Embedded insurance is one way to meet this demand, although it comes with challenges
Traditional insurers need to “up their game” if they wish to meet customer demand as economic uncertainty and the cost of living crisis bites, says Solaris’ business development manager Darren Lane.
Today, people in the UK are facing a heavy cocktail of financial concerns involving inflation and a looming recession – mixed with apprehension over global conflict and unrest, as the war in Ukraine continues alongside other geopolitical tensions.
This was reflected in PricewaterhouseCoopers annual survey of 2,000 UK adults, conducted by market research company Opinium in August 2022, which further highlighted that over half (54%) of respondents believed day to day living costs would have a high or very high impact on their daily lives over the next 12 months.
As uncertainties rise, Lane suggested that customers would increasingly look to more established, long-standing providers of insurance for more cover options, due to the perception of these firms as “stable and solvent”.
This increased interest presents an opportunity for these insurers. Lane added: “It’s a chance to re-engineer or replace legacy tech and ensure they have the seamlessly integrated digital payment offerings that are key to meeting customer expectations for secure, real-time and relevant insurance.”
One way to meet these customer expectations, according to Lane, is embedded insurance.
Embedded insurance is the integration of insurannce services into non-insurance focused websites – the ability to purchase travel insurance on an airline’s website is a common example.
While meeting customer expectations, insurer’s could also take advantage of increased conversion rates through embedded insurance.
Lane explained: “Insurance is an ideal candidate for embedded finance solutions – most customers buy insurance because they are required to, for example when buying a house or a car.”
Implementing embedded insurance, however, may present a challenge for legacy systems, because “they were not designed to integrate insurance firms into a broader financial ecosystem where customers dispense with traditional barriers between banks, retailers and insurance firms”.
He continued: “The good news is that the ecosystem also includes partners, suppliers and vendors who are equally committed to building trust and supporting a smooth customer experience – and who can provide the expertise and solutions needed to translate legacy systems (and legacy thinking) into embedded finance platforms. No rip and replace required.
“With the right kind of support, insurance firms can take advantage of smart payment rails, meet the demands of customers and ensure a healthy, stable and solvent market to everyone’s benefit.”
A payment rail, according to software company Tipalti, is a platform or network infrastructure that allows all digital money transfers to be made between payers and payees, regardless of country, currency, digital payment method, or whether the payer or payee is a business or consumer.
Solaris is an embedded finance platform, which operates in Europe and is headquartered in Berlin.