POL I CY The Israeli Insurance, Pension & Finance Newspaper 24 Special edition 2022 The market value of embedded finance, which also includes the embedded insurance market, will reach US$ 138 billion in 2026 As one of the first digital companies, Uber provides its 3 million drivers worldwide with not only an innovative employment platform, but also a variety of insurance products, bonuses and incentives. These relate to vehicles, personal injuries, illness, maternity leave or insurance against anything else that may result in loss of income. Some of the insurances are provided by Uber for free, some are integrated into the platform and are invisible, and some others are optional for the driver to add as they wish. What all these insurances have in common is that they are sold when the contract between the driver and Uber is signed, thus eliminating the driver’s need to approach their insurance agent separately to purchase a given insurance policy. Thanks to the company’s huge database of drivers and the data it collects, Uber also has the potential to offer its drivers complex and flexible insurance products, such as health insurance or life insurance. As such, it is considered one of the pioneers of embedded insurance, the hottest segment in the contemporary insurance world. Embedded insurance makes it possible to distribute insurance services efficiently by incorporating the insurance component into the product or service offered, which is sold as a single, integrated package. From a new study by Juniper, we learn that the market value of embedded finance, which includes the embedded insurance market, will reach US$ 138 billion in 2026, compared to US$ 43 billion in 2021. This study certainly supports the fact that embedded insurance is now contributing to the insurance industry, which is reinventing itself. Why does the insurance industry need to reinvent itself? According to Swiss Re data, Between 2000 and 2020, the protection gap – i.e. the gap between the need for insurance, as long as it is economic for the consumer, and the amount of coverage actually purchased – doubled and is expected to continue to grow in the coming years. This gap is a great opportunity for the insurance industry and other industries alike, and to realise the potential in changing the traditional distribution model. At the same time, connecting to technological and lifestyle changes will be crucial. A consumer study conducted by J.D. Power found that 74% of people who want to purchase an insurance product look for products digitally, but only 25% complete the process digitally. Indeed, it has been several years since the insurance industry experienced the digital switch, however it seems that only now is the trend maturing and starting to affect the industry considerably. Accordingly, a Deloitte study shows that by 2024, 33% of insurance premiums will come from new value propositions, and the focus will shift from product to service and to providing a holistic customer experience. The study also shows that use is growing of technologies such as AI, IoT and big data, which allow a transition from a claim handling approach following an incident, to an approach based on risk prevention or reduction of damages in advance. Amazon sells embedded insurance to business owners on the platform It takes three parties to create embedded insurance: the insurance company, the third-party company and the consumer, and the focal point of their relationship is a digital platform that is usually provided by the third-party company. This collaboration allows consumers to enjoy simple, available, personalised insurance tailored to their personal needs. It is usually an affordable price and arrives at the very point they need it most, at the time of purchase, thus eliminating the future need to contact an agent or insurance company. When buying a new car, for instance, the insurance is already included in the purchase transaction and its price is reflected in the cost of the ancillary services – a practice already adopted by companies such as Tesla, Ford and GM. By taking this approach, the insurance companies enable the Will embedded insurance bring about greater change than the autonomous car? Continued on page 40 By Dikla Wagner director of technology scouting for the Munich Re reinsurance company in Israel
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