In the past, financial services were always provided by what we customarily think of as financial institutions—banks and companies that issue credit cards and insurance coverage.
However, it is becoming increasingly common for non-financial companies to distribute financial services, thanks to embedded finance. We explained more about the concept of finance enablers in a series of articles, starting with our first entry.
In this article, we will be focusing on the way insurance products are increasingly embedded into other services.
The history of embedded insurance
Similar to what we discussed in our article about card-as-a-service, the idea of insurers selling insurance products via partners such as airline companies has existed for some time now.
Innovative insurance companies like Guidewire and Duck Creek emerged two decades ago, together with the emergence of the internet and the popularization of personal computers. Recently, insurtech startups such as Tractable, Concirrus, and Shift Technology have also begun to apply AI and big data to the insurance industry.
Since COVID-19, we have seen a massive increase in the number of early-stage insurtech enablers and in the amount of funding being invested into them. Some B2C insurtech companies have also spun out their proprietary technology into end-to-end SaaS solutions for other companies to provide their own insurance. One example is London-based pay-per-mile car insurance provider ByMiles and its spinoff By Bits, a customizable usage-based insurance platform for motor insurers.
Types of insurance enablers
Providing insurance products involves many layers of work. Below are some verticals that insurance enablers have chosen:
- Digitalization and automation: Efficiency tools that focus on process improvement for the front office, policy or plan management, and claims management.
- Data and technology: Data analysis services that utilize AI or blockchain technologies to capture or analyze data for specific use cases.
- Full-stack: Startups offering full digital insurance infrastructure to launch insurance products. They are B2B2C or B2B2B-oriented and usually have their own insurance underwriting and distribution license.
Among all the insurance enablers out there, here are some outstanding ones:
- Wefox: Established in 2015, Wefox has raised more than USD 900 million in funding from investors like SBI, Target Global, Horizons Ventures, and Salesforce Ventures. As a full-stack insurance company licensed in Lichtenstein, Wefox can passport its license to other European countries. It doesn’t sell insurance products itself, but instead sells them through 700 local agents and 5,000 associate brokers.
- Element: Incubated in 2017 by Finleap, which also incubated a banking-as-a-service company called Solarisbank, Element has raised more than USD 75 million in VC funding. Element is a full-stack insurance provider, but it strictly sticks to a B2B2x model. For example, it has enabled real estate companies to provide their own branded household and liability insurance. It has also powered Volkswagen’s car insurance products and other white-labeled insurance policies, such as travel and cybersecurity coverage.
- Finatext: Established in 2014, Finatext is one of the few insurance-as-a-service companies in Japan. Among other embedded financial services, Finatext provides “Inspire,” a SaaS unified system that connects traditional insurers to other companies, allowing them to distribute insurance products. It provides a user-friendly UI for customers to apply for insurance coverage, manage their contracts, and ask for payments. It also provides insurance companies and agencies with a system console to manage customer accounts, contracts, and claims.
- Akur8: The company develops an AI-driven insurance pricing platform designed to supply AI-powered pricing automation and optimization for insurance carriers. The company’s platform integrates with edge algorithms dedicated to insurance pricing that can spot anomalies and discover new patterns. The firm enables insurance carriers to improve their profits and win market share with pricing models created and updated in hours instead of months.
- DynaRisk: The company combines personal risk factors with external data and algorithms to determine an individual’s level of risk online. Insurers can use DynaRisk’s platform to drive sales, while policyholders can use it for risk management.
- Unqork: A no-code enterprise application platform that helps companies build, deploy, and manage complex applications, including insurance apps.
- Instanda: A SaaS insurance software platform that allows insurance companies to build, configure, and launch products online.
- Cytora: A service that transforms underwriting for commercial insurance. The company’s Cytora Risk Engine uses artificial intelligence to learn the patterns of risk over time, enabling insurers to underwrite more efficiently and deliver fairer prices to customers.