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November 11, 2021

From the Dais Research Team

The growing importance of embedded insurance

As we all know, 2020 changed everything and highlighted the significant tech deficiencies of the insurance industry. Consumer expectations shifted, and in doing so, gave companies with digital capabilities a huge boost. Now, insurers who digitized early are looking for new growth opportunities and finding them in embedded insurance. 

Embedded insurance is an insurance product sold in the sales process of a non-insurance product. For example, selling auto insurance as part of the auto loan process, or renters insurance sold by the property management company. To offer embedded insurance, insurers need a strong tech platform that supports APIs and enables touchless processing. When executed well, embedded insurance provides a seamless experience for the customer and makes the whole process simple and easy. 

Embedded insurance is already out in the wild, benefiting both insurers and financial companies, and the opportunity is massive for anyone who can get in. And while regulations are coming into play, people are taking on those challenges because embedded insurance presents such a valuable opportunity.

Consumer report

Consumers worldwide are ready for transaction-based embedded insurance

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What: Embedded insurance for financial products — such as auto and home loans — represents a great opportunity for both insurers and financial companies, due to worldwide consumer demand driven by the ease of obtaining the coverage they need. For banks, neobanks, and fintechs it offers a new revenue stream and for insurers it significantly enhances distribution. 

Why it matters: It’s clear consumers are demanding transaction based insurance. Consumers have higher trust in platforms they already know, and therefore are open to engaging those platforms for broader offerings. In this new world, it’s natural to buy insurance from the platforms one knows best. This sentiment is driving a growing trend of acceptance that will dislodge traditional markets. The real question is how well the incumbent insurance industry can keep pace, because if we don’t, someone else will fill the gap.

Read: Global Embedded Insurance Research Report

Funding news

Digital Bank N26 raises $900m, fueled in part by a bet on embedded insurance

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What: N26, a digital banking platform with 7 million users, raised a $900 million Series E round at a $9 billion valuation. Alongside its banking business, N26 has already added insurance for electronics to its product offerings, and is expanding to include bike, home, and pet insurance. 

Why it matters: N26 is a great example of how focusing on embedded insurance can raise the value of a company. N26 is starting small, but embedded insurance is a significant component of its model — it’s building trust with its customers and giving them the opportunity to obtain coverage digitally. For insurers, it’s important to have the tools needed to be ready to nimbly engage these opportunities.

Read: N26 raises $900 million

Industry Challenge

Embedded insurance’s potential is facing regulatory challenges

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What: Embedded insurance has made substantial gains in 2021, but the technology faces regulatory and other roadblocks that could postpone its full potential, a panel of experts and industry insiders said during InsureTech Connect 2021 in Vegas.

Why it matters: Whenever there is distribution in an industry there will be regulation involved. But companies that bring both regulatory expertise and technological capabilities stand to gain massively in such environments. For example, Uber and Lyft transformed transportation in the face of regulatory challenges, and corresponding companies will rise in the evolving embedded insurance market.

Read: Regulation, Technology Know-How Are Delaying Embedded Insurance’s Full Potential 

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