David Drotos is a marketing and product leader for insurance and financial services. David was interviewed by Andrew Daniels, Founder and Managing Director at InsurTech Ohio and COO at LISA Insurtech.
David, how do you define embedded insurance? Can it be more than a way of selling a policy?
“At its foundation, embedded insurance is offering affordable, relevant and personalized insurance to people when and where they need it most. The key word here is relevancy - making insurance available at a time when a consumer is likely to consider it as part of a related transaction. If you're applying for a mortgage, you need to consider your homeowner's insurance. If you're buying a car, auto insurance is highly relevant. If you're booking a vacation, travel insurance is a consideration. Beyond the sale, embedded insurance offers new paths for coverage to be connected into these other products. Imagine your auto insurance company offering coverage options for you as you get close to paying off a car loan, or your health insurance rewarding you with better premiums for healthy activities shared by you from your wearables. The future of insurance will be defined in part by moving the insurance/consumer relationship from a reactive to a proactive one, and embedded technology enables this.”
Are there any examples of companies who are doing this well, and why are they so successful?
“Among Ohio insurtech companies, I really like Branch out of Columbus. A lot of their business comes to partner integrations where they're providing their coverage through an API (Application Program Interface). They're enabling incredibly quick quoting and binding for both auto and home using pre-filled data. They ask as little of the customer as possible, so that experience can be translated to a lot of different portals where maybe all they have is the name and address of the customer to pass over. Their business model as a reciprocal also helps to limit acquisition cost and reduce pricing, enabling them to be both price-competitive and profitable.
Root Insurance is another Columbus insurtech that is doing some really interesting things in the embedded space with Carvana. They recently announced a new three-click process to purchase a policy on Carvana’s site alongside an auto, which skips application questions and moves directly to coverages. The longer term vision is an integrated solution that would support claims, service and even telematics directly through Carvana.
On the big company side, I'd like to mention Chubb, the largest publicly traded P&C carrier in the United States. They've built something called Chubb Studio, which gives companies digital access to lots of things that they do on the consumer insurance side: accident insurance, health and life, mobile phone travel, small business. They also have customer service and claims capabilities. I'd keep an eye on them to see how they penetrate the market. Their name recognition is opening a lot of doors for them, but they're taking the embedded game very seriously. For a big company, it's pretty interesting to see them apply that toward the future when they've been known for so long as this massive brand that's primarily for high, networth individuals distributed almost exclusively through agents.”
Talking proactive versus reactive insurance, how close are we to this, and how does embedded insurance contribute to it?
“From a technical perspective, we could make this happen in the not too distant future but there still are some significant industry and psychological barriers. Number one, the consumer needs to be comfortable with sharing their information with an insurance company to make it happen. You can have a house full of connected devices, but if a customer isn't going to get value out of sharing the data, they're unlikely to allow it. It's critical to have insurance pricing that is based on how the devices are being used and what the consumer behavior is. For that to happen, underwriting needs change. As underwriters and product managers know, it often takes a long time to change models, gather data and make significant conclusions. The department of insurance also has to approve a new pricing model. On paper, you have the technology to do a lot of this. Can the insurance ecosystem react around this to enable it?
Connected devices are certainly going to enable this, and the ‘magic moment’ for insurance is when you get an alert on your phone that says something like, ‘Hey, David, we noticed that you used this much electricity last month, or your temperature was on this much. If you turned it down at night to this or that, we could save you $50 on your monthly premium this month. Would you like us to do that for you?’ Insurance, ideally, shouldn't be something that you have just in case something bad happens - the idea of it actually being a prevention tool instead of a mitigation tool is super powerful and one that certainly can be enabled through technology. We have some barriers to getting customers willing to share the data and insurance companies able to activate on that in the current operating environment.”
Where do you see embedded insurance going, and what should we expect to see in the coming years?
“The idea around agents and carriers being the main source of contact is going to get mediated as big brands with name recognition distribute products through their own channels. Credit Karma, for example, has millions of people use their service to monitor their credit, and their overarching brand is the trusted advisor. If Credit Karma is now offering insurance products and solutions, it's likely that a customer is going to think about their insurance needs through Credit Karma versus Progressive Insurance or whoever it is. Big brands with name recognition are looking for ways to monetize the consumer and have a deeper relationship.
From a technological perspective, you're going to see more and more insurance offerings in different places where there's a spread between the risk incurred and the risk covered. I was reading an interesting story about a company that has an embedded insurance app in the phone that's connected to the telematic sensor. If they detect that the phone is dropped or being dropped, it turns on insurance coverage for the phone.
In auto insurance, companies like Tesla and GM will offer insurance at point of sale with pricing based on how you drive the car at scale. The idea of telematics-based insurance pricing is certainly going to be something we see a lot of in the next five to 10 years as credit continues to have some challenges with claims around disparate impact. Overall, embedded insurance will become more entrenched in the everyday services and products that we use.”
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