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3 Reasons Embedded Insurance is a Huge Opportunity for Businesses

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By Laura Knight on Oct 6, 2021
7 min read
how embedded insurance can increase your business revenue

When businesses that provide digital goods and services think about growth, they probably don’t think about insurance - but they should. “Insurance” might call to mind a complex, largely offline business, but the reality is that modern consumers’ behavior and expectations are driving rapid change in the industry, especially for the embedded insurance market. Over 60% of US consumers have said they prefer to buy insurance digitally, and just as many are happy to buy from non-traditional insurers1. In the US market alone, embedded insurance is opening up billions of dollars in opportunities for new entrants. 

What is embedded insurance?

Most people are familiar with embedded finance, whether they realize it or not. If you’ve ever used a meal delivery or a ride-sharing service, you’ve used an embedded finance system. The meal delivery company likely didn’t develop its own payment processing system from scratch - it probably integrated with a fintech company that already had the technology. You were able to seamlessly make your payment for the service without ever leaving the app because the payment-processing tech was embedded in the app experience.

Embedded insurance follows the same premise: a business offers an insurance product, usually at the point of sale, and the consumer can buy it within the same experience as the rest of the company’s products. This creates opportunities for companies whose core product or service isn’t insurance, but that consumers would benefit from insuring. The point when the consumer buys the product or service is a natural (and convenient!) time to buy insurance as well. 

Embedded insurance examples

An embedded insurance example might be a televet provider offering pet insurance on their app or website. A consumer could set up a virtual vet visit on their mobile device, and then be offered insurance to protect their furry friend’s health, right on the same page (and from a source they already trust when it comes to their pet). The consumer could then buy the policy in a few clicks, without ever leaving the televet’s brand experience. This is different from the more usual click-through partnerships with insurance, also called affinity partnerships. In the affinity scenario, the televet might have a button for getting insurance on the site, but clicking on it would only send the customer off to the insurance partner’s signup experience (with the televet essentially just acting as a lead gen channel for the insurer). The customer buys the insurance product from the insurance company directly, who then manages the relationship (for better or for worse).

With digital embedded insurance, the entire purchase experience takes place in the televet’s front-end environment, with the televet’s branding. The televet also continues to own the relationship and benefits from the consumer’s continued brand loyalty.

It sounds simple, but it can make a big difference for your top and bottom line, along with your customer satisfaction and retention.

Here are three key reasons why your company should be thinking about adding embedded insurance to help grow your business: 

Reason #1: Embedded insurance offers significant potential revenue growth

The single biggest reason to consider offering digital embedded insurance? It’s a very significant financial opportunity.

Insurance creates new recurring revenue streams.

Your customers will make regular premium payments to keep their policies active, which translates into regular income for your business. And recurring revenue builds value for your company besides just the money itself - regular, repeating income streams are exactly what investors and shareholders like to see.

Selling more to your customers increases their engagement and your retention rates.

The more your customers buy from you, the more likely they’ll keep buying from you. Adding insurance products increase your stickiness as their brand of choice - both by strengthening your relationship with the customer, and increasing their switching costs. This has benefits beyond just increased ARPU; Bain & Co. famously posited that a 5% increase in customer retention can boost profits by as much as 95%.

The insurance market is huge.

In 2021, the US property & casualty (P&C) insurance market is projected to take in $700B in gross profits. That’s an enormous sum coming in just from insurance, and a considerable amount is open for new entrants to tap into. Despite its size, the insurance market is ripe for disruption, because... 

Reason #2: Traditional insurance isn’t meeting modern consumer standards

For many consumers, the traditional insurance-buying experience just isn’t working any more. Why?

Traditional insurance is impersonal and frustrating.

The explosion of personalized services over the last decade has raised the bar on consumer expectations, and traditional insurers aren’t meeting it - as reflected in traditional insurers’ often-low NPS scores. A one-size-fits-all, take-it-or-leave-it approach isn’t compelling to the modern digital consumer.

Signing up is hard.

If a consumer does want to buy traditional insurance, providers don’t make it easy. The insurance industry is still largely dominated by old-school analog processes, requiring phone calls, printed and scanned forms, or even faxes (and nothing adds friction to a signup flow like needing to stop and google where to find a fax machine). Making things worse, the process itself tends to be a disjointed mix of multiple UIs, with the consumer required to submit the same information multiple times. This wastes consumers’ time - and increases the odds they’ll just abandon the transaction.

Most traditional insurance products are one-size-fits-all.

