In today’s rapidly evolving insurance landscape, embedded insurance has emerged as a key strategy for expanding distribution and closing the protection gap. I had the pleasure of speaking with Charlotte Koep, CEO of Root, to discuss the concept of embedded insurance, how it is transforming the industry, and Root’s role in this exciting space.
Embedded insurance is a hot topic in the insurance world right now. It’s a revolutionary approach that seamlessly integrates insurance products into everyday transactions, creating a convenient way for consumers and businesses to protect themselves from unforeseen risks. As Charlotte explained, “Consumers or businesses enter into transactions every single day. Those transactions themselves create a level of risk which has an economic reason to be covered.”
In essence, embedded insurance means incorporating insurance products into the process of purchasing other goods or services. For example, when you buy a new smartphone, you might be offered insurance coverage as part of the transaction, ensuring immediate protection. The key is to offer this insurance at the point of need, seamlessly integrating it into the customer journey so that it feels like a natural part of the transaction. “It’s about where those risks are created, where it makes sense to add insurance as an offering,” Charlotte explained. This makes the insurance purchase feel effortless, providing instant coverage for risks that customers may not even be fully aware of.
The Opportunity in Embedded Insurance
Charlotte highlighted that embedded insurance is highly opportunistic, but it’s also strategically planned to align with consumer needs. “It’s a seamless integration of insurance into another journey of buying a product or service and covering the risk that’s created by that transaction,” she emphasised. This integration provides a way for insurance companies to tap into new markets and reach customers who might not seek out insurance independently.
So, who are the big players in the embedded insurance space, and what products are being presented to consumers in this way? According to Charlotte, the biggest player in South Africa is currently Guardrisk insurance and the large brands they support. This market has led the way in pioneering embedded insurance solutions by integrating products into non-insurance channels. This approach has opened the door for other types of insurance to be introduced into consumer journeys, like motor insurance and asset protection.
Charlotte explained that every day, as consumers, “We are creating risks that we might not even be aware of. When you purchase a loan or buy a bicycle, there’s an asset here that poses a risk to your financial well-being.” Embedded insurance creates an opportunity to close the insurance protection gap by making consumers more aware of these risks and offering coverage options when and where they need them most.
The “insurance protection gap” is another growing concern that embedded insurance helps to address. As Charlotte noted, this gap is the difference between the amount of insurance coverage that’s economically needed and what is actually in place. “There is a bigger economically feasible risk that should be covered, but the actual cover being provided relative to that risk is quite small,” she said.
Embedded insurance has the potential to significantly narrow this gap by reaching customers at the right moment, making them aware of the risks they face, and offering a simple, convenient way to obtain coverage. By embedding insurance into everyday transactions, Root and similar companies are helping to make insurance more accessible, affordable, and relevant to consumers’ lives, ultimately helping them to be better protected.
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Root’s Role in Enabling Embedded Insurance
As an operating system and an API-first platform, Root plays a pivotal role in enabling insurance companies to integrate embedded insurance strategies into their offerings. Charlotte described Root as an adaptable platform that can easily integrate with other systems, making it possible for insurers to implement embedded insurance even if they have older, less agile core systems. “Being an operating system and API-first platform means that we really play with a bigger ecosystem around us, whether that’s other systems or value-added partners in that ecosystem,” she explained.
Often, insurance carriers have legacy systems that aren’t designed to handle the agility and flexibility required for embedded insurance. In such cases, Root runs alongside the core system, communicating with it to ensure seamless data flow while enabling the insurer to operate a more nimble and agile insurance book on the side. This allows insurers to explore new distribution strategies without being hampered by outdated infrastructure.
Root’s ability to work with an insurer’s existing systems means that companies can adopt embedded insurance strategies without a complete overhaul of their technology stack. This flexibility makes it easier for insurers to adapt to the changing market and reach consumers in new and innovative ways.
When asked about Root’s plans for expansion into Africa, Charlotte shared that the company is already working with a client in Mauritius and is actively exploring other opportunities on the continent. She noted that in many African countries, especially in Southern Africa, the unsecured credit market presents a significant opportunity for embedded insurance. “The unsecured credit market offers quite a good opportunity for embedded credit life because it acts as the security for the credit,” Charlotte explained.
This connection between credit and insurance is a pattern seen throughout southern Africa and is often the genesis of insurance operations in non-insurance companies, such as retailers. For instance, retail giants like TFG, Mr. Price, or HomeChoice have over the years built out a full suite of insurance products that align with the needs of their customer bases and the goods they are buying.
In Mauritius, for example, Root’s client has been focused on credit insurance for years on motor credit, which is now leading to opportunities for embedded motor insurance products. This is reflective of the fact that the embedded insurance model can be tailored to different markets, depending on the local consumer behaviors and industry needs.
While Root hasn’t fully delved into the East African market yet, Charlotte acknowledged the “lots of opportunities” that exist there, particularly given the region’s appetite for digital solutions.
The Future of Embedded Insurance
As we wrapped up the conversation, it became clear that embedded insurance is more than just a buzzword—it’s a transformative trend that’s reshaping how insurance is bought and sold. It offers an opportunity to close the protection gap, make insurance more accessible, and reach consumers where they are already transacting. With companies like Root leading the way, the future of insurance looks more integrated, customer-focused, and responsive to everyday risks.
Charlotte Koep and her team at Root are at the forefront of this movement, helping insurers adapt to a changing landscape and enabling them to tap into new opportunities. As Charlotte and her team continue their work in Africa and beyond, it will be exciting to see how Root helps redefine the insurance experience for consumers and businesses alike.
In conclusion, embedded insurance is not just about selling policies; it’s about meeting customers where they are and providing them with the protection they need in a seamless, efficient way.
As Charlotte Coep’s insights show, the future of insurance lies in integration, and the possibilities are truly limitless