Embedded insurance is “any insurance that can be purchased within the commercial transaction of another product or service”. Integrated cover for a purchase of a product or service.
Embedded insurance in itself is not a new innovation.
(In fact, one of the early use cases of embedded insurance was when people were offered life insurance when buying a plane ticket.)
However, recent growing interest in this category is due to the fact that embedded insurance is being increasingly offered alongside Ecommerce purchases.
Also, InsurTech startups are launching embedded insurance solutions, making it easy for online retailers to offer insurance on their products.
Zego, Element and Cover Genius are examples of InsurTech startups operating in this space.
And according to FinTech Global, the market for embedded insurance is forecasted to grow 6x by 2030.
Embedded insurance is part of the Embedded Finance meta trend.
Search volume for “embedded finance” has grown by 925% since 2019.
Some VCs describe embedded finance as essentially “making every company a fintech company”.
Embedded investment and embedded payments are examples of growing embedded finance tools.
The overall embedded finance market is on track to become a $7T industry by 2030.
Frequently Asked Question (FAQ)
Question: What is embedded insurance?
Answer: Embedded insurance is a type of insurance that is bundled with a product or service at the point of sale. It allows customers to purchase insurance coverage that is relevant, convenient and customized to their needs along with the main product or service they are buying.
Question: How does embedded insurance work?
Answer: Embedded insurance works by integrating insurance into the customer purchase cycle. This allows customers to purchase insurance coverage at the same time they purchase a product or service. The coverage is then bundled with the product or service and provided to the customer.
Embedded insurance refers to the integration of insurance products or coverage into the purchase or usage of another product or service. It involves offering insurance as a bundled or add-on feature within the user experience of a specific product or service. The goal of embedded insurance is to provide seamless and convenient access to insurance protection, often tailored to the specific needs or risks associated with the primary product or service.
Embedded insurance can be found across various industries, including travel, e-commerce, automotive, fintech, and healthcare. It offers customers a simplified and streamlined process of obtaining insurance coverage, as it eliminates the need for separate applications, underwriting, and policy management.
Embedded insurance works by leveraging partnerships between product or service providers and insurance companies. The insurance coverage is seamlessly integrated into the user journey of the primary product or service, making it easier for customers to access and manage insurance protection.
Here’s a general overview of how embedded insurance works:
- Integration: The product or service provider identifies a relevant insurance coverage that complements their offering. They establish a partnership with an insurance company or broker to provide the insurance component.
- Seamless experience: The insurance offering is seamlessly embedded into the user experience, either during the purchasing process or as an ongoing feature of the product or service. This can be in the form of a checkbox or an opt-in option during checkout, a pre-selected coverage package, or an automatic inclusion based on the nature of the product or service.
- Customization: In some cases, customers may have the option to customize the insurance coverage based on their specific needs. This can include selecting coverage limits, deductibles, or additional coverage options.
- Pricing and payment: The cost of the insurance coverage is often bundled into the overall price of the product or service. Customers may see a separate line item for the insurance cost or receive a single consolidated price. Payments for the insurance component are typically processed along with the primary product or service.
- Policy management: Customers can usually manage their insurance coverage through the same platform or interface used for the primary product or service. This may include accessing policy documents, filing claims, making changes to coverage, or canceling the insurance component.
Question: How big is the embedded insurance market?
Answer: The embedded insurance market is estimated to be worth $3 trillion globally, according to a report by McKinsey & Company. The report also predicts that embedded insurance could account for 25% of the total insurance premiums by 2030, driven by the growth of e-commerce, digital platforms, and connected devices.
Question: What are the benefits of embedded insurance?
Answer: Embedded insurance has benefits for customers, sellers and insurers, such as:
- For customers, embedded insurance provides better coverage, lower prices, improved convenience and enhanced customer experience. Customers can get insurance that matches their specific needs and preferences without having to shop around or fill out lengthy forms. They can also enjoy seamless claims processing and customer service from the seller or insurer.
