What Is Embedded Insurance and Why Does it Matter?

What Is Embedded Insurance and Why Does it Matter?

Embedded insurance is one of the hot topics in the insurance industry and was one of the biggest talking points at the recent InsureTech Connect Vegas event. It’s easy to see why, given that embedded insurance is projected to be worth $3 trillion by 2030, according to FintechFutures.

But what is embedded insurance, and why is it such a huge talking point in the industry? Let's take a deeper look at this latest buzzword.

What Is Embedded Insurance?

Embedded insurance is part of the broader embedded finance movement. It involves offering or providing insurance coverage or protection to consumers while they're purchasing a new product or service. Based on this embedded insurance definition, it means providing people with more affordable, personalized and relevant insurance products right when they need them. 

As a result, embedded insurance offers a range of benefits for multiple stakeholders, including:

  • Insurance carriers: Embedded insurance helps insurance carriers access more data, which they can use to improve product innovation and reduce risk. This allows carriers to reach the right customers with the right level of coverage at the right time. They also have an opportunity to reduce cost distribution, which means selling fewer products or services to customers who don’t want or understand them.
  • Consumers: Embedded insurance helps consumers get insurance bundled in with the products or services they purchase at the point of sale. That removes the need to search separately for insurance and enables people to protect products or services they may not realize need to be insured. 
  • Technology entrepreneurs and investors: Embedded insurance helps investors and entrepreneurs reap value from new technology ventures.
  • Third-party organizations: Businesses can use embedded insurance to create new revenue streams by bundling insurance deals with their products and services.

What (and Who) Does Embedded Insurance Cover?

Embedded insurance extends to virtually any product and has the potential to touch more consumers than traditional insurance. One of the most significant benefits of embedded insurance is that it closes the protection gap, which is the void between the level of insurance that businesses, households and people require and the amount of coverage they actually purchase. This gap doubled between 2000 and 2020, according to Swiss Re Institute findings.

Embedded insurance helps close this gap because it puts customers in control. For example, when insurance is built into the point of sale, a consumer can consider it while researching, comparing and buying products rather than conducting a separate search for insurance providers. 

In practice, embedded insurance examples include: 

  • Adding travel insurance when customers book a flight
  • Purchasing coverage on new appliances at checkout
  • Mobile phone users opting to purchase extended protection for their devices
  • Car rental firms providing coverage when a customer books a vehicle 

This makes the traditionally cumbersome process of buying insurance convenient, fast and flexible, which is vital to helping brands deliver the experiences their customers expect.

How Insurance Carriers Are Using Embedded Insurance

Insurance has traditionally been sold through agents, brokers and third-party organizations on the phone or face to face, and it has typically demanded lots of paperwork. While much of this process has gone online, many insurance products are still delivered through major multinational providers. 

Fully embedded insurance remains relatively small in the market, but it’s helping to simplify the process and remove some of the complexities that blight the industry. Digitization is blurring the boundaries between traditional sectors and allowing new digital ecosystems to emerge, and McKinsey estimates this will account for 30% of global economic activity by 2025. These new platforms enable businesses to match supply to demand and gain insight into vast volumes of data, which is ideal for embedded insurance.

As a result, insurance carriers are increasingly using embedded insurance, including tactics like the following.

Open APIs

Insurance carriers have started integrating embedded insurance into their systems using open application program interfaces (APIs), according to Fintech Futures. As the article claims, “Insurance is further behind payments and banking in maturity, with fewer APIs and developer platforms available today. Real-time data processing capabilities in the back office are also missing.”

An API approach can help carriers analyze real-time data and offer the policy best suited to a customer’s need at the point of sale. They can interact with customers on their preferred channel or device, be it through a call center or social media channel or on a laptop or mobile device. 

Real-Time Data

As brands generate growing volumes of data, it’s vital to put customers’ browsing histories and transactions to use. Firms can use these insights to create personalized insurance policies, which ensures risk data is accurate and relevant in real time. Insurance carriers can also use data insights to customize products and services, boosting customer engagement and loyalty. 


Another area to look out for is what Fintech Futures describes as “neo-insurers,” startups that help brands improve the customer experience around buying insurance products and engaging with insurance carriers. They use new technologies, such as artificial intelligence (AI), the cloud and modular architectures, to reduce operational costs and connect to third parties through APIs. 

New Platforms

Traditional partners, such as banks, manufacturers, retailers and travel firms, are coming under pressure to meet customer demand for greater personalization and lower prices. For example, Fintech Futures points out that warranties on products such as electronic goods aren’t always as reasonable or transparent as customers might like. 

However, new solutions and developer platforms, such as Insurance as a Service, enable organizations to be more transparent and innovative and provide services that meet customers’ needs. In the banking industry, for instance, developers are configuring platforms to rapidly launch new financial services and propositions that boost usability and customer loyalty.

Online Aggregators

Price comparison websites have become critical to delivering on customer requirements in markets like the United Kingdom. These aggregators make it easier for consumers to compare insurance prices and find the best deal for them. Using embedded insurance in this process can ensure it’s regulated effectively and help brands deliver insurance products that are in the customer’s best interest.

Physical Products

The rise of smart and, increasingly, wearable connected devices offers significant opportunities for insurance carriers. These devices generate vast volumes of data that, when combined with artificial intelligence solutions, can support greater adoption of medical insurance. Device creators are increasingly looking to add value to the services around their machines. Elon Musk, for instance, claims that insurance could one day generate 30-40% of Tesla’s total business.

The Future of Embedded Insurance 

If insurance carriers are to fully capitalize on this trend, it’s vital to look to partnerships, which bolttech CEO Rob Schimek describes as “chapter three” of embedded insurance. Schimek claimed this “is going be the real game, and it’s going be a lot of fun” in an interview at ITC Vegas with Carrier Management.

Embedded insurance points toward a world where insurers will help businesses and consumers quickly and easily protect their products and services at the point of sale.

Click here to learn more about how insurance carriers can leverage insurtech.