Putting agents first in embedded insurance
While product design—including technology capabilities and architecture—is key for carriers to play in the embedded insurance space, leveraging the agent strategically will greatly increase the likelihood of embedded product success. We believe agents can play a key role in distributing included insurance, driving sales and seizing opportunities for cross-selling and up-selling.
In our last post, we introduced the An overview of the evolution of embedded insurance Where it expanded from “Version 1.0″—purchasing life insurance at the airport before a flight—through “Version 2.0” and “Version 2.5” as technology and online commerce pushed built-in insurance toward its current iteration, “Version 3.0.” We define “Version 3.0” as insurance sold as part of another business transaction. Purchasing auto insurance from an OEM or home insurance through a real estate broker are examples of what we consider to be a built-in 3.0 insurance.
In this post, we will highlight why we believe proxies are important to achieving more with embedded and identify the potential implications for carriers, embed distributors, and the proxies themselves.
The relationship between customers and agents is built-in
Within an embedded insurance transaction, there are two existing products: the base product, which is the original product or service that the consumer sought to purchase, and the companion product, which is the insurance product sold within the underlying product or service transaction. Ideally, the customer interacts with both the core product and the facility through one unified experience.
Currently, most inline insurance transactions are conducted through digital / direct distribution channels rather than agent-led distribution channels. We believe this is the result of three market dynamics:
- Consumers prefer to consult the dealer as a trusted guide for the majority of personal line products. Consumers worry about the “risk of error” when it comes to the type or quality of coverage they have purchased. meta is found That 65% of auto insurance and 71% of property insurance purchases still happen over the phone or at the agent’s office. They also found that although 32% of buyers discovered car insurance options online, 40% turned to an agent to determine which product was right for them.
- Included insurance has a larger share in lower-cost products, where dealerships usually don’t participate. The higher the value of the insured items, the more clients will want to consult with an agent who can make customized recommendations. Most inline insurance offers provide policies that don’t cost much and tend to cover things of limited value or come where state-specific coverage includes some level of consumer protection.
- Primary product providers usually have a strong desire to control the customer experience. This tension between the vendor of the underlying product and the carrier offering the accompanying products inevitably leads to slower development of the included offerings as changes to the accompanying product are negotiated or the provider of the underlying product makes a decision to create its own insurance product. Basic product vendors have solved this problem by developing their own insurance product (eg Tesla) or form an exclusive partnership to offer insurance to customers – as is the case with Carvana’s online used car marketplace Insurance offer Built with Root Insurance Company.
As carriers have pursued embedded strategies, these market forces have created barriers to the successful adoption and activation of embedded insurance. These obstacles have also slowed the progress of education and upskilling to seize the opportunities that content creates.
Understand where the proxies fit into the inline distribution
When the seller of the primary product is focused on selling its offering and controlling its customers’ experience, the agent can act as an advocate for the attached insurance product, boosting conversions. A potential use case is renter insurance (the attached product) sold through the property rental process (the base product). Leveraging embedded lease insurance has the potential to allow the carrier to capture additional customer segments and increase its overall market share.
Rent insurance is a relatively simple product in nature, with low costs and low profit margins. However, it interacts with other insurance products a customer may have (such as car or pet insurance). As an embedded product, it creates ample cross-selling opportunities at any point in the customer journey. In this way, rental included insurance can serve as a gateway for new customers—particularly the younger demographic who are likely to rent—to learn about and purchase additional insurance products from the carrier.
While the embedded partner (the rental broker or property management company) may have a clear incentive to market and sell the attached insurance product, it is at best adjacent to their core business. The carrier is then responsible for marketing the insurance product and ensuring that sales are made along a customer journey that it may or may not control. This is where the agent comes in.
We believe introducing an agent within the core product will result in a more efficient sales funnel. As a product such as renter’s insurance interacts with other products, it creates the need for advice about a full profile of risk: how coverage will protect the client and where there may be gaps or overlaps in coverage. The agent is uniquely positioned to benefit from the interactions between different insurance products. Although commissions on an attached product may be low (as with renter’s insurance), the possibility of cross-selling and up-selling will incentivize the agent to direct customers to buy a combination of products that meet their needs—which can ultimately result in higher commissions overall.
The distribution strategy for embedded products is highly flexible and needs to be tailored to the core product to which it is attached. It is important for carriers to evaluate where and when is appropriate from the customer’s point of view and profitable for the business to make use of the agent.
For example, warranty and replacement insurance for a simple e-commerce product such as a VR headset can be offered at the point of sale without the help of an agent. Because the primary product is a direct purchase, customers are also less likely to need guidance from an agent and there are fewer cross-selling and cross-selling opportunities. Such a product can be marketed through digital channels and target the digitally native millennial audience. Carriers can leverage a retailer’s digital channels and partner with the retailer to create a seamless experience between brands. We see this type of model as a defensive game with less focus on growth. With the right placement, carriers can reach new customers that they might not have captured otherwise.
Key considerations for factor placement in inclusion
To see growth through the inline insurance channel, carriers must pay attention to the agent-inline relationship as a key part of their strategy development. When determining the placement of agents in the embedded strategy, key considerations include:
- Are the insurance products embedded in the building for defensive (increasing share) or offensive (to prevent equity erosion) purposes?
- Do you understand customers’ buying preferences for different types of products?
- Will customers need to understand how the product interacts with other insurance products they may own?
- What market segments is this new embedded product designed for and how does that fit with your existing customer base?
- Will the product be marketed only to “new” opportunities at the point of sale, or will the existing customers of the primary product vendor be marketed as well?
These considerations will help carriers decide where and how to deploy agents to support customer experience and sales through the embedded channel. Thinking about how an agent will drive the customer journey from the start will enable carriers to develop embedded insurance experiences that truly stand out to customers.
If you’re looking to explore how Inline Insurance can be integrated into your existing distribution strategy, we’d love to talk to you. keep in touch with Bob Bisio And Scott Stace.
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