A new survey from Chubb, the world's largest publicly traded property and casualty insurance company, reveals that a majority (56%) of financial executives involved in insurance decision-making globally expect to generate more than 10% of their revenue from embedded insurance within three years. Today, just 11% of firms in Europe report that level of revenue, compared to 20% globally, but 62% say their customers are interested in obtaining embedded insurance.
How, where and why embedded insurance is an innovation for our industry
Digital insurance embedded in websites and apps is becoming a must-have rather than a nice-to-have offering, according to 81% of financial executives globally, and 77% in Europe. This sets the stage for accelerating adoption of insurance products in financial services platforms. The trend is most pronounced in emerging markets in Latin America and Asia, with booming consumer interest in Europe.
"Banks and the Digital Wallet Race - The Embedded Insurance Strategy," a global survey of 2,000 consumers and 200 finance leaders conducted during the second quarter 2023, reveals the rapid adoption and investment by banks and fintechs in embedded insurance to meet blossoming consumer demand. Over half of consumers globally are interested in purchasing more insurance and in Europe, 42% believe that digital is the obvious way to buy it.
"The race to win a greater share of consumer digital wallets is intensifying – banks and fintechs are advancing with expanded offerings of insurance products to deepen customer relationships, drive growth and narrow the protection gaps of their customers," said Sean Ringsted, Chubb's Chief Digital Business Officer. "Digitized insurance is already widely popular with global consumers, and financial service providers are building trust and loyalty while unlocking new avenues for growth by offering customers simple, relevant and affordable insurance protection options embedded in their digital customer journey. As highlighted in the report, this is a global phenomenon, with companies in Asia and Latin America investing heavily in these digital insurance capabilities. Banks and fintechs in North America are in the race too, but not yet at the pace of their counterparts in other regions."
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Booming consumer demand, led by emerging markets
According to Chubb's survey, consumers are responding to a growing landscape of risk exposure with booming demand for insurance. Overall, 56% of consumers globally believe they are underinsured, including more than half (51%) of those surveyed in Europe. These figures are more pronounced in certain markets: Sixty-two percent of consumers in Latin American and 60% in Asia express interest in purchasing more insurance that not only protects their "stuff," but also their lifestyle.
Opportunity for established firms
Established banks and insurers have a unique opportunity to leverage these trends, especially in developed markets in Europe, all while structuring the insurance offers in compliance with applicable insurance laws and regulations. Over 60% of consumers in the region expressed high levels of trust purchasing insurance from established banks, and 63% indicated the same for established insurers. This compares with nearly 40% expressing high levels of trust in insurance purchases with digital-only insurers and 31% with digital-only banks. Globally, fifty-five percent of financial executives agree that established insurers have an edge over digitally native insurtechs because they have consumers' trust.
"Markets in Asia and Latin America already demonstrate the massive growth opportunity for banks and fintechs with embedded insurance," said Gabriel Lazaro, Head of Digital, Chubb Overseas General Insurance. "Consumers view legacy banks and insurers as the benchmark in this space, and as a result, we have seen our network of digital distribution partners around the world continue to scale. Global consumer demand is massive for embedded insurance, and we believe the next stage of expansion will come in developed regions and from established financial institutions."
"Across the European region, established banks and fintechs are looking at embedded insurance as an opportunity to not only drive revenue, but to build customer satisfaction and 'stickiness,'" said Israel Rayan, Senior Vice President of Consumer Distribution for Europe, the Middle East and Africa (EMEA) for Chubb. "With a growing consumer appetite for buying insurance digitally, the embedded insurance market in Europe is quickly gaining momentum and is a growth avenue for the banking sector."