With traditional insurance, the policy they offer is the policy you get, regardless of what you actually need. Need pet insurance to help cover your dog’s allergy meds? A traditional policy will likely package that coverage along with coverage for things like cancer and hip dysplasia, even if your dog is unlikely to ever require those treatments. If a company like Equifax gets hacked and costs insurers tens of millions in losses, your neighborhood coffee shop gets hit with a rate increase as if they pose the same risk. This one-size-fits-all approach means that many customers get stuck paying for things they don’t need because it’s the only way to get insurance coverage for the things that they do.

All these problems with traditional insurance add up to a big embedded insurance market opportunity to grow your business, because as it turns out... 

Reason #3: Modern insurance consumers prioritize trust and convenience

It may seem counterintuitive, but companies who aren’t traditionally known for selling insurance are uniquely positioned to win a significant share of the modern insurance market. The opportunity is greatest for digital businesses that provide other goods and services, where protecting those offerings with insurance is a natural fit. So why is your company in such a good place to help?

You know your customers.

You’ve already spent a lot of time and energy acquiring, learning about, and understanding your customers. You know their needs, which helps tailor the right insurance products to fit their life, and you know their preferences, which helps create the right experience. You specialize in serving your customer group, and you understand their needs in a way that a giant, generalized insurer can’t.

Your customer knowledge also allows you to reduce friction in the signup flow. Instead of requiring customers to fill out and send long, involved applications, you can use the information you already have about them to prepopulate the necessary forms and ensure you’re only asking them to provide information you actually need.

Customers want to buy more products from brands they already trust.

One of the insurance roadblocks for modern consumers is that they prefer convenient buying experiences with brands they already use and trust - which isn’t most insurance companies. This is particularly true for younger people. In a recent survey, 82% of millennial customers said they’d want to buy insurance from a “new entrant” (i.e., a company from outside the insurance industry).

Buying a traditional insurance policy often means tracking down and researching products from brands they aren’t familiar with - and as we’ve already seen, the industry doesn’t make this an easy task. For customers, it’s far simpler to obtain insurance from a trusted brand that they already have a relationship with (and also to keep track of the policy once they have it).

New insurance-as-a-service options lower traditional barriers to entry.

In the past, all these advantages still might not have been enough to make adding an insurance offering worth it. Insurance is a highly complex, highly regulated business, and new entrants could expect to take 24-48 months to bring a minimum viable insurance offering to market. For companies whose core focus isn’t insurance, the investment simply wouldn’t pencil out.

Things have changed, however, and so has the business equation. Advances in the insurance-as-a-service space mean that you can now partner with a company that’s already done the heavy lifting on the technology, operations, compliance, and capital required (like Boost!). With the right partner, you can go to market with a co-branded or white-labeled insurance offering in a matter of days or weeks, instead of years. 

If you’re looking to increase your company’s revenue (and who isn’t?), offering embedded insurance should definitely be near the top of your consideration list. With the potential for significant recurring revenue from embedded insurance, increased customer engagement and satisfaction, and an easier go-to-market path than ever before, there’s never been a better time to start.

Ready to get started with embedded insurance?  Contact us to speak to one of our Boost insurance product experts today.

