Whilst Embedded Insurance has overseen rapid evolution over the last several years, rapidly accelerating the insurance process for businesses, developments within emerging technologies such as blockchain and artificial intelligence (AI) have the potential to birth a ‘new era’ for the insurance sector. 

Nelson Castellanos, Chief Partnership Officer – International of HDI Embedded, spoke to Payment Expert on the role of these emerging technologies over the next iteration of embedded insurance and why firms should be implementing embedded insurance before it is too late.  

Payment Expert: Alongside your own work, why do you believe that digital insurance solutions have the capabilities of being able to lead the wider insurance industry into a new era? 

Nelson Castellanos: Digital insurance solutions are reshaping the insurance world, and for good reason. First off, digital solutions make insurance more accessible and convenient. Instead of dealing with paper forms and office hours customers can simply hop online and sort everything out from their couch. It puts control in the hands of the customer, simplifying their experience with insurance. 

Beyond convenience, digital tools empower insurers to optimise operations, leveraging vast datasets and advanced technologies like artificial intelligence to assess individual needs and risk profiles. Moving away from generic, one-size-fits-all policies, insurers can tailor solutions to each customer.

Moreover, digitalisation significantly enhances the speed and efficiency of various tasks. Processing claims? Piece of cake. Getting help with a question? Just a few clicks away. The overall goal is to simplify processes for everyone involved. making things better, faster, and more customer-focused. It’s like the insurance industry is getting a much-needed upgrade.

PE: How crucial are partnerships in not only being able to ensure embedded insurance growth, but create new innovations to protect the consumer even further? 

NC: Partnerships are crucial to fuel the embedded insurance market and ensure it keeps maturing, providing even better solutions to protect customers.

Teaming up with big players in different industries, like retail or travel, means insurers can tap into their existing customer base and reach more people. These partners know exactly what their customers want and need, and when combined with insurers, they make a complimentary team that can speed up the innovation process and build new insurance solutions that customers truly desire. 

Partnerships bring a range of different resources and skills, which makes trialling new solutions a lot easier too. Incumbents can get their hands on the latest tech from their partners, while insurtech firms can learn a thing or two about managing risk from insurers. It’s all about working together to offer better insurance solutions that revolutionise the customer experience. 

This all comes down to sharing customer insights when partners share data — safely and securely, of course — it’s like getting a sneak peek into what customers are up to and what risks they might face. With this level of information, insurers can tailor their insurance to fit each person perfectly, making sure everyone gets the coverage they need, no matter what.

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PE: Last time we spoke, you mentioned that AI will play an integral role for embedded services. What examples have you seen of this over the past year? 

NC: We’re already seeing financial services explore AI to create chatbots and virtual avatars to support customers. These virtual assistants will soon be able to offer 24/7 personalised guidance, based on customers’ individual preferences and interactions, for seamless and user-centric experiences.  

AI will continue its pervasive influence across all sectors but only with an intensified integration, especially in insurance. With its enhanced capabilities, AI will empower teams to effortlessly handle vast datasets, facilitating demand forecasts, and the creation of bespoke financial and insurance products, or reinforcement of prevention strategies. 

AI-driven fraud detection systems will also become pivotal, effectively identifying and mitigating fraudulent activities, and ensuring industry resilience in the face of evolving risks. This will reduce common use cases such as identity theft, false claims, and exaggerated/staged accidents. 

PE: Will it become inevitable before we see embedded insurance take to blockchain technology and what is the potential of this? 

NC: Getting blockchain into existing systems is no walk in the park. It takes a lot of time and expertise to make it happen, which can be a hurdle. However, in theory, it has the potential to be a game-changer for the insurance industry.

Insurers can use blockchain to keep a super secure and transparent record of all transactions, as well as ensure easier and safer data sharing among partners to cut down on fraud and assess risks more effectively. 

As I mentioned previously, smart contracts on blockchain can ensure a faster claim process as it cuts down the need to process paperwork, saving time and money.

In addition, blockchain has the potential to unlock a new era of personalised and innovative insurance products. By tailoring coverage to specific groups and incorporating real-time data, blockchain can foster fresh insurance ideas that cater to individual needs and behaviours. 

While it’s not certain whether blockchain is going to be the next big thing for embedded insurance just yet, there’s future potential. For now, the industry needs to improve the implementation of the technology for customer adoption to grow and then assess the real impact.

credit: Shutterstock

PE: Lastly Nelson, and thank you for your time, why should companies, if they have not already, adopt embedded insurance sooner rather than later? 

NC: Firstly, embedded insurance allows businesses to deepen their engagement with customers by providing value-added services and enhancing the overall customer experience. By offering insurance products tailored to their specific needs and preferences, companies can increase customer satisfaction and loyalty, fostering long-term relationships and driving repeat business.

This enables companies to expand their market reach and attract new customers. Affinity insurance programmes, in particular, provide a unique opportunity to tap into niche markets and target specific customer segments that may have been previously underserved. This not only helps companies broaden their customer base but strengthens their competitive position in the marketplace.

Moreover, embedded insurance presents a prime opportunity for companies to diversify their revenue streams and unlock new sources of income. By integrating insurance offerings seamlessly into their existing products or services, companies can capitalise on additional revenue streams without needing significant investment or infrastructure overhaul.

Embedded insurance plays a crucial role in risk management and mitigation for businesses, providing financial protection against unforeseen events or liabilities. Companies can safeguard their operations and assets by proactively addressing potential risks through insurance coverage, ensuring continuity and resilience in the face of adversity.