- For sellers, embedded insurance provides increased revenue, customer loyalty, competitive advantage and differentiation. Sellers can generate more sales by offering value-added services to their customers and creating cross-selling and upselling opportunities. They can also build stronger customer relationships by providing protection and peace of mind to their customers. They can also stand out from their competitors by offering unique and innovative solutions.
- For insurers, embedded insurance provides access to new markets, customers, data and distribution channels. Insurers can reach more customers who may not have bought insurance otherwise or who may have been underserved by traditional insurance models. They can also collect more data on customer behavior, preferences and risks to improve their underwriting, pricing and product development. They can also leverage the seller’s brand, trust and customer base to expand their distribution network.
- Convenience: By integrating insurance directly into the user experience, customers can easily access and manage insurance coverage without the need for separate applications or interactions with insurance providers. It provides a seamless and hassle-free insurance solution.
- Tailored coverage: Embedded insurance allows for the customization of insurance coverage to match the specific needs and risks associated with the primary product or service. This ensures that customers receive relevant and appropriate protection.
- Increased adoption: The integration of insurance as an embedded feature can drive higher adoption rates compared to standalone insurance products. Customers are more likely to opt for insurance when it is presented as part of the overall purchase or usage process.
- Enhanced trust and brand loyalty: Offering embedded insurance can strengthen the relationship between customers and businesses. It demonstrates a commitment to customer well-being and risk mitigation, fostering trust and loyalty.
- Streamlined claims process: With embedded insurance, the claims process is often integrated into the primary product or service platform. This can result in faster and more efficient claims handling, reducing the burden on customers and improving overall satisfaction.
- Revenue generation: For businesses, embedded insurance presents an opportunity for additional revenue streams. They can earn commissions or fees from the insurance component, creating a new source of income.
Question: What are some examples of embedded insurance?
Answer: Some examples of embedded insurance are:
- Car insurance that is offered by car manufacturers or dealers when buying or leasing a new or used vehicle
- Smartphone insurance that is included in the monthly subscription fee of a mobile network operator or a device manufacturer
- Travel insurance that is automatically added to the booking confirmation of a flight, hotel, or tour package
- Pet insurance that is bundled with the purchase of pet food, toys, or grooming services
Question: What are the types of embedded insurance?
Answer: There are different types of embedded insurance depending on the product or service it is attached to, such as:
- Post purchase protection: This type of embedded insurance covers any losses or damages that may occur during the delivery or use of a product purchased online or offline. Examples include extended warranties, accidental damage plans, theft protection plans and shipping insurance.
- Auto insurance: This type of embedded insurance covers any liabilities or expenses that may arise from owning or driving a vehicle. Examples include comprehensive, collision, personal injury, third-party and gap insurance.
- Travel insurance: This type of embedded insurance covers any risks or inconveniences that may occur during a trip or vacation. Examples include flight cancellation, baggage loss, medical emergency, trip interruption and rental car insurance.
- Home insurance: This covers any damages or losses to a property or its contents due to fire, theft, natural disasters or other perils. Home sellers, builders or lenders often offer this type of embedded insurance at the point of sale, along with other options such as mortgage protection, title insurance or home warranty.
- Life insurance: This type of embedded insurance covers any financial losses or obligations that may result from the death or disability of a person. Examples include mortgage protection, credit card protection, loan protection and funeral cover.
- Health insurance: This type of embedded insurance covers any medical costs or services that may be needed by a person due to illness or injury. Examples include telemedicine, dental care, vision care and wellness programs.
Question: What types of products or services can have embedded insurance?
Answer: Embedded insurance can be applied to a wide range of products and services across various industries. Some common examples include:
- Travel: Travel booking platforms can offer embedded travel insurance to cover trip cancellations, delays, or medical emergencies.
- E-commerce: Online retailers can provide product insurance to protect against damages or theft during shipping, or offer extended warranties for electronic devices.
- Automotive: Car manufacturers or ride-sharing services can embed insurance coverage for accidents, theft, or third-party liability into the purchasing or usage experience.
- Fintech: Digital banking or payment platforms can include insurance coverage for fraud protection, identity theft, or purchase protection.
