The Opportunities of Embedded Insurance - How this “New Normal” Transforms Business

Transforming Business with Embedded Insurance: The New Normal

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Sensedia has been helping financial and insurance organizations reinvent their business models for years. We've seen firsthand how embedded business creates better customer opportunities and builds meaningful partner ecosystems to drive innovation to expand services beyond a single brand. At an October Open & Embedded Insurance Observatory summit in New York City, there was a recurrent theme that resonated for me – embedded is now just the new normal for business.

Embedded business occurs when an organization inserts its technology services into another business’ prospect's journey, capturing the exact context precisely when a person is acquiring something. For example, when a customer is buying a car, during the process, they can also purchase a new insurance policy. The customer has policy options the moment they need them, and their purchase experience becomes enhanced. In a digital world where hundreds of businesses are constantly vying for consumer attention and resources, embedded business can offer highly targeted and relevant solutions to each customer and potential customer exactly when those solutions are required. Embedded business helps companies achieve high customer expectations and increases user attention, keeping prospects in the platform longer to potentially trigger additional revenue.

Banks have been more assertive than insurance companies in adopting open finance and enhanced customer experiences. For example, banking apps can offer business customers and their clients multiple banking services one platform. Banks can embed services within customer online purchasing journeys, such as buy now/pay later. Customers have access to nearly every aspect of their bank account in one powerful app.

Some successful examples of Open Finance include US Payment fintechs Pathward and TabaPay joined forces to provide fintechs a more complete end-to-end solution with capabilities including payment, issuing, acquiring, processing, credit, and tax solutions. BBVA joined forces with a leading telecom to launch an innovative home insurance product sold under its own brand in Spain, using BBVAs Open APIs, bringing in new revenue for both companies. Sensedia’s case study with Banco Topazio illustrates a successful Bank-as-a Service (BaaS) strategy that allowed the bank to partner with numerous fintechs and provide unique lending solutions that resulted in 4000x loan growth in one year.

And insurance is quickly catching up. The market demands products that are easier to consume and more tailored to customers' needs. Insurance companies, some in business for over a hundred years, must consider a significant shift in doing business. This change requires evaluating how to unlock core data and modernize legacy systems to meet these new demands. Insurers must ask how to get to the root of their needs to lift customer experiences and build new products. InsureTech is guiding the way. Innovative technology is opening possibilities for every type of insurance, but insurance providers are treading very carefully as they consider new tech.

The insurance ecosystem and the business model differ from banks. Roles differ. Brokers are usually in the middle of every transaction. That structure fundamentally changes the interaction between the customer and the insurance company when buying, acquiring and signing up for new insurance products. And the ecosystem opportunities in insurance are massive.  A 2020 Accenture report cited seven digital ecosystem opportunities for insurance; Mobility, Living (home and wellness,) Enterprise, Health, B2B Marketplaces, Travel/Hospitality and Wealth.

These unique ecosystems create complexity that is paramount to manage from the beginning and proper API management, beginning with an API first strategy, alleviates risks around open insurance and open finance initiatives. Different processes and players in this industry highly influence end customers' experiences.

And customers want embedded options. This study from CoverGenius shows that renters, landlords and homeowners worldwide are ready for embedded insurance. In the US, they are highly interested in embedded protection due to the convenience it offers, eliminating the need to take that “second step” when purchasing insurance and spurring 31% of respondents to switch at the cost of traditional insurers.

For established businesses with legacy systems, like insurance, integration and innovation have historically been incredibly complex, daunting and time-consuming. APIs are simplifying and opening new doors much faster than before, and Sensedia has already found solutions to many of the roadblocks insurance companies face. We understand how to unlock core data to innovate and embed technologies without completely scrapping critical legacy systems. It's possible to modernize legacy systems and explore embedded technology for the best ways to build a new ecosystem. InsureTechs across the globe are looking at everything from micro-insurance to reinsurance, and they're driving the market through some fantastic innovation.

Take, for example, AXA, one of the world's largest insurance groups, serving approximately 100 million people worldwide. The company turned to Sensedia for an API strategy to enhance and simplify its connectivity with customers. Sensedia’s team modernized AXA’s legacy architecture by transitioning it from a monolithic setup to a modular approach, facilitating solution integration via APIs and microservices. Benefits to AXA included:

• A shorter processing time
• Enhanced traceability, and increased flexibility for collaborating with partners
• Improved capability to support high request volumes
• Improvements on technological resilience to enable agile integrations through online transactions
• Better handling and connecting of diverse information types
• Modernized event-driven integration architecture

AXA was able to reduce policy issuance from 3 business days to 30 seconds. Implementing an efficient and agile maintenance approach ensures AXA’s customer service team accurate and swift problem resolution. And the updated architecture can drive continuous improvement for even better customer experiences in the future.

Pottencial, the largest insurtech in Brazil, faced challenges in dealing with legacy systems and isolated solutions for each offering. They needed a solution to prevent high integration costs, lack of standardization and complexity in maintaining integration governance. Sensedia helped Pottenial modernize systems and standardize its architecture to integrate with its partners more agilely. Pottencial optimized policy issuance times by 52%. In addition, the volume of unnecessary calls decreased by 97%, allowing the team to focus on more strategic tasks with greater added value.

Sensedia's solutions continue to expand. We're excited about multi-gateways for APIs. Multi-gateways allow users to connect to partners like AWS using our multi-gateway and a standalone development portal. This connection improves how companies build and use their existing systems. We're also excited about the landscape of platform businesses and embedded technologies and how Sensedia can bring our years of experience to companies, including insurance, in the US to transform platform businesses faster than businesses ever thought they could.

If your organization's legacy systems or other issues are causing roadblocks to innovation, let's connect to explore solutions. Visit Sensedia.com to learn more or send us a message and we’ll connect with our head of solutions to brainstorm about how we open new opportunities for businesses like yours.

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