How embedded solutions are transforming the insurance sector

In today’s digital age, industries are undergoing rapid transformations, and the insurance sector is no exception.

Embedded insurance, a concept integrating insurance into non-insurance services, is revolutionising the landscape. For instance, imagine getting travel insurance as part of the flight booking process or being offered insurance by the car rental agency when hiring a vehicle.

Similarly, picture purchasing a recently launched laptop and being presented with insurance that covers the cost of replacing a damaged or faulty laptop.

This is the essence of embedded insurance – offering convenient coverage within everyday interactions.

The time is now for embedded insurance 

Insurance companies and businesses across various industries are realising the importance of integrating insurance into what people buy, use, or maintain. Thanks to advancements in technology, constant connectivity, and changes in what customers want, embedding insurance has become a priority for all sorts of insurers.

Companies such as Uber and Apple are already seeing positive results from including insurance with their products, making customers happier and their offerings more valuable. The use of modern technology platforms is crucial in this shift.

These platforms allow insurance companies to use up-to-date information to create personalised solutions and handle insurance claims more quickly.

Embedded insurance in the Middle East market

Just like many other industries, the insurance sector faced a major challenge when th e full impact of Covid-19 became clear, affecting their profits.

To adapt, established companies began investing more in technology to increase efficiency and enhance the customer experience. Some companies chose to develop their technology, while others bought existing tech tools. The growing interest in financial technology, known as fintech, created opportunities for new startups in insurance.

However, these startups faced resistance from insurance companies, who saw them as competition rather than helpful partners. In the Middle East region, insurance companies often prefer to buy old-fashioned, large computer systems rather than work with smaller, newer companies.

This cautious approach from insurance companies might be why the insurtech industry is still in its early stages of development.

Nevertheless, positive changes are underway. Embedded insurance is swiftly gaining traction among consumers in the Middle East market. The insurance business in that region is expected to grow at a CAGR of 7.17 per cent between 2023 and 2029, reaching a valuation of $386.39bn by that time.

This growth is mainly because more people are realising the importance of insurance, driven by increased urbanisation and economic development. Moreover, commercial insurance leads the way in the Middle East market, with personal insurance making up only a small portion of the total premiums. The State of Fintech report shows that fintech in the region grew by 52 per cent in 2020, attracting $241m investments.

This growth provides a fertile ground for embedded finance solutions to meet the changing needs of businesses and consumers. However, compared to global markets, the region still has lower rates of insurance product usage. Customers in the insurance industry are quickly changing their expectations, pushing the industry to adapt faster than ever before.

The MENA region, especially the Middle East, is making significant strides in financial technology, with embedded finance emerging as a game-changer. The region is becoming more data-driven in its insurance practices.

The embedded insurance industry in the Middle East is expected to grow by 40.2 per cent annually, with revenue projected to reach $7,763m by 2029. This suggests that companies best equipped to serve this region will likely dominate the market soon.

Read: GCC insurance sector growth soars: $44.4bn projection by 2028

Market size and growth potential

The embedded insurance market is growing worldwide and is expected to reach $482.8bn by 2032 with a CAGR of 22.6 per cent. This growth is fuelled by factors like reaching new customer segments, expanding insurance coverage, and improving customer satisfaction and loyalty.

Both traditional insurance companies and newer insurtech startups are exploring embedded insurance opportunities. They are leveraging their knowledge and innovative technology solutions to tap into this expanding market.

Embedded insurance market trends

Increasing life insurance premiums are driving the market forward, and technological advancements and improved underwriting processes have made life insurance more competitive and accessible. E-commerce, artificial intelligence, machine learning and big data are all contributing to the rise of embedded insurance.

These technologies let businesses tailor their insurance offerings to each customer, improving their experience. API providers are essential in fuelling the embedded insurance trend, while future brokers can embrace embedded insurance to enhance agent productivity and improve customer relations.

Closing the insurance gap

Embedded insurance is considered the most relevant opportunity to tap into new customer segments and reduce the insurance gap. By offering simple and transparent products with a straightforward claims process, it has the potential to revolutionise how insurance products are distributed by non-insurance brands worldwide.

The bottom line

Embedded finance, particularly embedded insurance, presents a great business opportunity in the Middle East market. This is because of the growing fintech ecosystem and consumer demand for seamless financial experiences.

Businesses in the region must seize the opportunity, adapt to changing consumer expectations, and leverage partnerships and technology integrations to open new revenue streams and enhance customer experiences. By doing so, they can position themselves as leaders in the region’s evolving financial landscape.

The writer is the co-founder at Turtlemint.