Are insurance products being designed for insurer or customer needs?

In 2018, I explored the growing trend of insurance becoming embedded in products and services, making it less of a standalone transaction and more of an invisible safety net. The idea was that insurance, a service that no one wants to pay for or ideally use, would slowly integrate into everyday experiences, making it less intrusive while remaining essential for when things go wrong. Six years later, the question is: Has this shift progressed quickly enough?

The customer’s dilemma: insurance as a necessary evil

Customers have always had a conflicted relationship with insurance. At its core, it’s a service people hope they never need, yet they pay for it "just in case." This creates emotional and financial tension: paying for something that may seem like a waste until a moment of crisis when its value becomes clear. Insurance, in its traditional form, remains something that many want to minimise their interaction with—much like how we take out loans but don't relish the paperwork or enjoy making payments.

This mindset has driven the industry to look for ways to make insurance less visible, embedding it within products and services, much like how warranties or customer service guarantees are bundled with purchases. But is this happening fast enough?

Where insurance is disappearing

1. Travel and mobility

The shift towards invisible insurance has been most noticeable in sectors like travel and mobility. Think of Zipcar where you hop in and insurance is baked into the cost of your temporary vehicle.

Similarly, airlines and travel booking sites now offer seamless trip protection as part of the booking experience. For example, when you book a flight, you're often presented with the option to add travel insurance at the click of a button, and in some cases, it's automatically included for premium services. This has significantly reduced customer friction while ensuring they're covered without making it a conscious purchase decision.

2. Consumer electronics

Insurance is increasingly embedded into product offerings for smartphones and electronics. AppleCare is one prominent example: It’s presented as part of the sales pitch when you buy an iPhone, and many customers see it as a no-brainer add-on. Moreover, the rise of subscription models for electronics, where you essentially rent the device with all support and insurance included, has made this integration more seamless.

3. Embedded insurance in digital platforms

E-commerce and fintech platforms are increasingly building insurance into their services. Shopify, for example, has integrated business insurance options for its sellers, while companies like Revolut offer insurance as part of their premium banking services. These kinds of offerings ensure that users are covered without seeking out standalone insurance products.

Where insurance is lagging

1. Health insurance

While there has been some innovation with telehealth services and direct access to health providers, health insurance remains a slow-moving, complex product that hasn’t seen the same level of integration or user-friendly evolution. In many countries, navigating health insurance is still a painful process, filled with bureaucracy, paperwork, and out-of-pocket expenses that frustrate consumers. The lack of transparency and ease makes health insurance one of the least customer-friendly sectors.

2. Home insurance

Home insurance remains largely a traditional, standalone purchase for most customers. While efforts are being made to embed home insurance within mortgage or rental agreements, it’s still often cumbersome. Insurtech startups have made some progress by simplifying the purchasing process, but the industry has not fully caught up with the seamless integration seen in other sectors.

The disconnect: Why isn't it happening faster?

Despite some notable progress, the insurance industry still struggles with customer engagement and trust. Many insurers remain focused on selling policies rather than reimagining the customer experience. This is a key factor slowing the industry's transformation. A couple of roadblocks include:

• Complexity and regulation: Insurance is heavily regulated, and simplifying it while staying compliant is challenging. Many providers are hesitant to innovate too quickly, fearing backlash from regulators or mishandling customer data.
• Lack of digital transformation: Although InsurTech companies are pushing the industry forward, many legacy insurers have been slow to adopt technology that could make purchasing or managing insurance easier. Digital-first insurance options like Lemonade and Oscar have made some headway, but they remain exceptions rather than the norm.

The way forward. How insurance can combat disengagement

To truly align with customer needs and accelerate the disappearance of standalone insurance, the industry needs to take a more user-centric approach.

Here’s what could help:

• Focus on embedded, invisible insurance: Insurance should become a natural part of other transactions. This means bundling it with products, services, and experiences—whether that’s when buying a home, using a mobility service, or subscribing to a digital platform.
• On-demand and usage-based insurance: Customers today prefer flexibility and personalisation. On-demand insurance models, like pay-per-mile car insurance or travel insurance activated by a GPS trigger, put customers in control of how and when they are covered, making it feel less like a recurring burden and more like an adaptive tool.
• Simplification and transparency: The more simplified and transparent insurance becomes, the more willing customers will be to engage with it. Removing jargon, offering clear, concise policy explanations, and providing quick resolution when claims are needed can go a long way toward restoring trust and reducing the feeling of dread when dealing with insurance.
• Leverage data to improve customer experience: Insurers can use data and AI to create better, more personalised policies. Predictive analytics can help insurers identify risks more effectively and offer custom policies tailored to individual needs, rather than forcing customers to fit into pre-existing boxes.

My conclusion - Not fast enough, but moving in the right direction.

Insurance is disappearing, but not fast enough to meet the expectations of today’s customers. While we’ve seen great strides in travel, mobility, and digital platforms, sectors like health and home insurance are still lagging. The future of insurance lies in making it as seamless, invisible, and integrated as possible, so that customers get the protection they need without the burden of thinking about it. For insurers, the challenge remains: innovate quickly, or risk further alienating an already disengaged customer base.

Reference - 2018 article

Author: Jenny Burns, CEO Magnetic