Business article: Is embedded insurance the key to unlocking customer loyalty?

In recent years, embedded finance has been woven into our everyday lives and digital interactions, often and perhaps crucially – without us even noticing.

And while it comes in many iterations – savings, lending and investments to name but a few – it's embedded insurance which is leading the charge and driving previously unseen levels of customer retention, loyalty and engagement for companies who've long seen its potential and integrated accordingly.

The rise of embedded finance

Shopify's March 2023 financial report perfectly illustrates the transformative impact of embedded finance. Their revenue from these services reached $1.1 billion in 2023, growing at an impressive 31% year-on-year. This significantly outpaced their software-only revenues, which stood at $384 million with an 11% year-over-year growth. The stark contrast in both revenue and growth rates underscores the substantial potential of embedded finance.

The insurtech industry in particular has experienced accelerated growth in recent years, driven by customers’ increasing insistence on “simplified, digitised, personalised services”. Marat Nevretdinov, Managing Director of HDI Embedded, states: “Embedded insurance enables seamless, convenient and diverse options to be made available to the consumer much more quickly than before and also boosts revenues for brands as a result of integrating these options. So much so, embedded insurance is expected to create US $3 trillion in market value for industry players.”

Embedded insurance emerges as a powerful driver of customer loyalty

But what exactly is embedded insurance? Embedded insurance seamlessly integrates insurance products into the customer journey of other goods and services. This innovative approach makes coverage more accessible, relevant, and convenient for consumers.

Here are some of the reasons why it's proving to be particularly effective in driving customer loyalty:

1. Making customers feel protected:
   
   Research conducted by Eleos Insurance in 2024 found that amongst those who had purchased income protection insurance in the last 2 years, 52% were aged between 25-34, clearly demonstrating a leaning towards long-term financial planning amongst young adults. By embedding products such as income protection and life insurance into platforms these demographics already use, businesses can cater to their customers’ clear desire for financial protection and wellbeing, thereby increasing customer loyalty.
   
   
2. Improving user experience:
   
   Embedded insurance removes friction from the user experience. Instead of navigating multiple platforms or facing complex application processes, users can access insurance products within apps they already use and trust. 30% of super-app users value the consolidation of multiple functions within a single platform above all else, a clear demonstration that convenience can significantly boost customer satisfaction and loyalty.
   
   
3. Providing added value to customers through personalisation:
   
   With access to users' financial behaviour and preferences, platforms can offer hyper-personalised insurance recommendations. This level of customisation demonstrates value and understanding of individual needs, fostering a stronger connection between the customer and platform.
   
   
4. Creating financial literate customers:
   
   By integrating insurance products into their platforms, businesses have the opportunity to educate users about risk management and financial protection. A study published in the Journal of Financial Services Research in 2022 suggests that customers with advanced financial knowledge are considerably more inclined to adopt additional banking offerings, including retirement and investment products. This expanded engagement not only enhances profitability but also improves customer retention rates.

Looking ahead

As the digital financial landscape continues to become more competitive, companies need to focus on actively retaining and improving their customer loyalty, and it’s clear that embedded insurance plays a crucial role in customer retention strategies. By offering seamless access to vital financial protection within trusted platforms, businesses can create a more holistic and valuable experience for their users. This approach not only meets the sophisticated demands of digital consumers but also provides a significant competitive edge in the crowded marketplace.

Eleos plug & play are providers of embedded, life insurance and income protection which are seamlessly integrated into partners’ platforms and boosting customer loyalty. 

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