People have always needed to get around, and they’ve always needed ways to manage their risks. However, we are seeing big changes in both the mobility industry and the insurance industry, and new opportunities are emerging. One of these new insurance models – embedded insurance – could be a game-changer for the mobility industry.
Understanding Embedded Insurance
When you buy something, it’s often smart to buy insurance coverage for it. This is true for anything that has considerable value or that carries substantial liability risks, whether you’re talking about a service or a product. For example, if you buy a car, you’ll need car insurance. You might also want insurance when you rent a scooter, buy an engagement ring, or book a vacation.
You have the option to buy insurance separately or at a later time, but it's not always easy. Shopping for insurance can be time-consuming, and frankly, it’s not most people’s idea of a fun way to spend an afternoon. In addition, the insurer requires a lot of details about the item to be insured, which can be a hassle. Some people don’t ever get the needed insurance, either because they keep putting it off or because it slips their mind. If someone goes wrong, they won’t have the coverage they want or need.
Embedded insurance offers an alternative. Insurance is offered at the point of sale, so the consumer can secure coverage immediately and in a single transaction.
The Benefits of Embedded Insurance
The embedded insurance models offer many benefits for the insurance industry, the company providing the product or service in question, and the consumer.
First, the model is convenient. Consumers don’t have to shop around for insurance, and this can be a big time-saver. The application can also be streamlined because all of the information about the product or service is already known, so consumers don’t have to enter these details into various forms, and they don’t have to worry about coverage not being available for the specific product or service in question.
Awareness is another key benefit. In some cases, consumers might not even think about insurance unless it’s offered to them – or until something goes wrong and they need coverage. At this point, both the insurer and the consumer have missed out on the opportunity, and the consumer might be angry that they were never told about their coverage options.
For the company offering products and services that require coverage, embedded insurance is a way to boost customer satisfaction. Satisfaction can be experienced at the point of sale, when consumers may appreciate the simplified coverage option. It can also happen down the road when a loss occurs. If the customer’s problem is resolved quickly, thanks to their embedded insurance coverage, they’ll know that they’re in good hands, and this has the potential to boost customer loyalty.
There are also benefits for the insurance industry. According to Research and Markets, the embedded insurance industry is expected to achieve a compound annual growth rate (CAGR) of 20.7% between 2022 and 2029. In 2022, embedded insurance Is worth about $56.98 billion. By 2029, it is expected to be worth about $161.56 billion.
The embedded insurance model can achieve this kind of growth because it’s meeting a need. Insurers that succeed in meeting this need efficiently will stand to gain the most. It’s a win-win-win situation.
The Changing Mobility Industry
The mobility industry is also changing, and it’s doing so in a way that can go hand in hand with the embedded insurance trend.
Renting, sharing and lending are on the rise thanks to a variety of new models. Ridesharing companies like Uber and Lyft match drivers who have cars with people who need rides. Peer-to-peer (P2P) carsharing companies let car owners lend out their vehicles. There are also carsharing companies that use platform-owned vehicles, as well as car subscription companies that let people rent cars for longer periods of time.
It's not just for cars, either. Electric scooter and bicycle rentals have popped up in certain cities, giving residents and tourists a new way to navigate urban areas. RVs, Boats, ATVs and more can be rented using the platform model.
According to McKinsey & Company, the shared mobility market had a value of approximately $130 billion to $140 billion in 2019. E-hailing accounted for the lion’s share of this with a value of $120 billion to $130 billion. However, other forms of shared mobility also have a significant market value, including carsharing ($4 billion to $6 billion), shared micromobility ($1 billion to $3 billion) and P2P carsharing and ridesharing ($3 billion to $4 billion).
This is a market that is seeing rapid innovation. New models are emerging to meet new needs. Unfortunately, insurance isn’t always keeping up.
The Need for Insurance
Shared mobility models are changing the way the world gets around. States have strict car insurance requirements, so all of these forms of mobility require coverage. The National Highway Traffic Safety Administration (NHTSA) says that traffic fatalities increased 10.5% in 2021, so having solid insurance is key. The need is also there for other types of mobility as well, such as electric scooters, which can lead to serious injuries. In addition to injury, rented and leased items are also at risk of being stolen or damaged, so property damage and loss is also a concern.
Embedded insurance provides a logical, simple solution. By making insurance part of the shared mobility transaction, platforms can protect their users, and by extension, themselves.
Lowering Costs and Managing Risks
Bain & Company says that various technologies, including automation and the internet of things, can reduce claims payouts by as much as 20% and operational costs by as much as 50% by mitigating risks and increasing efficiency. New models, notably embedded insurance, are also reshaping insurance. In certain lines, including mobility, the inclusion of embedded insurance is inevitable.
More and more, insurance isn’t just about paying out for losses that have already occurred. It’s also about mitigating risks in the first place. With the right embedded insurance program, risk control can be part of the insurance experience. If all of the data is in one place, that gives platforms the information they need to manage their risks effectively.
A Seamless Experience
More than anything else, embedded insurance offers a seamless UX for the mobility industry. Customers don’t have to worry about shopping around for insurance and filling out confusing application forms. Coverage is part of the transaction.
The embedded insurance experience is also seamless for the mobility platforms. If insurance is part of the transaction, these platforms don’t have to worry about verifying coverage. Even better, embedded insurance can be used to mitigate risks and generate revenue. By linking screening processes to insurance coverage and claims data, platforms can take charge of their risks. Screening data can be used to underwrite insurance, while claims data can be used to make adjustments to the screening process as needed.
Innovative companies are revolutionizing mobility with shared models, but these companies have new insurance needs.
At DigiSure, we are meeting these needs by providing screening and embedded insurance options. With our insurance program expertise, there’s nothing holding you back from launching pioneering new products.
Do you want to see how embedded insurance can support your mobility platform?
