Embedded insurance is expanding quickly and creates a great opportunity for businesses looking to grow their revenue. But if insurance is not your business’s core focus, it’s not always obvious what kind of insurance offer is the right fit for your business. In this blog, we’ll explain what to consider when getting started offering embedded insurance, and how to determine what’s right for your business.
There are two layers to consider when it comes to offering insurance: product type and coverage. The insurance product is the type of insurance that you’ll offer to your customers. For example, pet health insurance, renters insurance, management liability insurance, and cyber insurance are all types of insurance products.
Of course, not all products are the same - two different pet health insurance products might provide very different levels of protection. This brings us to the second layer: insurance coverage.
Coverages describe what risks and/or benefits are covered by an insurance policy. Under the umbrella of a product like renters insurance, things like third-party liability, theft, and earthquake protection are coverages. Another common insurance term that you might hear is “endorsement.” This is the official name for optional coverages that add protection to a policy.
Embedded insurance represents a significant opportunity for businesses to build revenue, and increase their customer engagement and LTV. A big reason why is that it reaches customers when they’re already making a related transaction, and are most likely to be interested in adding insurance. To make embedded insurance work for your business, you don’t just need to offer an insurance product - you need to offer one that makes sense for your customers to buy when they’re already making a purchase from you.
Sometimes the right kind of insurance product may be obvious. If your business is pet retail, you can offer pet insurance. A proptech company might offer renters insurance. For other businesses, it might take a bit more thought. Pet and renters insurance might not immediately spring to mind for a neobank, but they can actually be a great fit - the neobank already sells services and expertise to help their customers manage their financial health. Offering insurance to protect important areas of their customers’ lives is a natural extension of that, and further adds to the value they provide.
Think through the value you offer your customers, and what’s on their mind when they buy from you. Chances are, there’s a kind of insurance product that’s naturally adjacent.
Once you have determined what product(s) you want to offer, you can assess what kind of insurance coverages you want your product to include.
If you choose to work with a traditional insurer, you probably won’t have much control over this - most traditional insurance products don’t allow for customization, so whatever your insurance partner provides is what you’ll have to sell. If you go this route, make sure that you’re 100% happy with your partner’s insurance product because you won’t be able to make changes to the coverages.
On the other hand, if you’re working with a white-label insurance infrastructure-as-a-service provider like Boost, you might have a wide range of options on what coverages to offer as part of your insurance package. This adds significant value because it gives you the control to craft a product that is customized to your customers’ needs. But how do you know which coverages are right for your insurance offering?
The same way you know what products to offer in the first place: by knowing your customers and what they want, so that you can offer them the coverage they most need.
With embedded insurance, this is the first and simplest step because you have already done the hard work for this: your target customer pool are your existing customers. The nature of embedded insurance is that it is an add-on to the purchases that your customer is already making. And you’ve already done the work necessary to understand their lifestyle and buying habits, which helps you determine the type of insurance they’ll want to buy.
Do many of your customers live in a busy urban environment, with plenty of opportunities for their pets to slip out of the apartment door and go missing? If the answer is yes, you might choose to include Loss Due to Theft or Straying coverage in your pet insurance offering. Do they live in a region in danger from earthquakes? They’d likely be interested in renters insurance packages that include earthquake coverage. If you know that your customers are likely to encounter a particular scenario where insurance would help, you can plan to offer that coverage.
While some customers may be happy to pay whatever it takes to have comprehensive protection in any scenario, others may be more sensitive to cost. Higher insurance coverage comes with a higher price tag, so knowing what your customers are willing to pay for insurance will help you assemble a product offering that delivers the most value for the target price.
Let’s say that your business is an online pet retailer, which sells everything from toys to food to medication. Sally, who has an elderly dog named Max, is one of your frequent customers. Because Max is getting older, Sally likes to take him to the vet for regular checkups. On top of that, Sally is an avid traveler, but sometimes Max takes an emergency trip to the vet right before a trip and she needs to reorganize her flights. Sally is a prime candidate for pet insurance, but what coverage does she need?
From her purchasing history on your website, you know Sally has an elderly dog, and from what you know from her third-party data, you also know that Sally loves to travel. If Sally is buying pet insurance, standard Accident & Illness coverage is a given—she needs insurance that includes veterinary exams and treatment for injury or illness, like tests, surgery, hospitalization, and emergency pet ambulance. But what else does she need?
Because she likes to travel, Sally would also highly benefit from Pet Vacation coverage, which would include non-recoverable travel and accommodation costs if she needed to cancel or postpone travel due to Max’s medical emergency, which he has a history of. Since Max is getting older, she might benefit from having Prescription Drug coverage to defray medication costs for conditions that may develop.
These are the specific needs of one customer, but you can do this on a large scale based on your broader consumer data. You’ve already researched their lifestyles and spending habits to power your general marketing, and you can use that same data to deduce where they most need insurance coverage.
Assembling an insurance product with the right coverages for your customers doesn’t have to be complicated. You know your customers best, and choosing insurance coverages is all about assessing and meeting their needs.
If you would like to speak to an expert or learn about how Boost can help you to assemble a great insurance product that will grow your revenue, contact us, or dive into building your insurance program with Boost Launchpad.