Digitization has long been the dog that didn’t bark for the insurance industry. For many years, profits across the industry were solid, if unspectacular, bolstered by steady premiums and investment returns. 

But now legacy insurers are confronting demographic, competitive, and macroeconomic shocks: their client base is getting older, and a new generation of customers is open to buying insurance outside of traditional channels; inflation is making claims fulfillment more expensive, with US liability claims costs rising 15% in 2022; and volatility in bond markets is causing investment income to be harder to count on.

The result is that stasis is impossible: as the world changes around them, insurers can’t do business the same way they always have.

In response, the industry is reinventing itself online. This includes established companies like Aon that are now selling embedded insurance through gig economy marketplaces and SaaS platforms, and brokers like Cross Agency that are bringing customers more choice through digital commerce offerings. They are joined by startups such as Lemonade and Luko that are disrupting the traditional broker-client model with reimagined direct-to-consumer experiences.

These innovations depend on sophisticated financial infrastructure to offer customers an effortless purchase experience and automatically split payments among a wide range of players. For many leading insurance companies, from incumbents to startups, Stripe provides the tools—such as Connect and Billing—that make this possible. As we’ve partnered with many different types of insurance businesses, we’ve seen a few prominent trends emerge across the industry. We explain each in detail below.

Embedded insurance, everywhere

Embedded insurance enables insurers to market relevant policies to customers in high-traffic third-party environments. For example, Chubb sells driver-income protections to rideshare drivers: if the driver is sick for a week, or their car is in the shop, they can file a claim with Chubb and receive payment to cover the gap. Instead of selling insurance through a standalone website or app, Chubb is able to embed its insurance offering within Grab, a popular delivery app in Southeast Asia, allowing it to reach its target customers directly.

For insurers, the model provides enhanced market reach, better conversion rates, and access to partner data that improves underwriting. Partners benefit by providing more value to their customers and from policy referral income. 

However, insurers typically lack the financial infrastructure needed to manage the intricate fund flows embedded insurance requires. Stripe Connect helps insurers realize the potential for embedded insurance by automating complex money movement. It allows insurers to handle digitized payments in any third-party environment, simplifying the process of splitting, routing, and reconciling premiums. This alleviates the need for expensive treasury operations or technology and allows insurers to get to market faster.

CoverWallet, an Aon subsidiary, uses Stripe to programmatically split every payment collected from customers across multiple parties without any manual intervention. The result is higher conversion rates, more revenue, and lower costs.

Meeting customers where they are

Insurers have long been attracted to a direct-to-consumer model because of its low distribution costs. However, they’ve struggled to create a widely appealing customer experience. Direct-to-consumer attempts are often hindered by payment technology constraints, such as poor UX, lack of support for modern payment methods, and high decline rates. 

Stripe’s optimized checkout suite removes those barriers by providing customers with a delightful checkout experience designed to improve conversion. Stripe Checkout minimizes failed payments with features such as card account updaters, network tokens, and adaptive card acceptance, and improves conversion by offering customers their preferred payment methods at initial purchase and renewal. Transactions with the optimized checkout suite can be completed in as little as six seconds in some cases.

Insurers like Lemonade, Pie, and Luko are using products like Connect and the optimized checkout suite to successfully offer a range of insurance products directly to customers—from pet insurance to more complex lines like life and commercial. They’re using a frictionless payments experience to begin realizing the tremendous potential of direct-to-consumer sales.

Controlling costs and expanding revenue with claims cards

Claims costs are the largest source of losses for insurance companies, and they’re rising quickly due to inflation. Insurers are also struggling with claims leakage—when insurers spend more than they should to settle a claim—which costs the industry $29 billion per year on auto policies alone. In response, insurers are investing heavily in automation and efficiency to reduce costs. But until now, they’ve had few options to directly mitigate claims losses.

Stripe Issuing provides businesses with physical and virtual card programs that they can use to manage expenses and grow revenue. For insurers, it supports insurance payout cards that provide additional control over the claims fulfillment process. Once an insurer approves a claim, they can use Stripe’s technology to send their customers a prefunded virtual or physical card that enables claimants to quickly access funds that they can use to obtain services from select vendors. In the case of virtual cards, the funds arrive in the customer’s digital wallet for immediate use—a delightful customer experience, especially compared to the bureaucratic slog that can characterize claims fulfillment. Insurance payout cards also enable insurers to generate income on every swipe via a share in interchange. This drives revenue in coverage areas such as commercial, pet, auto, and home renovation claims through a modern, digital-first approach.

Intelligent and automated billing

Insurance distribution occurs via a dizzying number of channels and intermediaries including a variety of agents and brokers, government agencies, employers, franchises, and new embedded experiences. The variation and complexity of these channels creates major challenges for billing, invoicing, and collecting recurring premiums. Stripe Billing resolves this by automating recurring payment collection, reconciliation, and settlement. Cuvva, a UK-based company that provides short-term auto policies through its app, uses Stripe to split payments at the moment of collection: Cuvva keeps its commission while splitting off the net premium to one of three different underwriters. This reduces—and even eliminates—the need for manually batching and reconciling payments.

Insurers also often see an increase in missed or failed premium payments across the life cycle of a policy. This isn’t necessarily deliberate—it can result from temporarily low funds for a specific payment method, for example. Stripe helps insurers automatically retry failed payments with our Smart Retries solution. This increases revenue and liquidity and prevents involuntary customer churn.

Fit for the future

The insurance industry developed in an analog world, but in many ways it’s a perfect fit for the online economy. Insurers have always been at the center of global, multiparty product and payment networks—exactly the business model that Stripe’s financial infrastructure is built to support. Stripe is continuing to build product features that enhance the opportunities for insurers online, including making it easier to deliver claims payouts. To learn more about how Stripe can help, please get in touch.