How Embedding Insurance Can Turn Risk Into Reward for Marketplaces

How Embedding Insurance Can Turn Risk Into Reward for Marketplaces

Intrinsic embedded insurance makes it possible for marketplaces to turn potential risks into rewards for their customers - and their bottom line.

Running a marketplace isn’t easy. You are constantly balancing supply with demand, ensuring your pricing is fine-tuned, and building trust with your customers. If you’ve grown a marketplace into a thriving business, congratulations - you’ve earned our respect! However, you likely still have quite a few concerns that keep you up at night. 

How do you continue to build trust with existing customers? Are your users growing month over month? How active are they? How will you nurture loyalty, so users become brand ambassadors? And how will you stand out from your competitors? These questions speak to the risks involved with operating a marketplace - but what about your customers? What risks do they worry about if they are using your service?

Depending on the type of marketplace you run, the risk type and the level of risk for your customers will vary - but all marketplaces have some level of risk for users. What if there were a way to take the risk that exists for your customers turn the tables on it – so you’re using risk to your advantage? Turning risk into reward. Marketplace insurance embedded directly into your platform is one of the quickest ways to achieve this goal.

More specifically, we’re talking about intrinsic embedded insurance. Intrinsic embedded insurance is the making of insurance or other types of protection related to your core offering available for purchase digitally during the point of sale. By being embedded, it’s possible for users to secure protection without leaving your site. By being intrinsic, your customers are protected from the unique risks associated with using your platform.

By offering your users protection in the form of embedded marketplace insurance (or protection) from the inherent risks of using your platform, you’ll realize several of benefits that can have a huge impact on your business overall:

  1. Boost user confidence in your product or service

  1. Improve conversion rates

  1. Promote a higher user lifetime value (LTV)

  1. Increase revenue

In this article, we’ll dive deeper into these benefits, take a look at how embedding marketplace insurance or protection works and explore options for starting a protection program on your platform. But first, the above benefits aside, there’s a fundamental reason why you should consider implementing an embedded insurance program in your marketplace. 

And it has everything to do with your users.

In a perfect world, users purchase your product or service and nothing goes wrong. There’s no damage. No loss. Or disappointment. But the world is not perfect, so from time to time you have situations come up that call for protecting users from damage or loss that results from using your platform. Most marketplaces will do everything they can to make sure customers are happy with the outcome. You end up taking care of the problem, but it’s all ad hoc. A messy, chaotic process that relies on the personal judgment call of an individual customer service representative.

When you have an embedded insurance program through your marketplace, you have a predetermined, structured plan for addressing those user issues that require you to “make good.” Your internal team will know exactly how to handle issues as they arise and customers will know ahead of time what to expect if the unexpected happens.

A structured program keeps your team from scrambling every time one of these events inevitably occurs. It saves time and resources because your course of action is already laid out for you every time – resulting in a more consistent and satisfactory response that users will value. And it allows you to be upfront with your users from the very beginning of your relationship, building the trust you need to ensure they use your services again. The first time a prospective customer visits your marketplace, they’ll know they’re covered by a default protection program or additional protection they can opt into - which leads to a fifth benefit:

Offering your users embedded marketplace insurance differentiates you from your competitors.

If that were the only benefit of embedded marketplace insurance, it would still add enough value to warrant serious consideration, but let’s explore those other benefits mentioned earlier.

Embedded Marketplace Insurance Benefits Your Business While Protecting Your Users

With an embedded insurance or protection program in place, you’re protecting your users from the risks of using your marketplace, and at the same time, you’re protecting yourself from many risky unknown variables.

User Confidence

User confidence in your platform is elevated through embedded insurance. Your users may love your product but once they see that you stand behind your offering with protection, their affinity for your brand grows. They’ll love and trust you. 

Keep in mind there are a couple of ways to deliver protection for your users. Default protection, such as guarantees or warranties, can be included in the purchase price. Users get the protection by default built directly into your offer or service. Other ways to distribute your program include offering opt-in or tiered plans that allow users the choice of varying levels of protection at an additional cost.

Conversion Rates

With little to no risk in using your marketplace, users are more comfortable and at ease. This leads to them completing more transactions which means your conversion rate goes up. For example, users of an asset-sharing marketplace may have qualms about renting a jet ski because they don’t want to risk being responsible for any damage to an expensive water toy. Looking for insurance for one-time use on another website is a hassle and time-consuming. But the availability to easily add coverage right then and there on your marketplace provides the level of personalization they need to take the plunge.