- Healthcare: Healthcare providers or telemedicine platforms can integrate health or medical insurance coverage to offer comprehensive healthcare services.
- Ride-sharing platforms offering insurance coverage for passengers and drivers.
- Banks and financial institutions integrating insurance coverage with loans or credit cards.
These are just a few examples, and the possibilities for embedded insurance extend to many other industries and products where additional protection or coverage is relevant and valuable to customers.
Question: How is embedded insurance different from traditional insurance?
Answer: Embedded insurance is different from traditional insurance in that it is bundled with a product or service at the point of sale. This makes it more convenient for customers to purchase insurance and can result in better coverage and lower prices. Embedded insurance is different from traditional insurance in several ways. Some of the main differences are:
- Embedded insurance is sold at the point of sale of a product or service, while traditional insurance is sold through separate channels such as agents, brokers or online platforms.
- Embedded insurance is customized and tailored to the specific needs and preferences of the customer, while traditional insurance is standardized and generic for a broad market segment.
- Embedded insurance is convenient and easy to purchase and use, while traditional insurance is complex and time-consuming to compare and buy.
- Embedded insurance is based on data and analytics that enable more accurate and dynamic pricing and underwriting, while traditional insurance is based on historical and static factors that may not reflect the current and future risk profile of the customer.
- Integration: Embedded insurance is seamlessly integrated into the user experience of a primary product or service, while standalone insurance is typically purchased separately from an insurance provider.
- Customer experience: Embedded insurance aims to provide a convenient and streamlined customer experience by eliminating the need for separate applications, underwriting processes, or policy management systems. Standalone insurance often requires separate interactions and may involve more complex processes.
- Customization: Embedded insurance allows for customized coverage that is specifically tailored to the risks associated with the primary product or service. Standalone insurance may offer more standardized coverage options.
- Pricing: Embedded insurance is often bundled into the overall price of the product or service, with the cost incorporated into the total offering. Standalone insurance is priced separately and may have more flexibility in terms of premium calculation.
- Policy management: Embedded insurance typically allows for policy management through the same platform or interface used for the primary product or service. Standalone insurance may require interactions with the insurance provider’s dedicated systems or channels.
While both embedded and standalone insurance serve the purpose of providing coverage and protection, the integration and convenience offered by embedded insurance make it an attractive option for many customers and businesses.
Question: What are the trends in embedded insurance?
Answer: Some of the trends in embedded insurance are:
- Increasing demand from customers who expect more convenience, personalization and value from their insurance purchases.
- Growing adoption by sellers who want to enhance their customer offerings, increase their revenue streams and differentiate themselves from their competitors.
- Rising innovation by insurers who want to tap into new markets, customers, data and distribution channels by partnering with sellers or creating their own platforms.
- Expanding opportunities in emerging sectors such as e-commerce, gig economy, sharing economy, mobility services and smart devices.
- Evolving regulations and standards that aim to protect customer interests, ensure fair competition and promote best practices in the industry.
- Rising adoption of digital technologies such as artificial intelligence, big data analytics and cloud computing that enable more efficient and effective delivery of embedded insurance.
- Growing emergence of insurtech firms that leverage innovative business models and solutions to disrupt the traditional insurance value chain and offer embedded insurance.
- Expanding opportunities for cross-industry collaborations and partnerships that create new value propositions and customer segments for embedded insurance.
- Evolving regulatory and legal frameworks that support and facilitate the development and distribution of embedded insurance.
- The emergence of new distribution channels and platforms for embedding insurance products into various industries and sectors, such as health care, education, entertainment, gaming, social media, etc.
- The adoption of new business models and revenue streams for generating value from embedded insurance products, such as subscription-based, pay-per-use, freemium, cross-selling, upselling, etc.
- The application of new technologies and techniques for enhancing the customer experience and engagement with embedded insurance products, such as artificial intelligence, blockchain, biometrics, gamification, etc.
- The creation of new insurance products and services that are tailored to the specific needs and contexts of customers in different situations and scenarios, such as microinsurance, parametric insurance, usage-based insurance, etc.
