Part 3: Embedded Insurance - the potential for Europe, and the key role of 'Operating Systems'

New research shows that embedded Insurance has significant potential in Europe, particularly in certain vertical markets. But old methods and tools are preventing the realisation of this potential. New 'Operating Systems' are key to unlocking the full benefits for businesses, society in general and the insurance industry.

In Part 1, the status of Embedded Insurance, I described the the $7 trillion ‘insurance protection gap’ - the gap between the level of cover society needs to be resilient to risk and what it currently has in place - and why the next generation of affinity and embedded insurance - ‘Embedded Insurance 2.0’ - offers an important opportunity to help close protection gaps and, in so doing, grow the value of the insurance industry to the world.

I was making a case for much closer and more creative collaboration between insurance and non-insurance organisations: to make society and business more resilient to the increasingly complex risk we face, and as a pathway to new profitable growth for the insurance industry.

In Part 2, the Future of Embedded Insurance, I introduced 10 strategic requirements to realise this potential, and described the first 4 from the list below in some detail.

1. Appreciate the new table stakes
2. Radically segment the market
3. Find ‘Visionaries’
4. Fix problems for ‘Pragmatists’
5. Use ‘Operating Systems’ to drive innovation
6. Think beyond Risk Transfer
7. Think beyond insurance
8. Exploit ‘Vertical Data’ and AI
9. Re-configure the organisation
10. Execute like Jeff Bezos

Since then I've undertaken two activities:

• In-depth research into the European market - to identify where unmet demand for Embedded Insurance lies.
• Explored how new types of 'Operating Systems' can enable and unlock the full potential of Embedded Insurance, not just in Europe but everywhere (point 5 on the list above).

For the former my team analysed 36 sub-segments across 12 European industrial sectors to determine what markets and company types provided the most attractive un-tapped or under-tapped markets for Embedded Insurance.

We used that to update our forecasts for Embedded Insurance in Europe.

We think that over €1.5 trillion of insurance premiums is sharable with non-insurance brands over the next decade, making deeper insurer/non-insurer collaboration a much more important growth opportunity for the sector than previously recognised.

Embedded Insurance also has the potential to address large levels of ‘non-consumption’ of insurance. European ‘protection gaps’ across the four key categories of cyber, healthcare, pensions and natural catastrophe, we estimate, stand at €350 billion.

New, creative embedded solutions could unlock this market too.

For the latter - the requirement for new 'Operating Systems' - we spent time talking to leading technologists, vendors and insurtechs.

In 2022 I co-authored a benchmark of 45 leading embedded insurtechs with my friends at Aperture (the 'Embedded Insurance market map'). One of the highest ranking pure tech companies from the analysis was InsureMO, and so I was delighted when asked if they could collaborate on Part 3 of this series of articles.

So, Part 3 is now available as a free white paper, which you can access here.

It covers:

• Updated forecasts for the potential of Embedded Insurance in Europe - P&C and Life.
• A description of some of the key vertical sectors which our research has shown as attractive, and how to engage them.
• A description of the 'why, what and how' of an Embedded Insurance 'Operating System'.

For those interested, we are running a senior executive event in London on the topic in February (invitation only) and a webinar in March (open for all - watch this space).

I've cover points 6-10 from the list above in subsequent articles in 2024.

In the meantime, for more information about any of the ideas in this article or about my ‘Embedded Insurance 2.0 Growth Strategy-in-a-box’ offering, please mail me at simon.torrance@embedded-finance.io