Regulation, Technology Know-How Are Delaying Embedded Insurance’s Full Potential


“Regulation is a roadblock and it hurts the patron immediately,” said Meitav Harpaz, CEO and co-founder of Pattern, an embedded insurance startup that helps services or products providers integrate insurance or other products into their offerings.

Embedded insurance is the power for any business that sells services or products to also sell insurance as if it were itself a carrier or agent.

Harpaz, speaking as a part of an Oct. 5 panel presentation, explained that some embedded offerings require multiple consumer signatures and other potentially excessive actions before a transaction could be accomplished, resulting from regulatory restrictions. That is something that he said could be prohibitive to efficient use of embedded insurance.

“It’s got to be something that basically works for each side,” Harpaz said throughout the panel discussion. “And the delivery value to the insured, has set to work for the insurer, who’s form of getting out of the way in which and just isn’t as dominantly present within the transaction. It has set to work for the business as well.”

Panelist Sean Ringsted, chief digital officer and chief risk officer at Chubb, agreed that the regulatory and customer experience needs to be higher for some embedded products.

“This just isn’t for all products … you aren’t going to do [it] for the center market [or] upper middle market,” Ringsted said. “What now we have the thrill about is for those who consider a broader swatch of consumer products within the digital economy, is having to drive the change in [embedded] product. A part of that’s regulation. A part of that’s you could have to design [insurance] products which are relevant.”

Panelist Mike Shim, CEO and co-founder of DigiSure, a customer identity verification platform, said technology just isn’t where it needs to be yet to make embedded insurance and related transactions seamless.

“From what I see, technology remains to be a ways away, a minimum of from what we hear after we consult with our customers,” Shim said. “We want more technology from our insurance partners, which is why we created our company.”

What Customers Want

Shim said that some customers — reminiscent of those within the travel sector— see embedded insurance as a possibility to create incremental revenue, but most want something more fundamental than that.

“Essentially the most basic thing they need out of embedded insurance is definitely to lower their insurance costs,” Shim said. “They’re on the lookout for ways to cut back premiums, reduce friction, get value from their spend. Embedded insurance to me, the way in which I give it some thought, allows for all of those things.”

Shim said embedded insurance may help with reducing customer claims frequency, claims severity, and digital claims management.

Harpaz said he sees consumers winning in the long run.

“We eventually get to the purpose where insurance is embedded and integrated into the product itself. You purchase the phone, the phone is protected,” Harpaz said. “The clear winners will probably be the consumers.”

Winning is feasible for insurers, too, due to the way in which embedded insurance addresses distribution, in keeping with Harpaz.

“For insurers, certainly one of the largest challenges within the industry is the distribution,” Harpaz said. “Insurers waste about 50 percent of their income on distribution [and] it does diminish their role as a transparent third entity [in embedded insurance] that’s present. But after all they’re those that produce products and protections and the underwriting and regulatory models. In addition they win on this scenario – it’s a slight shift of the role that insurers play today.”

Ringsted said that embedded insurance carries some risk, but argued success is feasible after mastering a couple of variables.

“The winners will probably be whoever can deliver the precise product and services to consumers and determine use the technology and data,” he said. “But it surely is a dangerous business and I don’t think we must always lose sight of that.”


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