Higher LTV

The right kind of embedded marketplace insurance program allows you to personalize protection products geared toward the unique needs and wants of your users. Most traditional insurers will require you to mold your program based on a generic plan they offer to lots of companies - not something bespoke to the unique needs of your innovation platform - but intrinsic embedded insurance allows marketplaces to create a unique program that really works for their customers. In addition to personalization, the fact that the whole purchasing process is seamless and completed directly through your existing checkout process enhances the user experience. Both customization and a frictionless checkout can improve your customer's lifetime value.

Profit Center

Identifying the optimal kind of embedded marketplace insurance plan for your platform is one piece of the puzzle, deciding how much risk you are willing to take on to offer your program is another. If you choose the right kind of distribution for your users, at the right price and make sure your program protects users from the risks that really matter - you’ll increase the odds of your program being successful. 

However, turning your program into a profit center relies on your willingness to take on some of the risk. It sounds scary but the typical way offering a program works is that you transfer all the risk to an insurer, and while they take on all the risk - they also reap the rewards. If you take on the risk yourself you would be responsible for paying out any claims that come through the program but you also keep all the profits. Most companies view insurance as a cost center - embedding marketplace insurance and retaining the risk of a well-designed program means you can turn user protection into a profit center. 

How Embedded Marketplace Insurance Works

Whether your marketplace connects vacationers with RVs or handcrafted goods with buyers, the people who are considering a camper or a candle are more apt to click “Buy Now” if they know they’ll be protected if something goes wrong.

Embedded marketplace insurance provides this assurance. It’s an option or feature that you add to your core offering and there are several ways to implement it.

  1. You can work with a traditional insurer. Typically, you find a broker and pay them a commission, then pay a premium to the insurer who manages your protection program. Although it’s an easy way to provide protection to your users, this option has its drawbacks. First, you won’t have much flexibility to customize protection products for your users. Next, you’re giving up control of your user relationships to an outside party – how can you be sure they’re receiving the level of customer service you would provide? And finally, along with the control, you’re handing over the profits!

  1. Developing your own “home-grown” solution. This option means you are in the driver’s seat which can lead to personalization, but developing your own protection program is a complicated and costly process - not to mention the hoops you’ll have to jump through to stay compliant or the ongoing maintenance needed from your tech team. Your engineers will have to shift focus to become experts in insurance infrastructure. To be up and running with an embedded insurance program can take years. Whether on the engineering side of the house or on the compliance side you’ll need to hire expert guidance to ensure that you’re both in compliance and taking on the right amount of risk to be profitable. 

  1. You can work with an embedded insurance platform. This option takes the best of the other two, giving you the flexibility to customize your program and maintain a close relationship with your users. Your program will be compliant, profitable and scalable without diverting your engineering resources away from where they need to focus. Plus, if you decide to self-insure you’ll also reap the rewards of retaining the profits. With this option, you’re still in the driver’s seat but you have a great copilot. 

Tint: Your CoPilot For Embedded Insurance 

Partnering with Tint can take the great idea of providing protection for your users and turn it into a working program in as little as a few months. As insurance insiders, we’re able to guide you through many of the decisions you’ll need to make about how much and what kind of risk to take on. 

We’ll help you create customized protection products that will appeal to your users. We’ll make sure your program is in compliance and structured to generate an additional revenue stream. With our insurance-in-a-box intuitive infrastructure, you’ll be able to manage and update your program as you scale without tying up your engineers.

Although we’re involved from the beginning to launch (and always available for help when you need it), be assured you will own your embedded insurance program. You won’t have a third party between you and your users. Our goal is simply to provide the expert guidance and infrastructure you need to take risk and turn it into rewards.

We’ve worked with some of the biggest names in vacation rental marketplaces, ridesharing, and shipping. Ready to try a new shade of insurance? Contact our team today and let’s talk embedded marketplace insurance.

 

This website is made available to you for informational purposes only. It does not provide specific legal advice and is not a substitute for competent legal advice from a licensed attorney. The material on this website may not be used by any person or entity without the express written consent of Tint.

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