Embedded insurance in a subscription economy
There is a growing trend towards subscription over full ownership. To benefit from this trend, P&C insurers need to be enabled to sell their insurances via the companies that provide these subscriptions. Enter embedded insurance.
There is a growing trend towards subscription over full ownership. Especially in the demographic of young professionals (30s or below). Many are no longer inclined to buy expensive items such as cars, bikes or even property. Instead, they prefer to pay all-in-one, renewable subscription fees to gain access to use such items.
This demands new, different business models across many industries, including the P&C insurance industry. To benefit from this trend, P&C insurers need to be enabled to sell their insurances via the companies that provide these subscriptions.
Enter embedded insurance.
Embedded insurance is insurance that is sold as part of a transaction for a different product. For most P&C insurers, selling embedded insurance poses a challenge, as they not only have to rethink the way they price their insurance, they must also redesign the processes they apply around regular insurances.
The use case:
There is a city-based rental company renting out electric scooters per hour (or maybe even per minute). You can pick up a scooter from anywhere in that city by simply scanning a QR code on the scooter, which will automatically unlock the scooter. And, once you have arrived at your destination, you simply scan the code
again and the scooter self-locks. If you want to rent such a scooter, you simply register your details with that company and download the app. Furthermore, whenever you rent a scooter, you will be automatically insured for accidents. This is where embedded insurance comes in.
So, how does this process looks from the point of view of the insurer?
First, they must calculate the insurance premium. The result will probably be a simple function of X euros x time rented. Next, the premium will be collected by the rental company, as it does not make sense to send the customer two bills (one for the rental and one for the insurance), especially since we are talking about embedded insurance.
The most efficient model for both the rental company and the insurance company therefore will be to exchange rental data on a regular basis. This data exchange is only required to make sure that premium can be settled between the rental company and the insurance company.
Next is the claims process. Unfortunately, there has been an accident and the renter contacts the insurance company directly. The renter will be registered on the claim, and a simple service call can be made as part of the claims process to validate the person is indeed insured.
The Axon Platform
The Axon Platform can help insurers break ground with an embedded insurance business model. We achieve this by having an open architecture which allows for quickly setting up connections with external business partners. And, if needed, use their interface definition to connect to the standard processes of Axon.
Furthermore, Axon supports usage based, or declarative insurance, in which it is possible to provide the usage number that affect the premium on a regular basis, and recalculate based on these usage numbers.
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