By Mary Sams, Senior Research Analyst, Triple-I
“Integrated insurance,” often described as “B2B2C insurance,” has long been touted as a path to innovation and growth in the traditional insurance market. However, it has been slow to mature.
The term refers to the integration of insurance products and services into retail transactions. The objective is to offer insurance solutions at the point of sale or as part of a package of products or services. This requires that products and processes be simplified so that the consumer can make an informed purchase. Complex commercial insurance products are not likely to succeed using the integrated insurance model.
Six years ago, according to a report published by the global investment management firm Conning, integrated insurance was frequently cited as a use case for distributed ledger or blockchain technology. Blockchain is a complex ledger-centric technology that has a multitude of benefits, such as enhanced data security, immutability, and optimized data sharing.
More often than not, these benefits are overshadowed by the cryptocurrency’s somewhat lackluster reputation. This complexity, and the more recent travails of cryptocurrency, may have contributed to the slow adoption of this technology for integrated insurance.
“We are overwhelmed by the insurance industry’s curiosity in network-based technologies such as blockchain,” says Brendan Picha, head of outreach at the RiskStream Collaborative. “We have several initiatives, some global in scope, that are reaching a welcome point of maturity within the company. This is happening at an interesting intersection with developments in other emerging technologies. The industry is now taking a hard look at how these technologies might work together and RiskStream is well positioned to support and usher in this exploration.”
RiskStream, like Triple-I, a subsidiary of The Institutes – is a member-led, non-profit organization that aims to create an ecosystem using blockchain to streamline data flow and verification, reduce vendor and operational costs, drive efficiencies, and improve customer experience.
Many applications for integrated insurance have used open APIs and microprocesses to scale applications with retail partners. These technologies have helped support the growth of insurance integrated into travel, personal auto, homeowners and extended warranty insurance products.
However, for most traditional insurance products, integrated insurance poses a challenge. These products are “sold, not bought,” and moving purchase to a simplified platform and tying it to the retailer gives customers choices they may not be likely to make without a sales pitch.
Private equity investment firms have been drawn to companies looking to expand into integrated insurance, attracting $3.5 billion since 2015, according to Conning. Gartner, a large research and consulting firm, has positioned integrated insurance at the heart of what it predicts will become the mainstream insurance business model.
The growth in online sales since 2020 has increased the opportunities presented by integrated insurance as consumers become more involved in all types of online transactions. Financial services companies have grown and expanded tremendously during this time. Consumers have become involved in buying and selling cars online and have expanded their relationship with OEMs.
However, online insurance sales have not experienced similar growth. In 2017, Tesla launched an entire direct-to-consumer insurance business. While this is technically not integrated insurance, it illustrates the benefits of sharing vehicle telematics data when underwriting the insurance program.
Expectations for embedded insurance are mixed. Personal lines insurance with a $400 billion premium and small businesses with a $100 billion premium continue to be top targets, according to Conning. Simplifying the insurance application, increasing the premium, lowering expense ratios, and reducing protection gaps are all opportunities. The realization of these benefits and successes will depend on their adoption by retail transportation partners.