Moving on from AI/ML: the future of insurance distribution is embedded

Speaking to Intelligent Insurer’s Re/insurance Lounge, Angus McDonald, chief executive officer and co-founder of Cover Genius, explained why embedded insurance will be the next big thing in a crowded insurtech market.

Cover Genius offers end-to-end embedded insurance using proprietary technology that can be plugged into a third party’s digital platform, allowing it to sell products, services, or platforms with insurance coverage or warranty protection embedded in it.

Embedded insurance can be seen as an alternative to getting insurance from carriers⁠—but one that benefits the customers with seamless digital experience, automated quotes, policy issuance and claims settlement within their purchase funnel. For example, travel insurance offered as part of flight or hotel reservation process, or auto insurance coverage that tags along with car rental or car-sharing services.

“Consumers are looking for embedded protection products that are integrated into their online experience, so they don’t have to leave the environments they are familiar with in order to buy insurance and warranty products,” said McDonald. “It’s about convenience.”

He believes that in future, insurance distribution will be embedded in digital platforms. It will enable insurers to sell the “right product to the right people with the right coverage levels”, and ultimately help close the protection gap.

Embedded insurance allows insurers to scale their business because it opens up new audiences through new distribution channels, McDonald explained.

“When you’re embedding products within digital platforms it reaches audiences who don’t regularly come directly to insurers’ websites—often the younger groups who are not familiar with insurance products or what is available.

“We see it as a means of making insurers more profitable.”

McDonald stressed that the market has changed post-COVID-19, and that companies which are unwilling to adapt to changing consumer behaviour, or caught up in the struggle to leave legacy systems, will miss out.

“There has been this massive disruption. People are now more aware of the need for insurance protection,” he said.

“If you are not doing embedded insurance, you will end up not embracing technology that is going to have a very large part of the market, and possibly the best part of the market,” McDonald noted.

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Still early days for insurtech

The past decade has brought a significant rise in emerging technologies within the insurance space but, McDonald says, developments around AI and ML are still at a nascent stage.

“AI and ML have been a catch cry for a while. We’ve been talking about them for five to 10 years, but there’s still so much opportunity to be able to improve the digital aspects of all our customers’ lives,” he said.

“What AI and ML offer is more precise and personalised products and experiences for individual customers. They can do that in a way that automates and makes embedded insurance possible.”

McDonald stressed that the end customer experience is more important than ever. “People are expecting technology to deliver the kind of services they’ve become used to,” he said.

McDonald highlighted that the industry has been a slower adapter of technology resources and personnel, such as software engineers, because of legacy systems still in place, which is a major barrier in the digital transformation of the insurance industry.

“Having that lack of technology capability makes it hard for insurance industry participants to move quickly,” he said.

“But insurtech provides the opportunity for the industry to transform. The more investment we see in new insurtech players is going to drive that digital transformation.”

McDonald co-founded Cover Genius in 2014 in Sydney, Australia. The startup enables companies such as Booking.com, eBay, Skyscanner, and Wayfair to offer insurance policies and warranty products on their sites.

The company is licensed in more than 60 countries and all 50 US states, and has  raised  A$100 million ($74 million)  in a series C funding round led by re/insurer Sompo Holdings Asia.

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