Frankfurt, Munich Landlords on the Airbnb housing platform have always paid insurance – they just don’t notice it right away. Insurance coverage in the event that a customer falls down the stairs during their stay is included in the overall product. A so-called “embedded insurance”.
One of the major trends in the insurance industry is that insurance is offered as a package with other products or services. Dietmar Kottmann, industry expert at the management consultancy Oliver Wyman, predicts: “The digitization surge in the corona pandemic is making embedded insurance into a huge growth market.”
Platform strategy expert Simon Torrance predicts that property and liability insurers could generate $ 700 billion in gross premiums with embedded policies by 2030. That would be a quarter of the total global market. Including life insurance, there is even a $ 3 trillion chance.
For example, the online portal Immoscout24 recently started selling insurance to landlords. The new rent loss insurance should offer protection against bad payers or even rental nomads. The policy comes from the Swiss Re subsidiary Iptiq. Customers can secure themselves directly online in the rental process with just a few clicks.
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The idea of offering appropriate insurance when products are sold is not new. For years, when you buy a smartphone, laptop, bike or glasses in business, at the end of the sales pitch the question inevitably arises as to whether the expensive new purchase should also be insured for a small amount. If the buyer agreed, there was often uncertainty as to whether the insurance would make sense.
The digital world is now opening up new opportunities for insurers. Insurance can be seamlessly integrated into the sales process without the customer perceiving this as a nuisance. The simpler and more precisely the policy is tailored to him, the better he can see added value. In some cases – as with Airbnb – the insurance becomes invisible to the end user as part of the overall package.
For insurance companies, the opportunities to acquire new customers in “embedded insurance” are immense. “There are no major marketing or sales costs for insurers,” says Alexander Hornung, co-founder of Insurtech Hepster. “If an insurance policy is embedded in another product, data is constantly being generated that offer further options for offers and services.” The embedded insurance policies therefore also mean new sources of income for the product provider.
Industry experts see opportunities in the area of mobility
Many insurers are currently active in the field of bicycles and e-bikes for opt-in solutions, i.e. the insurance that customers can book when purchasing a product. For example, the Insurtech Hepster is working on a new all-round package: “A lot of data can be read out using hardware integrated into the bike or using a smartphone. Customers can then take out theft, accident or travel insurance, among other things, ”says Hanna Bachmann, co-founder of Hepster.
The Rostock-based company also sees great opportunities in the areas of smart homes and networked machines. Many solutions are conceivable, especially for medium-sized companies, where insurers can offer quick support if a machine should fail.
Fabian Nadler, Insurtech expert at the digital association Bitkom, also sees opportunities for insurers in the motor vehicle business. In the future, the insurance policy will often be included when buying a car, and many integrated applications are then conceivable. A typical example of so-called annex insurance is the authorized dealer who not only sells the car, but also offers his customers the right insurance at the same time.
“Telematics already make it possible today to offer customers who drive prudently a cheaper insurance premium,” says Nadler. There will be new developments in claims management: “The software detects when a damage occurs and can call the breakdown service directly and initiate a settlement with the insurance company.”
Tesla, the US electric car pioneer, is a pioneer in the automotive sector and also sells specially developed policies to its customers in California. The company intends to significantly expand its insurance activities, and the insurance subsidiary Tesla Insurance Limited already has a branch in Germany. Corporations like Tesla are growing into great competition for the established insurers.
But they too want to take advantage of their opportunities. Mark Klein, CEO of Ergo Digital Ventures, says: “We have learned a lot with annex insurance such as warranty extensions, in particular how to work as an insurance and technology partner with e-commerce companies and how to digitize processes. We will continue to develop and expand such partnerships – we see great opportunities in the mobility ecosystem in particular. “
Ergo assumes that there will be two types of customers here in the future: some who want to get extensive information and take out the insurance themselves, and others who prefer a process that is as simple as possible without extensive research. For this target group, it is interesting to take out car insurance when buying a car. The immense data that will be available in the car in the future will also make it increasingly possible to offer customers tailored and flexible insurance solutions, according to the company.
Start-ups benefit from modern IT infrastructure
In addition to Ergo, Allianz and Axa are also among the major insurers that have been bringing insurance to end customers together with product partners for years. But start-ups such as Simplesurance, Element and Hepster or Bsurance from Austria and Toni Digital from Switzerland have also achieved a good position.
The Insurtechs have the great advantage of having a modern IT infrastructure. Nadler from Bitkom says: “The IT systems of the insurance industry often represent an obstacle when it comes to integrated insurance solutions.” It is therefore often the start-ups who occupy the interface between insurers and product providers. Bachmann von Hepster is therefore convinced that cooperation between product providers, insurers and insurtechs in the property insurance business will replace the classic sales channels of insurers in the next five to seven years.
For insurers, business in the corona crisis is by no means a sure-fire success: Allianz Partners, the group subsidiary for assistance and insurance for travel, medicine, living and mobility, had to accept a drop in sales of almost 20 percent last year. The severe restrictions in global tourism as well as the significantly reduced opportunities for many other activities led to the severe slump.
Nevertheless: A turnover of more than 5.3 billion euros in the Corona year 2020 shows the importance Allianz Partners has for Europe’s largest insurer. The group subsidiary already has around 200 million customers around the world who are insured through an embedded insurance policy with Allianz. Often they don’t even know who is behind their contract. For comparison: Allianz currently has around 100 million direct customers worldwide. As soon as the pandemic is over, the Group expects Allianz Partners to return to double-digit growth rates.
Contact with customers is changing
But contact with end users is changing with embedded insurance. Michal Trochimczuk, Managing Partner at Sollers Consulting, says: “The relationship with customers is on the partner side, the insurer has no contact with the customer. The insurer can easily be replaced by another. “
The brands of the insurance companies are also taking a back seat. For Insurtech expert Nadler, insurance brands do not play a major role for consumers anyway. “As a rule, it is important for the end customer to be well protected and to find simple and understandable products.”
Klein from Ergo Digital Ventures takes this calmly. The insurer’s brand does not have to be in the foreground: “We support the ecosystem provider with our services.”
According to Bachmann von Hepster, the decisive factor for the further development of the products will be how willing people will be to share their data with the insurer. The Hepster co-founder says: “I am convinced that even the hesitant Germans will soon notice how convenient such integrated insurance solutions are.”
More: “Digital leader by 2025”: This is how Ergo challenges the market leader Allianz.