Opportunities available within the protection gap are a driving force behind most of the insurance technology innovations we see today.
The protection gap is the amount of insurance that could have been purchased compared to the amount of insurance that is bought. It represents the missed opportunity and profit accumulated when consumers do not purchase the subsequent insurance attached to a product (i.e. supplemental business insurance, pet insurance, protection plans, coverage in cases of natural disaster, health care, etc.).
Swiss Re Institute found that this protection gap is worth $1.2 trillion and has doubled since 2000.
Often insurance companies lose consumers when they check out after the purchase of a high-value service or item. An additional, subsequent purchase for insurance can feel inconvenient and unappealing.
For example, when forming an LLC online small business owners may not be aware that they need business insurance. Or they understand the necessity but will forego the inconvenience of sourcing and purchasing an insurance policy. Embedded insurance aims to meet these customers where they are, closing the protection gap and reducing loss of profits.
Embedded insurance provides the competitive advantage for insurers to thrive in today’s business to business environment. The experience allows insurance companies to offer personalized solutions seamlessly.
Insurers can expand their value proposition to their customers while simultaneously decreasing their costs of distribution. Meanwhile technology companies benefit by expanding their product offerings to current customers.