Question: What are the challenges of embedded insurance?
Answer: Embedded insurance also poses some challenges for sellers, buyers and insurers. For sellers, it can require significant investments in technology, data and partnerships to enable seamless integration and delivery of embedded insurance. It can also expose them to regulatory and compliance risks if they are not licensed or authorized to sell insurance. For buyers, it can limit their choice and transparency of coverage and pricing if they are not aware of the terms and conditions or alternatives of embedded insurance. It can also create confusion and dissatisfaction if they encounter any issues or claims with embedded insurance. For insurers, it can increase their competition and commoditization if they are not able to differentiate their products or services from other providers. It can also challenge their traditional distribution channels and relationships if they are not able to adapt to the changing customer expectations and preferences. Embedded insurance also poses some challenges to customers, such as:
- Losing the ability to compare and choose among different insurance options and providers
- Facing potential conflicts of interest or misalignment of incentives between the product or service provider and the insurer
- Having limited control and transparency over the terms and conditions of the insurance policy
- Dealing with complex claims processes and customer service issues
Question: How do I use embedded insurance?
Answer: To use embedded insurance, you should follow these steps:
- Choose a product or service that offers embedded insurance as an option or as a default feature.
- Compare the coverage, price and terms of the embedded insurance with other available options.
- Select the embedded insurance that suits your needs and preferences.
- Complete the purchase of the product or service along with the embedded insurance.
- Enjoy the benefits of the embedded insurance while using the product or service.
- Contact the seller or insurer in case of any claims or issues related to the embedded insurance.
Question: How do I know if I need embedded insurance?
Answer: You may need embedded insurance if you have any of these situations or goals:
- You want to buy a product or service that involves some risks or uncertainties that may cause losses or damages.
- You want to save time and money by buying insurance coverage that is relevant, convenient and customized to your needs along with the main product or service you are buying.
- You want to enjoy a seamless and hassle-free customer experience by getting insurance coverage that is integrated with the product or service you are buying.
- You want to protect yourself and your loved ones from any financial hardships or obligations that may result from unexpected events or emergencies.
Question: How do I know if embedded insurance is working for me?
Answer: You may know if embedded insurance is working for you if you notice any of these outcomes or benefits:
- You have adequate insurance coverage that matches your specific needs and preferences.
- You pay lower premiums or fees for the insurance coverage than you would have paid otherwise.
- You have easy and fast access to the insurance coverage, claims processing and customer service.
- You have peace of mind and satisfaction from knowing that you are protected and taken care of.
Question: How can I compare different embedded insurance plans and prices?
Answer: You can compare different embedded insurance plans and prices by using online tools or websites that aggregate and display information from different sellers or insurers. You can also use online reviews or ratings from other customers to get feedback and recommendations on the best plans and prices for your purchase.
Question: How long does it take to see the results of embedded insurance?
Answer: The results of embedded insurance may vary depending on your individual situation, condition and response. Some people may see immediate results, while others may need longer periods or specific events to notice any difference. It may also depend on how consistently and correctly you use the embedded insurance, and whether you combine it with other products or services.
Question: Is embedded insurance safe and reliable?
Answer: Embedded insurance is safe and reliable if you buy it from reputable sellers and insurers who comply with the relevant regulations and standards. You should also check the terms and conditions of the coverage plan carefully before buying it to make sure you understand what is included and excluded, how to make a claim and how to cancel or change your plan if needed.
Question: Is embedded insurance safe for everyone?
Answer: Embedded insurance is generally safe for everyone, as long as it meets the following criteria:
- It is offered by a reputable seller or insurer who has the necessary licenses, certifications and accreditations to provide the product or service and the embedded insurance.
- It is compliant with the relevant regulations and standards that govern the product or service and the embedded insurance in the jurisdiction where it is sold or used.
- It is transparent and clear about the coverage, price and terms of the embedded insurance, and does not have any hidden fees, charges or exclusions.
