John San Filippo
Underinsured Members? Embedded Tech to the Rescue
By John San Filippo
According to Dennis Li, co-founder and CEO of embedded insurance provider Reeske, approximately 50% of all Americans are underinsured, meaning they either have too little insurance or none at all. However, he added that if one drills down into that statistic, the percentage of underinsured millennials is closer to 80%.
“It's a huge problem today,” Li told Finopotamus, “particularly for middle-market millennials. And the problem is really deteriorating; it’s getting worse.” He said that three factors contribute to the problem:
Financial literacy. Consumers in general, and millennials in particular, don’t understand the importance of insurance and the level of protection it provides. “It’s like telling people to eat their vegetables,” said Li. “They know it’s a good idea, but they may not understand why.”
Convenience. While credit unions and banks, as an industry, have kept pace with the changing needs of today’s all-digital consumer, the insurance industry has not. Buying non-compulsory insurance products is still a cumbersome process. “Compared to other financial services that have digitized, insurance products suck,” said Li.
Confidence. Because insurance is a low-touchpoint product – for example, one might buy life insurance once or twice in a lifetime – there isn’t much opportunity for insurers to gain consumer trust.
Given that credit unions place a high value on financial literacy, have already tackled digital convenience, and have built their brands around member trust, Li said they’re in an ideal position to address the underinsurance issue – with the help of the right partner.
By the simplest definition, Reeske is merely an insurance broker. However, what makes the company different is the manner in which it delivers its products. The company uses embedded finance technology to offer its products through partner websites and mobile apps. Li said the company is particularly interested in partnering with credit unions due to the alignment of shared goals.
The company offers benefit packages that include both insurance and non-insurance products. “The first step with a credit union is to take a look at the members and see what they need,” said Li. The company then customizes one or more packages that the member can elect to pay for monthly. One example of a non-insurance benefit is a hospital advocacy plan where members can talk to an expert to help them better understand the financial side of medical treatment and what options are available for cost-effective treatment.
Reeske does not charge a setup fee or an ongoing maintenance fee; the company makes its money from selling its products to members. The credit union has the option to increase the cost of each package to generate revenue, let Reeske sell the packages at their regular price, or even subsidize the cost for members. Li recommends against the latter because that option can devalue the benefit in the eyes of the member.
Under the Tech Hood
Li recommends taking a phased approach to implementation, starting with minimal integration and then enhancing the offering as members become more and more engaged. “We can roll out in the beginning through emails,” explained Li. “Once we get a level of interest that meets our objective, we can start thinking about mobile app integration and other digital delivery channels.” He added that the company also offers its own white label app that can be branded for each credit union.
“We find that just having a partnership doesn't solve the problem,” noted Li. “It's about working with a partner that is super in line with Reeske in terms of values and effort. That's how this whole credit union thing came about. We see really good alignment with credit unions.”