With an eye to bring new value to their customers and maximize the effectiveness of their portfolios, insurance companies must focus on the Embedded Insurance approach. Those unfamiliar with this go‑to‑market strategy can imagine it as a further evolution of Open Insurance, which in turn hinges on the omnichannel and cross-selling logic. Gradually this logic is taking hold in the industry thanks to the app economy and digital transformation more generally.
Accordingly, the business model horizon is therefore evolving leaving more and more room for operators capable of integrating and managing micro‑policies and value‑added services, typically based on IoT solutions. There will be an advantage for those who can network with innovative or specialized partners, including those from other industries so that they can increase their customer base without actually incurring additional costs.
However, propositions built on the concept of Embedded Insurance are more popular than we think. For example, there is baggage loss insurance offered by airlines, or the now popular Covid‑19 policy related to booking hotels, accommodations and tourist experiences. But mention can also be made of car liability insurance sold bundled with vehicles directly at the dealership, or insurance integrated with ski passes offered by ski resort operators.
In other words, it is about delivering the kind of protection to customers exactly when they need it. The ability to offer great user experiences will be crucial to avoid losing competitive advantage in a scenario in which Embedded Insurance will have reached a dimension of utter normality for the global market. According to the report “Insurance: Embed or not to embed” compiled by Instech London, this distribution model will be majority in 2030, when the industry’s turnover will be worth approximately $722 billion globally.
The Challenges of Embedded Insurance
It should be pointed out that now not all types of insurance can be embedded. There are some features that limit their choice and implementation. Above everything else, products must be simple, transparent, easily understood, and with an executable claims process in just a few steps. A delicate balance should be achieved between providing low‑touch use paths and ensuring that regulatory requirements are still met.
In addition, traditional insurance companies also face internal difficulties related to the traditional roles of agents and brokers, who must be framed in this new industry. The more the company is structured, the more internal friction within the company increases.
But the biggest challenge, especially for traditional insurers, is on the technological side. The constraints of legacy systems limit the ability to create intuitive pathways and incorporate plug and play solutions without creating bottlenecks or disruptions within digital ecosystems. Embedded Insurance also requires insurers to develop advanced capabilities over data management. As mentioned, those who can be there at the right time with the right product and – most importantly – at the right price will win. To do this, it is essential to understand the customers and their needs in real time, which can only come from an evolved Data Governance that relies on fast data. With the availability of real‑time data, the company can find the right path for Embedded Insurance, apply it to new types of customers and markets that have yet to be explored.
Finally, the speed of creating new products and the ability to integrate them with third‑party propositions depend on the adoption of two enabling technologies.
APIs and platforms: the two technology pillars of Embedded Insurance
Let’s talk specifically about APIs (Application Programming Interfaces) and platforms. APIs, which define protocols for creating and integrating application software, are the perfect tool for sharing data and services because they are agnostic with respect to the underlying service. APIs can be tracked, encrypted, and monitored, and once developed do not require special modifications to be reused in new integrations. It is no coincidence that insurers who have already implemented an API Governance strategy are able to make integrations with new distributors much more quickly. The value of APIs increases considerably the more the APIs themselves represent different stages of the insurance process (e.g., claims APIs, life insurance APIs, and so on). As we shall see later, the accurate inventory of these types of APIs becomes crucial as the steps of a broader process.
Being able to work with APIs, however, is not enough. An agile and flexible IT ecosystem is also needed, and this is where the platform model comes in. If properly designed and developed, a platform allows all the services the company can offer to be made available as APIs, whether for internal use, for partners or directly for customers.
The cloud‑native approach is the best in this regard: offering high performance, scalability, availability, and reliability. In addition, this approach helps enterprises create and manage microservice architectures. This kind of architecture ensures integration with partner tools, and also encourages reuse of components already developed through modular logic.
The two tools for Embedded Insurance: the Mia‑Platform offering
Aware of the complexity of the challenges raised by Embedded Insurance, Mia‑Platform has created two tools that will help practitioners enter this new dimension: the API Portal and the External Developer Portal (EDP).
The first tool allows you to survey all internal APIs, document them in terms of architecture, dependencies, and flows, making them available to teams to encourage internal reuse and avoid duplication.
The second underpins an API Governance capable of addressing the Embedded Insurance scenario. More specifically, the EDP exposes the APIs and business services to external developers, providing them with technical documentation and all information related to the context of use. In this way, testing and integration phases can be managed by ensuring the highest API Management and API Security standards of the Insurance industry.
The next step will be the introduction of an API Manager, that is, a figure with both technical and business skills in charge of the proper creation, management, and use of APIs.
Accelerating the time to market of Embedded Insurance
Building and learning how to use such tools from scratch is usually a long and expensive process: this complexity clashes with the need to produce and integrate new products quickly. That is why, in order to start seizing the benefits of Embedded Insurance instantly and reduce the time to market, it is worthwhile to rely on Mia‑Platform.
In fact, as a technology partner, Mia‑Platform allows companies to implement API Portal and External Developer Portal with just a few clicks, by providing users with easily customizable features and an ever‑growing Marketplace with ready‑to‑use connectors and specialized microservices for the insurance industry that can accelerate application development.
Mia‑Platform is a founding member of the Open & Embedded Insurance Observatory, and has been advocating since its founding for the key role of cloud‑native technologies in the adoption of Open and Embedded Insurance.
The Report 2022 is now available on the Observatory website: this is an essential resource for understanding the current adoption status of Open and Embedded Insurance, what has been done so far, and the trends that will shape the near future.