Three facts we learnt from the Embedded Insurance 2.0 Report

Technology has continued to infiltrate and improve every part of our day-to-day lives and insurance is no exception.

Despite the hype around and investment into insurtech coupled with the eagerness from big corporates all the way to smaller fintechs to disrupt the space, it may come as a surprise that the current model for insurance is still not working, although it is clear that there is huge potential to close the ‘protection gap’, and bring significant gains for just about any brand.

So, why is that? First and foremost, insurtech is a highly complex vertical and one that is truly misjudged; for example, non-financial brands misunderstand the potential for embedded insurance into everyday goods and what the first steps to successfully making it work is.

Secondly, part of the problem is that today’s insurance products are primarily designed for the well-off. Those with enough discretionary income can afford the prices the incumbent industry needs to charge to make a profit.

Lastly, the feelings attached to the industry from the wider population range from ‘scam’ to ‘unnecessary’ all the way to ‘unaffordable’, yet all three sentiments around insurance could not be further from the truth.

At Aperture, our vision for embedded insurance is: “More and better protection baked into the everyday lives of everyone.”

Over the next decade, the world is due to, cumulatively, spend roughly $80 trillion on insurance, yet the gaps between what people need for protection against risks and threats and the coverage they have are getting wider and wider.

When done well, insurance brings peace of mind to consumers and businesses, protecting them from threats and giving them the confidence to try new things. By incorporating ‘peace of mind’ and ‘resilience’ into their customer propositions, brands have the potential to create new growth and value for themselves.

At Aperture, we’re constantly looking at how embedded insurance can transform industries and solve very real problems faced in today’s world. Here are our three takeaways on the landscape pulled from our extensive coverage report (which you can access here).

Investors want to see more innovation from the insurance sector

For the last decade, institutional investors have seen the insurance sector as a relatively safe haven for investments in the financial space.

Yet, the insurance market is untapped. Truly, there is nothing investors love to see more than a space ready for a renaissance, that can create ethical profits for the business and really benefit the end-user’s day-to-day life.

Many firms are noticing that the addressable market is way bigger than originally anticipated. 

They are keen to delve into much-hyped industries, however, without seeing actual impact and justification for why sectors like insurtech are ripe for disruption, it can be harder to get them excited once the hype dies down.

Today, the worldwide retirement savings gap is over $98 trillion…

… which is only a fraction of the bigger picture. Closing the protection gap is a noble cause and one that looks at the amount of money that can protect for the future, whether its life insurance, retirement savings or insurance on everyday goods.

Protection gaps are defined as the difference between the amount of insurance that is economically beneficial and the amount of coverage actually purchased. 

According to Mercer and the World Economic Forum, in India the retirement gap is more than $3 trillion today, growing at 10% per year. Even in ‘rich’ countries like the UK, the retirement savings gap is over $10 trillion today. In emerging markets, insurance and savings typically meet less than 10% of the population’s protection needs. In Mexico, for example, over 60% of vehicles are without motor insurance. In China, out of pocket expenditure on healthcare stands at $193 billion, which is three times insurance cover.

These figures are not easy to rectify, and local governments will not be able to address these gaps alone.

One of the most effective routes to decrease these figures – brands have an intimate relationship with their customers and are in a golden position to provide the most appropriate protection solution.

Any brand regardless of industry can benefit from the opportunities embedded insurance provide

Over $5 trillion of insurance could be distributed by non-insurance brands, worldwide.

Currently, brands have not had much involvement in the process of designing protection or peace of mind solutions for their customers, therefore insurance comes off as a supplementary product that looks and feels years behind the brands own image and mission, creating a disconnect for end-consumers.

Unfortunately, this is because it has been left to insurance companies to create risk management solutions, operating without consideration for the everyday lives of the general public and using partial information to create products which are too complex and difficult to supply profitably.

The companies – brands – that create the products, services and solutions that enable these everyday activities – retailers, banks, healthcare providers, transporters, media, telcos, equipment suppliers, realtors, NGOs, employers, manufacturers, and digital platforms across all sectors – have more knowledge about the risks and threats inherent in the products and services they offer than anyone else.

This knowledge is becoming increasingly enriched with data as more and more products and services are digitised. Building thoughtful and useful embedded insurance solutions into well loved brands can change the widespread.

As outlined in this blog, it is very clear to us that the possibilities are endless. We see embedded finance, in particular insurance, as the clear future of financial integration powering up industries as wide ranging as the travel space, e-commerce space, even the delivery space.

To really take advantage of embedded insurance, it is critical to have the right tools to understand what you need and the addressable market as it stands today.

Download the ultimate guide to embedded insurance, or to hear how leaders within the space see it, you can watch our 4×4 Virtual Salon on Embedded Insurance here.