Australia’s Embedded Insurance Growth Projected to Outpace Traditional Channels

Australia’s Embedded Insurance Growth Projected to Outpace Traditional Channels

by May 13, 2024

Embedded insurance in Australia is poised for strong growth, driven by various factors related to customer preferences, technological advancements, and industry collaborations.

Embedded insurance refers to the integration of insurance products into non-insurance platforms or experiences, such as e-commerce, travel or healthcare. This integration allows customers to access insurance coverage conveniently and efficiently within the context of their everyday interactions, without the need to visit traditional insurance providers separately.

This growth is projected to be substantial, with PwC estimating that gross written premiums (GWP) generated with embedded insurance will grow by 34% annually between 2024 and 2033. This rate surpasses the estimated 4% annual growth rate for traditional insurance channels during the same period.

These figures suggest that embedded finance is set to account for A$35.3 billion, or 18% of the total Australian insurance market worth A$210 billion in GWP by 2033, up by a staggering 1,370% from the market’s estimated A$2.4 billion in GWP in 2024.

Within the sector, the consultancy expects redistribution to stand out as the primary revenue driver, accounting for 12% of the Australian insurance market (A$24.1 billion) by 2033. New customer segments and new products are projected to contribute to smaller proportions of additional revenue at 5% (A$10.1 billion) and 1% (A$2 billion), respectively.

Australian Insurance Market Size by Growth Driver, A$, 2024-2033, Source: Embedded insurance: a multi-billion dollar opportunity for Australian insurers, PwC, Apr 2024

Australian Insurance Market Size by Growth Driver, A$, 2024-2033, Source: Embedded insurance: a multi-billion dollar opportunity for Australian insurers, PwC, Apr 2024

Across the main types of insurance, the general insurance segment is expected to witness the greatest adoption of embedded finance. Between 2024 and 2033, general insurance distributed through embedded channels is projected to see its share soar from 1% to 12%. The category will be followed by health insurance and life insurance, which are set to grow from 0% to 3%, and from 0% to 2%, respectively.

Australian Insurance Market Size Split by Segment, A$, 2024-2033, Source: Embedded insurance: a multi-billion dollar opportunity for Australian insurers, PwC, Apr 2024

Australian Insurance Market Size Split by Segment, A$, 2024-2033, Source: Embedded insurance: a multi-billion dollar opportunity for Australian insurers, PwC, Apr 2024

Embedded insurance in Australia

For insurers, PwC says embedded insurance holds significant potential for market expansion due to several key factors. Firstly, it offers additional distribution channels, facilitating access to new and broader customer segments. Second, the concept also fosters collaboration with partners for the creation of innovative new products. Lastly, it allows for the redirection of distribution revenue from existing channels.

For consumers, embedded insurance offers convenience and simplified processes. Customers access coverage without the hassle of separate transactions and benefit from reduced paperwork. Embedded insurance also allows for personalization, providing customers with tailored insurance offerings that better align with their specific needs, preferences, and behaviors within these platforms. Finally, embedded insurance offers increased choice, presenting customers with a wider range of insurance options to choose from.

In Australia, embedded insurance is rising in popularity due to the demand for seamless solutions. A 2021 banking customer survey commissioned by Cover Genius found strong interest among Australian bank customers, with 70% of digital bank customers and 54% of traditional bank customers keen on receiving embedded insurance offers based on transaction data. Convenience was named as the primary driver for their interest, stated by 55%.

Embedded insurance in Asia

Across Asia-Pacific, an increasing number of players are leveraging embedded insurance to develop their own ecosystems along the insurance value chain. In Singapore, AXA launched in 2017 an insurance-as-a-service (IaaS) API platform to link insurers and non-insurance retailers and enable embedded-insurance propositions. The AXA Affiliates platform has onboarded customers such as Scoot, the low-cost subsidiary of the Singapore Airlines Group, and PropertyGuru Group, an online property company from Singapore.

Meanwhile, new insurtech players such as Cover Genius are emerging and rapidly gaining ground. Cover Genius, a startup founded in 2014 in Sydney, Australia, partners with digital companies for embedded protection. Its customers include Booking Holdings, Uber, Hopper, Ryanair, Turkish Airlines, Descartes ShipRush, Zip and SeatGeek.

Additionally, non-insurance players such as Tesla are entering the insurance scene, adding further pressure on incumbents. Tesla launched its car-insurance product in late 2019, offering comprehensive coverage and claim management services for Tesla owners in select US states.

Global consultancy McKinsey and Company estimates that embedded insurance in Asia could grow to become a US$270 billion market in terms of GWP. 66% of this growth is anticipated to stem from GWP shifting from traditional channels like agency and bancassurance, to embedded channels.

Embedded insurance is part of the broader embedded finance phenomenon where financial products and services are distributed through other activities or industries. PwC expects the global market for embedded finance applications to grow fivefold over the next decade, soaring from US$54.3 billion in 2022 to US$248.4 billion by 2032.

 

Featured image credit: edited from freepik