- It is suitable and appropriate for your needs and preferences, and does not have any adverse effects or consequences for you or others.
Question: Is embedded insurance regulated by the government?
Answer: Yes, embedded insurance is regulated by the government. However, the regulations vary depending on the type of product or service being sold.
The regulatory framework for embedded insurance can vary depending on the jurisdiction and the specific type of insurance being offered. In many countries, insurance activities are subject to regulatory oversight by government authorities or insurance regulatory bodies.
Insurance companies and product or service providers offering embedded insurance are generally required to comply with applicable insurance laws and regulations. These may include licensing requirements, consumer protection measures, solvency requirements for insurance companies, and disclosure obligations.
It is crucial for businesses involved in offering embedded insurance to ensure compliance with the regulatory requirements of the jurisdictions they operate in. Working with experienced legal and compliance professionals can help navigate the complexities of insurance regulations and ensure adherence to applicable laws.
Question: How is embedded insurance regulated?
Answer: Like all insurance products, embedded insurance is regulated by insurance regulatory bodies. These regulations vary by country and state, and they govern aspects like licensing, solvency, consumer protection, and market conduct.
Question: What are the regulatory implications of embedded insurance?
Answer: Embedded insurance is subject to the same regulatory requirements as traditional insurance products, such as licensing, solvency, consumer protection, data privacy, and anti-money laundering. However, embedded insurance also raises some specific regulatory issues, such as:
- The role and responsibility of the distributor in relation to the insurer and the customer
- The disclosure and consent requirements for informing and obtaining agreement from customers about the embedded insurance product
- The suitability and appropriateness standards for ensuring that the embedded insurance product matches the customer’s needs and expectations
- The governance and oversight mechanisms for monitoring and enforcing compliance with regulatory rules and standards
Question: Is embedded insurance more expensive?
Answer: Not necessarily. The cost of embedded insurance depends on the type of coverage being offered and the specific terms of the policy. In some cases, embedded insurance can be more cost-effective than purchasing a separate policy, as it’s tailored to the specific product or service and eliminates the need for customers to seek out coverage independently.
Question: How do I know if a product has embedded insurance?
Answer: You can usually tell if a product has embedded insurance by reading the product description or by asking the seller. The coverage should be clearly stated and should be included in the price of the product or service.
Question: Can I purchase embedded insurance separately from a product or service?
Answer: No, embedded insurance cannot be purchased separately from a product or service. It is only available as part of a bundle at the point of sale.
Question: Can I opt out of embedded insurance?
Answer: Yes, customers typically have the option to opt out of embedded insurance. While it’s offered as an add-on or feature during the purchase process, it’s usually not mandatory, and customers can choose whether or not to acquire the coverage.
Question: How do I make a claim on my embedded insurance policy?
Answer: To make a claim on your embedded insurance policy, you will need to contact your insurer directly. They will provide you with instructions on how to file your claim and what documentation you will need to provide.
Question: Where can I find more information about embedded insurance?
Answer: You can find more information about embedded insurance online or by contacting your insurer directly. They will be able to provide you with more detailed information about how it works and what types of products it can be bundled with.
Question: How can I learn more about embedded insurance?
Answer: If you want to learn more about embedded insurance, you can:
- Read some of the latest reports and articles on embedded insurance from reputable sources, such as McKinsey & Company, Accenture, Deloitte, etc.
- Attend some of the upcoming events and webinars on embedded insurance from industry associations and organizations, such as Insurtech Insights, Embedded Insurance Forum, etc.
- Join some of the online communities and networks on embedded insurance from experts and practitioners, such as Embedded Insurance LinkedIn Group, Embedded Insurance Clubhouse Room, etc.
Question: How can customers purchase or access embedded insurance?
Answer: Customers can typically purchase or access embedded insurance through the platform or interface of the primary product or service. The process may vary depending on the industry and the specific implementation, but here are some general steps:
- Selection: During the purchase or usage process of the primary product or service, customers may be presented with the option to add or opt-in for the embedded insurance coverage.
- Customization: If customization is available, customers can often select coverage limits, deductibles, or additional coverage options based on their preferences or needs.
