How will embedded insurance affect agents and brokers?

Agents and brokers are no strangers to whispers that their role may one day disappear. However, thus far, they continue to be a mainstay in insurance distribution and have successfully navigated significant industry transformation. But could the recent rise in embedded insurance solutions tip the scales?

What is embedded insurance?

First, let’s establish what constitutes embedded insurance. Here at ReSource Pro, we use this definition:

For example, you might purchase AppleCare along with your new iPhone or trip interruption coverage for your upcoming vacation.

However, the breadth of embedded insurance solutions has grown significantly, primarily driven by technology, changing customer expectations, and carriers’ desire to expand their market reach. Remember that at its core, embedded insurance is like direct placement and partnering with agents/brokers – a distribution approach.

What differentiates many embedded solutions, however, is their use of technology. APIs, artificial intelligence, and advanced data analytics help offer customers insurance solutions in places where they are already spending time. With customers seeking convenience, personalization, and a seamless experience, embedded insurance is an attractive approach for carriers.

Many industry analysts are projecting that as much as one-third of all insurance placements will be through embedded channels by the end of the decade. However, at ReSource Pro, we believe these predictions are likely overly optimistic. That doesn’t mean embedded solutions won’t have a significant impact on the industry. They will, and distributors must be ready to respond and adapt.

How will embedded insurance change the industry?

To start, it’s essential to recognize that embedded solutions will not be felt evenly across the industry.

As seen with prior industry transformation, segments and lines of business with lower risk complexity and a broad customer base will likely be impacted most. For distributors focused on personal lines, revenue from coverages such as auto, homeowners, and renters will be at risk.

The same can be said for some small commercial risks. There are already multiple embedded solutions targeting each of these segments. For example, Next Insurance, an SMB insurer, has embedded partnerships with LegalZoom (legal services platform), Gusto (payroll API for accounting and bookkeeping), and Intuit (accounting software provider).

Embedded solutions are also giving rise to new insurance products by addressing risks previously been considered uninsurable.

For example, GradGuard partners with universities to offer tuition reimbursement coverage for students and families. Upper Hand, a sports management platform, partners with Pattern Insurance to offer coverage for accidents and registration cancellations. Historically, many micro-risks such as these could not be handled profitably and weren’t targeted by agents/brokers due to low commissions. However, advancing technology and the availability of embedded insurance platforms are removing these obstacles.

Over time, distributors may find that revenue from some personal and small commercial risks moves to non-insurance products and service providers as they seek to provide a comprehensive buying experience for their customers. However, these may also be risks that agents and brokers struggle to address profitably – and as a result, choose not to prioritize.

Instead, distributors should focus on specialization and expanding their value proposition. Agents and brokers will undoubtedly be needed for complex risks even as embedded solutions become more commonplace. Customers will continue to have questions, need guidance, and want access to a trusted advisor. Here, agents and brokers can have the most significant impact.

That said, distributors must expand their value proposition beyond coverage placement and basic policy servicing. While these will remain needs for more complex risks, they will not be differentiators. Additionally, advancing tech solutions are helping many agents and brokers deliver these services more efficiently and effectively.

How can you stand out in a changing insurance ecosystem?

So, how can agencies and brokers differentiate themselves? Unfortunately, there is no one-size-fits-all answer, but start by considering the following:

How are you servicing your customers today?

Look beyond the tasks themselves and consider your processes and the experience you provide. Customers increasingly desire a holistic and omnichannel experience. They want real-time access to their information and the ability to contact you through their preferred channel.

Do you have an area of specialization?

While many distributors operate as generalists, pursuing every business opportunity that comes their way, others choose to niche down and become domain experts in one or several areas. Specializing helps agents and brokers grow their brand recognition and expand their value proposition for these targeted customers.

What are your customer’s pain points?

Think beyond insurance and risk management to consider their business as a whole. What are they struggling with? What keeps them up at night? A comprehensive view of your customer’s business and needs enables you to extend your value proposition beyond insurance without substantial investment. How you choose to provide added value will depend on your customers’ needs and can take various forms, including education, networking, roundtables, and more.

Lastly, don’t ignore the increase in embedded solutions. Instead, educate yourself. Become familiar with the available solutions and their capabilities, strengths, and weaknesses. Most importantly, determine how the embedded insurance model could impact your book of business – and find your differentiator.

Discover more insights in our research report, “The Future of Embedded Insurance: Will It Be a Disruptor or Distraction?” The report is available to download free of charge. Fill out the form below to join the research community and receive your complimentary copy!


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