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Selling Non-Admitted Insurance Products vs Admitted: What's the Difference?
May 12, 2023
When it comes to insurance, there are two major regulatory types: admitted and non-admitted Admitted insurance refers to insurance products that have been licensed by the Division of Insurance (DOI) in the state where they are being sold and are subject to state regulations. In addition to meeting state standards on things like price, coverage, and packaging, admitted insurance products offer additional protection to their end buyers - if the carrier fails, the state will pay a certain amount of its outstanding claims. Non-admitted insurance, on the other hand, refers to products that are not licensed or approved by the state DOI, and do not have the same financial protections from the state. There can be many benefits to offering non-admitted insurance products, but because they aren’t regulated by the state, there are unique responsibilities that agents, brokers, and insurance have to keep in mind. In this blog, we will break down 3 important areas where non-admitted insurance products differ from admitted insurance products, and explain the implications for agents and brokers.  By nature, non-admitted insurance products exist to cover hard-to-place risks that most admitted products won’t cover — whether that be insuring a barrier island home that is frequently at risk of flooding or covering Beyoncé’s voice in the event of injury.  To sell non-admitted policies that cover these unpredictable, difficult-to-price, high-risk situations, regulations require an agent or broker to first get several declinations from separate admitted insurance carriers. The exact number can vary by state, but the standard is typically three declinations.   A declination is a written refusal of an admitted insurance carrier to issue an insurance policy. To get one, the agent or broker will have to fill out an application or written request for coverage to each insurer, and then wait for the insurers to return documents that decline each request. This process ensures that the agent or broker has done their due diligence in attempting to place the risk in the admitted market, and that they understand and accept responsibility for offering a non-admitted policy. This process of getting three declinations often has to be done for every policy sold. Going back to our examples: say an agent goes through the usual process to find an insurance policy for their client’s island home: they make inquiries to three carriers for admitted products, are declined three times, and eventually place the risk with a non-admitted product. If their client’s next-door neighbor then calls and asks the agent to find them a policy as well, the agent would generally have to once again try for three different admitted products before moving on to the non-admitted market.  There can be state-specific nuances to the compliance requirements regarding declinations. In some states, there may be exceptions to the declination rule if no equivalent product exists in the admitted market. For example, crypto wallet insurance is a first-of-its-kind insurance offering, and only currently exists as a non-admitted product. In some states, this means the agent or broker selling it can be absolved of having to do the due diligence of getting three declinations from admitted carriers.  Some states also allow for getting the declinations once, and then using it for all similar risks going forward. In that case, the agent in our above example wouldn’t need to get three new declinations for the neighbor’s house - the risk would be similar enough that they could use the declinations they had already received as justification for placing their client with a non-admitted product. Every agent and broker needs an insurance license to sell insurance products, and most will need more than one. Insurance is licensed at the state level, so a license is required for each state you intend to sell in. There are also different types of licenses required for selling admitted and non-admitted products.  Here are the four types of licenses an agency will need to sell non-admitted insurance products. Current agents and brokers will already have the first two license types but may need two additional license types to start selling non-admitted products. The basic license required for selling insurance is known as a “producer” or “agent” license. This is obtained by completing a pre-licensing course and passing the required tests in a particular state which allows an individual to sell insurance in that state.  An agency or brokerage will also have to attain an “entity” or “agency” license. This license allows a company (rather than an individual) to sell insurance within the resident state.  Selling non-admitted insurance products requires an additional non-admitted license. In most states, the non-admitted license will have an entirely separate license number from the individual license.  Finally, selling non-admitted insurance products requires a surplus lines license. While non-admitted products don’t have to go through the intense approval processes with the DOI, the companies that create these products do need to submit articles of incorporation, a list of officers, and various financial and company information to the surplus lines office, which is run and regulated by the state. 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In short, non-admitted billing is much more operationally burdensome for brokers and agents to support versus admitted, which is why adding on an additional administrative fee is very common.  Non-admitted insurance products are an important part of the insurance market and can help provide vital protection for hard-to-place risks. Being equipped, informed, and licensed to sell these products can open up lucrative new lines of business for agents, brokers, and insurtechs. If you want to learn more about selling non-admitted insurance or getting your insurance licenses through Boost’s licensing-as-a-service, contact us.
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Offering insurance: build, partner, or white-label?
Offering Insurance: Build, Partner, or White-Label?
Nov 1, 2021
So you’ve heard that the insurance market is set to pass $700B gross written premiums this year and that changing consumer expectations are creating big opportunities for companies that haven’t traditionally offered insurance. Now what? If you’re ready to get started with offering insurance, your options fall into three general buckets: build and sell the insurance product yourself from scratch, partner with an insurance company to offer their product, or work with an insurance-as-a-service provider to offer white-label insurance products. So, which is right for your business? We’ll go through what’s involved with the top 3 options, as well as some pros and cons to be aware of. Your first option for offering insurance to your customers is also the most intensive: you can create the insurance products you want to offer, in-house. With this option, you would essentially create a business within a business: an insurance agency that operates as part of your company. 