global insurance protection gap could cripple individuals, communities, and nations, as evidenced by data and the increasing frequency and severity of natural disasters,” he stated. It is alarming and is currently intensely demanding attention. It is a problem that needs to be fixed immediately.
“By bringing demand and supply for risk transfer solutions together with minimal consumer effort, embedded insurance is an innovative, creative, and cost-effective method of addressing this issue,” he explained.
In addition to addressing the global insurance protection gap, embedded insurance is expected to benefit a number of industries by providing insurers with "access to more data to enhance product innovation and reduced underwriting risks" and a lower-cost distribution channel for reaching more businesses and individuals. In addition, service providers, manufacturers, and retailers can improve value propositions and generate new revenue streams, and insurtech investors and tech entrepreneurs will have the chance to start new businesses.
According to Mitchell's statement, "as technology continues to evolve, we will be presented with more and more opportunities to utilize embedded insurance solutions to increase insurance protection and, in doing so, reduce the global insurance protection gap among individuals, businesses, and communities."
He explained that one way to reposition insurance as a "must-have" purchase is to bring insurance protection directly to the customer at the point of sale with an embedded insurance solution.
“Embedded insurance is a flexible model in which insurance coverage is provided in conjunction with the purchase of a product or service. As a result, Mitchell explained, the customer does not have to look for coverage because they may not even be aware that they require it until they are provided with the option as part of a bundled, frictionless buying experience.