- Pricing: The cost of the embedded insurance is usually included in the overall price of the primary product or service. Customers may see a separate line item for the insurance cost or receive a single consolidated price.
- Acknowledgment and acceptance: Customers are typically required to acknowledge and accept the terms and conditions of the insurance coverage before completing the purchase or usage process.
- Policy documentation: Once the purchase or opt-in is confirmed, customers may receiveQuestion: What is the role of insurance companies in embedded insurance?
Question: Where can I buy embedded insurance?
Answer: You can buy embedded insurance from various online or offline sources, such as:
- E-commerce websites: These are online platforms that sell various products or services, such as Amazon, eBay or Shopify. They may offer embedded insurance as an option or an add-on for your purchase.
- Insurtech companies: These are companies that use technology to innovate and improve the insurance industry, such as Lemonade, Trov or Cover Genius. They may offer embedded insurance as a standalone product or a partnership with other sellers.
- Market disruptors: These are companies that challenge the traditional business models and practices of the insurance industry, such as Tesla, Uber or Airbnb. They may offer embedded insurance to their customers as a way to enhance their value proposition and customer experience.
Question: How can sellers offer embedded insurance?
Answer: Sellers can offer embedded insurance by partnering with insurers or insurtech firms that have the expertise and capability to provide coverage that matches their products or services. Sellers can also obtain a license or authorization from the relevant authorities to sell insurance themselves. Sellers need to ensure that they have the necessary technology, data and processes to integrate and deliver embedded insurance in a seamless and compliant way. Sellers also need to communicate and educate their customers about the benefits and features of embedded insurance and how it works.
Question: How can buyers benefit from embedded insurance?
Answer: Buyers can benefit from embedded insurance by getting coverage that is relevant, affordable and convenient for their needs. Buyers can also save time and money by avoiding the hassle of comparison shopping and dealing with multiple providers. Buyers can also enjoy more peace of mind and security by knowing that they are protected from any potential losses or damages that may occur from their purchases. Buyers need to ensure that they understand the terms and conditions of embedded insurance and how it differs from traditional insurance. Buyers also need to compare and evaluate their options and alternatives before opting for embedded insurance.
Question: How can insurers participate in embedded insurance?
Answer: Insurers can participate in embedded insurance by developing and offering products or services that are suitable for embedding with other products or services. Insurers can also partner with sellers or insurtech firms that have access to customers and data that can enable more effective distribution and delivery of embedded insurance. Insurers need to ensure that they have the necessary technology, data and capabilities to provide embedded insurance in a seamless and compliant way. Insurers also need to adapt and innovate their products or services to meet the changing customer expectations and preferences in an increasingly competitive and dynamic market.
Question: How does embedded insurance benefit businesses?
Answer: Embedded insurance can benefit businesses by providing an additional revenue stream, increasing customer engagement, and enhancing the overall customer experience. By offering relevant and personalized insurance coverage, businesses can add value to their products or services and build stronger relationships with their customers.
Question: How can I offer embedded insurance in my business?
Answer: To offer embedded insurance in your business, you’ll need to partner with an insurance provider that offers this type of service. This may involve integrating their insurance products into your sales process, either through an API or other form of digital integration. It’s also important to ensure that you comply with all relevant insurance regulations.
Question: What are the best practices for designing and delivering embedded insurance products?
Answer: Some best practices for designing and delivering embedded insurance products are:
- Conducting thorough market research and customer segmentation to identify and understand the customer’s pain points, needs, preferences, and behaviors
- Developing a clear value proposition and differentiation strategy for the embedded insurance product that addresses the customer’s pain points, needs, preferences, and behaviors
- Establishing a strong partnership and alignment between the distributor and the insurer on the goals, roles, responsibilities, expectations, incentives, and risks involved in offering embedded insurance products
- Leveraging data and technology to enable seamless integration, personalization, automation, optimization, and innovation of embedded insurance products
- Providing clear and transparent communication, education, and support to customers throughout their journey with embedded insurance products