Source: McKinsey
As more noninsurers recognize insurance as a valuable profit pool and differentiator for their customers, embedded insurance has emerged as a strategic priority for insurance companies. McKinsey spoke with Pia Schlüter, a partner in the Düsseldorf office, to understand more about the latest trends in embedded insurance and how insurers can be successful.
McKinsey: How has embedded insurance evolved, and why has it become a priority for noninsurers?
Pia Schlüter: The concept of selling insurance at the point of sale of another purchase has been around for quite a while, but the way it is presented nowadays feels more integrated. The insurance offer is seamlessly embedded into [typically digital] customer journeys and is sometimes fully included in the price. Often this integration is done in such a smart way that the customer will consider the insurance offer a value add rather than an upsell or additional purchase.
For noninsurers, taking advantage of embedded insurance not only means enhancing their own offerings and customer value propositions, but it also opens new revenue streams. For a Spanish department store, for example, insurance accounted for 12 percent1 of the group’s EBITDA. As a result, more and more noninsurers, from OEMs to telcos to online travel agencies, are enhancing their own offerings with insurance to reap the same benefits.
McKinsey: What does this mean for insurers? How should they think about embedded insurance?
Pia Schlüter: For insurers, embedded insurance represents both a threat and an opportunity. On one hand, embedded insurance is becoming a significant sales channel, which gives insurers access to a high number of customers with high conversion rates. On the other hand, insurers risk becoming a mere capacity provider to noninsurers and turning insurance into an even more commoditized business.