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Besides just the effort involved, the long lead time for getting an insurance product to market means that by the time you get there, the market may well have changed. On top of time concerns, there’s another disadvantage you should weigh before going the build route. Everything we just covered about starting your own insurance program probably falls outside your company’s core business and specialization. What’s more, recruiting and hiring the right people to manage it may be significantly more challenging than hiring the right people for your core business. It’s often difficult to know what to look for when hiring for a completely different skill set, outside your core industry. Once you’ve brought all these new people on board, you’ll also have to manage them in an area where your core leadership has little experience. Consider whether the benefits of building it yourself outweigh the inevitable distraction of running an entirely separate secondary business within your company. Instead of creating an insurance product yourself, you might choose to partner with an established insurance company to offer your customers their product. In this scenario, you would have a link on your site for the customer to buy insurance. When the customer clicks it, they would be taken to the insurance partner’s website to buy the product from them. This is sometimes called affinity marketing, or click-through affinity. In this situation, you would be essentially acting as lead gen for your insurance partner. Your partner may pay you a certain amount per click, but after that you would not participate in the transaction. Your insurance partner would complete the transaction, collect the premiums, and own the insurance relationship with the customer. A click-through insurance partnership like this is both fast and simple to set up. 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As just another marketing partner, you won’t have much influence to try and get a product created that closely matches what your customers need from insurance.  A relatively new third option is to work with a company that offers insurance-as-a-service, and white-label the insurance product they provide you with. If you aren’t familiar with insurance-as-a-service, it generally works like this: insurance-as-a-service providers are companies who have already done the work we outlined in Option 1 (Boost is one example). They’ll have all the necessary state licenses to create their own insurance products, and they will have already negotiated with licensed carriers to back those products. A good insurance-as-a-service provider will also already have built the necessary technology to offer an embedded insurance product experience. Your company can then sign on with the provider to offer one or more of the insurance products they’ve created, under your own brand name, on your company’s website or app. Unlike affinity partnerships, partnering with a white-label insurance-as-a-service provider doesn’t simply generate customers for someone else. Your company will be the one selling the insurance product, on your own website. The customer will buy the policy from you, and you’ll be the one to collect the premiums and own the ongoing customer relationship. White-labeling an insurance-as-a-service product offers many of the advantages of building it yourself, but at a fraction of the time and cost. Because your partner will have already done the heavy lifting on things like operations, technology, compliance, and capital, you can easily offer the right insurance products for your customers - and get to market in a dramatically shorter timeline versus trying to create an insurance company from scratch. A white-label insurance product also allows you to reap the full business benefits of offering your customers insurance: While white-labeling an insurance-as-a-service product is much faster and easier than building one yourself, it’s still more involved than simply adding a link to your website. Working with an insurance-as-a-service provider may take longer to implement than partnering with an insurer for click-through affinity since you will be building the full experience into your website rather than just linking out to an insurance partner's website. Selling white-label insurance policies also requires an important additional step: someone at your company will need to be licensed as an individual broker, and then sponsor a license for your company. You may recall this as Step 1 in the build process - the broker license is required to legally sell insurance, which your company will do with its insurance-as-a-service products. This sounds much more intimidating than it actually is. The insurance licensing process itself is relatively simple and straightforward. However, it does require additional effort from one of your employees (usually a senior executive who is unlikely to leave the company). The other good news is that not only is the licensing process easier than it sounds, but once it’s done, it’s done. You’ll need to maintain it with fees, renewals, etc, but you won’t need to go through the process again as long as that employee is still at the company. A good insurance-as-a-service partner will also help you with this step, so you can check the box and start offering insurance to your customers as soon as possible.  The insurance market is changing quickly, and there’s never been a better time for new entrants to take advantage of the embedded insurance opportunity. Depending on the route you take to get there, however, the cost, time to market, and experience for your customers can vary a great deal. When starting on the road to offering insurance, it pays to carefully consider your budget, your timeframe, and your business goals, so that you can choose the option that’s right for your company. Is insurance-as-a-service the right option for you? Boost can help get you started. Contact us today to learn more about your options for offering the different ways to offer insurance with one of our Boost product experts.
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The top 3 takeaways from our embedded insurance consumer survey
Embedded Insurance Survey Results: What We Learned From Consumers
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You may have heard that embedded insurance is a big opportunity to grow your business, but are your customers actually interested?  We wanted to get the story straight from the source, and so in Q4 2022 Boost surveyed 650+ US consumers. We asked about their experiences with insurance, how they felt about their current insurance options, and what mattered most in their insurance purchases.  Here are the top 3 things that we learned from our consumer insurance survey results. [See Full Size] In our insurance survey, a whopping 73% of consumers had either already bought insurance from a non-insurance brand, or would be interested in doing so. While price was mentioned most often, other reasons included brand loyalty and convenience. Trust was another important factor. 62% of respondents were interested in buying financial products from a trusted brand, rather than a bank. For millennials, the number went up to 95%. First movers might have an advantage here as well. 20% of our respondents had never been offered financial products from a retail brand - but they liked the idea. All this is promising news for companies outside the traditional insurance sphere who are looking to build revenue and customer loyalty with embedded insurance. If you can deliver the product and experience consumers are looking for, the appetite is there. It’s hardly a secret that convenience is crucial to customer experience in the digital age, so it comes as no surprise that it was important to our respondents. 59% told us that they’d be more likely to buy insurance if it were offered digitally, as part of a related transaction. Younger consumers were more likely to be enthusiastic about digital insurance: nearly 70% of respondents aged 18-29 were interested in buying insurance directly through a transaction on a retail website. For half of our respondents, embedded insurance wasn’t a novel idea. 50% had already bought embedded insurance at least once, at the point of sale in a related transaction. For many consumers, insurance is a long-term purchase. 68% of our survey respondents told us they’d had the same insurance provider for at least two years, and 10% had had the same provider for more than five years. For retailers, insurance could also be an overall boost to retention. 62% of respondents said that when a retailer offered protect-your-purchase options, they were more likely to be repeat customers. Learn more about offering embedded insurance in our free guide, or contact us to get started.
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