It may seem odd to suggest insuring sofa deliveries; after all, purchasing furniture is a standard part of setting up a home. When you’re walking through the showroom at your local furniture store, admiring a new leather couch, the last thing on your mind is giving the underwriters a quick call to check you’re covered for any accidental loss or damage before it ends up in your sitting room. However, if you are that furniture store and running an online retail operation delivering thousands of sofas a week, insurance makes more sense than you might think.
Consider for a second, everything that might go wrong. There could be a mishap in the warehouse — maybe a forklift malfunctions, or some sofas are damaged or stained. A delivery truck might get stuck in traffic or break down, prompting the customer to cancel the order. Maybe a colleague gets mixed up and sends the wrong sofa by mistake.
The list of possible problems is almost endless, but the outcome is always the same: the customer ends up with items they don’t want, can’t use or didn’t order. A recent study found that nearly three quarters of online shoppers have been hit by a delivery failure of some kind. When that happens, it is almost always the merchant who bears the cost of replacement or restitution.
That’s not good for anyone’s business model, nor for their bottom line, and this is just the type of risk that the new business model of embedded insurance is designed to tackle.
Embedded Insurance: Your e-Commerce Safety Net
Embedded insurance, as the name suggests, happens when insurance is embedded in the sales motion for another product. For instance, rather than going to a separate travel insurer, you could buy it directly from the site you use to book your tickets. With your permission, the online travel provider shares some details about you and your journey with the insurer. Perhaps the insurer asks a couple more questions and then, bingo, it comes back with a plan and a quote to meet your needs.
Importantly, all of this happens — in this example — on the traveller seller’s app or website. The buyer doesn’t spend ages filling in forms and making declarations. And there’s no need to visit a third-party vendor. The whole process is instant, fast and seamless — with the insurer calculating risk in close to real time, using a range of contextual data.
e-Commerce and the Imperative for Embedded Insurance
In any e-commerce business, consider all the potential causes for loss or conflict, right along the supply chain. Suppliers may suffer a raw-materials shortage and be unable to meet their obligations. There could be a shipping problem — we all saw the chaos caused at ports by COVID and by the grounding of the Ever Given — labour difficulties, breakages, last-mile delivery disruptions — again, the list is almost endless.
Not only do these problems potentially lead to loss of reputation, a poor customer experience and lower customer retention. They can also cause cash-flow problems, lead to the breakdown of relations with key suppliers and partners — and more. However, it doesn’t have to be that way.
The Power of AI in Embedded Insurance
AI has a huge role to play in the insurance process; by making AI-driven, embedded insurance part of the supply chain at every point, companies can mitigate risk, smooth financial and business planning, and protect key relationships. Using data and detailed, dynamic risk models, embedded insurance delivers detailed, comprehensive and fairly priced insurance coverage for any and every transaction, no matter the complexity or how many parties are involved.
This protects all the companies involved at every stage in the supply chain, helping them to do business with confidence, even in an increasingly volatile business environment. And because it’s data-driven and quotes are generated in near real time, embedded insurance delivers protection at the speed of business, so you never need to slow down, or miss opportunities.
The Future is Embedded Insurance
This isn’t even the end state for embedded insurance; as the sector matures, gets access to more data and more advanced AI and other technology, it will be able to make more accurate predictions, faster, on ever more specialised transactions.
Every micro-transaction could come with its own, instantly generated, built-in insurance policy. More complex contracts could come with equally complex insurance cover — policies that include programmatic triggers for changes to price, coverage and other variables, to insure all parties against even fast-moving, ever-changing eventualities as they happen.
One of the thrilling aspects of this new era is that it’s not merely the cost of insurance that will be improved. The integration of embedded, data-driven, and AI-powered insurance into every transaction will indeed make it more equitable and provide better value, but that’s just a part of what it promises to offer. Using data and advanced, real-time analytics to de-risk transactions across sectors and supply chains will mean fairer prices and better value for us all, in every purchase we make.
The companies which move first to make embedded insurance part of their standard offering will give themselves a significant competitive advantage. And where embedded insurance is integrated across a supply chain, all of the companies involved stand to benefit in a way that makes them smarter, leaner and able to deliver a better service and a better price to consumers. That’s true whether we’re buying a plane ticket, a shipment of iron ore, a consignment of semiconductors — or, indeed, that L-shaped leather couch.
About the author: Megan Bingham-Walker
Megan is an award-winning entrepreneur and CEO of Anansi, who thrives on bringing innovative new technologies to market. She has had a diverse career spanning entrepreneurship, Principal of a leading cleantech venture fund and Principal Private Secretary to a UK Secretary of State. As a black, female rounder, she is passionate about diversity in startups and in the insurtech industry in particular, and is co-chair of the Diversity & Inclusion Sub-Committee of InsurtechUK. .
