How embedded insurance can be used as a customer value proposition and competitive advantage.

Online stores have always competed on three main levers: price, delivery and speed. The issue is that no business can compete on price against the major global players - they just have too many revenue drivers that allow them to undercut your price, even at a loss. Competing on delivery and speed has also become incredibly difficult as the major players have invested millions into technology and infrastructure to dominate in these spaces.

So what other levers are available to compete against the major players and create sustainable, profitable businesses? Value. Value is where trust, perception and reduced friction merge into a powerful fourth lever.

Embedded insurance can be integrated into your platform in three ways to increase customer value:

1. Opt-in at point of sale: tickbox to add to your basket (instant quote).

2. Opt-out at point of sale: "remove from basket" approach. Should have a pop-up warning the customer what removing the product means.

3. Fully embedded: incorporated into your platform fee or product/service cost. You can then decide on your price point to absorb the cost or pass on to the customer.

Which way you choose entirely depends on the perceived value of the embedded insurance to your customers and the associated cost and price point.

How do you decide what product to embed into your platform?

You start by understanding your customers' pain points when interacting with your platform. This could be missing deliveries from theft, trust issues with independent contractors, faulty devices or time to find supporting services.

Once you've identified your main pain point/s, a digital insurance broker can assist in sourcing, and structuring, the correct product to embed into your platform.

How to decide which way to embed the product into your platform?

Opt-in at point of sale is ideal when your customers are very price sensitive. This allows the customer to add the embedded product to their basket as a separate line item, allowing them to choose whether to buy it or not.

Opt-out at point of sale is ideal when you are solving a known potential problem and would like to provide a solution without relying on your waiver of liability (especially applicable to platforms that supply independent contractors). The main issue with a waiver of liability is the customer still associates the platform with the service - the contractor doesn't get the negative review, the platform does.

Fully embedded is ideal to be used as a value proposition and competitive advantage. This could be in the form of underwriting a "satisfaction guarantee" or a marketable promise to customers - "by buying on XYZ, you automatically get".

Ultimately, the main decision comes from perceived value and deciding where the cost comes from. For Opt-in and Opt-out, the customer controls if they want to incur the cost or not. For fully-embedded, the platform either absorbs the cost into their margin or passes the cost onto the customer with an slightly increased price.

Incorporating an embedded insurance value proposition into your platform creates a strong value proposition for your customers and should be considered for your 2027 strategy.