Embedded insurance: Definition, types, benefits

What is embedded insurance?

Embedded insurance refers to products seamlessly integrated into a customer's buying experience, such as offering travel insurance when booking a flight or car insurance when renting a car.

Embedded insurance leverages technology to streamline the underwriting and claims processes, making it more convenient and accessible for consumers. This model simplifies the customer experience by offering insurance as a part of the transaction, ensuring instant protection without additional steps.

The customer does not have to interrupt their process to do further research or to buy insurance; instead, embedded insurance offers personalised protection at a competitive rate that can be made available seamlessly to customers when and where they need it most.

Embedded insurance vs. traditional insurance

Traditional insurance is typically purchased separately from the product or service it covers, often requiring customers to seek out policies from insurance providers by phoning brokers or using online platforms. This process can be time-consuming and involve significant effort to compare different options and complete the necessary paperwork.

In contrast, embedded insurance is seamlessly integrated into the purchase process of a product or service, providing immediate coverage at the point of sale.

Here are some of the key differences:

Buying experience: Embedded insurance is integrated into a customer’s buying experience, often offered as an add-on at purchase or as part of a subscription or membership package. On the other hand, traditional insurance is sold separately from the primary purchase, requiring customers to seek out coverage actively.
Customisation: Embedded insurance can be packaged and sold to customers as products that best fit their needs. Traditional insurance is typically a one-size-fits-all product.
Convenience: Embedded insurance is designed to be convenient for customers, providing a streamlined experience and reducing the need for separate insurance purchases. Traditional insurance may require more time and effort to research and purchase.
Accessibility: Embedded insurance can be more accessible to customers who may not have considered purchasing insurance. Traditional insurance may be seen as a luxury or a non-essential expense.
Partnership: Embedded insurance is often provided through partnerships between insurance companies and other businesses, such as retailers, travel companies or car-sharing services. Traditional insurance, on the other hand, is sold primarily by insurance companies directly to consumers or through insurance brokers or agents.

How embedded insurance works

Embedded insurance enables third-party providers and developers to integrate innovative insurance products seamlessly, rapidly, and cheaply into their customers' purchase journeys via APIs.

APIs seamlessly integrate insurance products or coverage options into a customer’s buying experience, typically at the point of sale. APIs can help insurers analyse data and offer the right policy at the point of sale. They also enable them to meet customers on their chosen channel, whether a computer, laptop, mobile device or call centre.

With embedded insurance, coverage can be integrated with products and services in various ways: as add-on coverage for a product or service at the time of purchase, as coverage included in the price of the core offering or as an additional benefit to customers alongside other services. This can be done through partnerships between insurance companies and other businesses, such as retailers, travel companies or car-sharing services.

Types of embedded insurance

Here are some examples of insurance that can be embedded:

Travel insurance. Travel insurance covers trip cancellations, delays, or medical emergencies abroad.
Electronics insurance. Retailers like Best Buy or Amazon offer insurance plans for electronics and appliances, covering damage, theft or malfunction.
Car insurance. Car dealerships provide embedded insurance options that include coverage for new vehicles, offering policies that can be activated immediately upon purchase.
Ride-sharing insurance. Ride-sharing platforms like Uber and Lyft offer insurance coverage for drivers and passengers as part of their service, protecting them during rides without needing a separate policy.
Event ticket insurance. When purchasing tickets for concerts, sports events or other live performances, buyers can opt for ticket insurance that covers cancellations or inability to attend the event.
Home appliances and furnishings. Stores selling home appliances and furniture often offer embedded insurance that covers damage, repairs or replacements bundled into the product's sale.
Mobile app-based insurance. Certain fintech apps offer embedded insurance products, such as rental or pet insurance, directly through their platforms, allowing users to purchase coverage easily.
Online marketplaces. Platforms like Etsy or eBay allow sellers to include shipping insurance for buyers, protecting against loss or damage during transit.

Embedded insurance benefits

There are many benefits to embedded insurance. For one, embedded coverage makes insurance protection more accessible and inclusive globally. Offering coverage at the point of sale can help narrow that gap by making it easy for customers to purchase coverage.

Embedded insurance can also enhance businesses' value proposition. Whether they are a digital-first, born-in-the-cloud startup, a brick-and-mortar business, or something in-between, embedded insurance can bring a range of benefits:

Provide added value to your customers
Deepen customer loyalty and engagement
Add new revenue streams
Differentiate your business and attract investors
Build brand equity

From a customer experience perspective, embedded insurance extends the customer experience. Many customers will likely feel more comfortable buying insurance via a familiar brand with an existing relationship.

For insurers, embedded insurance offers new ways to reach customers online. By partnering with digital brands that have a broad reach, insurers can offer protection to consumers exactly when they need it.

In this always-on digital world, offering integrated insurance solutions can deepen your business's engagement with customers and grow revenues. Embedded insurance is a game-changer for the insurance industry by helping insurers reach the right customers at the right time with the right coverage.

Embedded Insurance

What is embedded insurance?

Embedded insurance vs. traditional insurance

How embedded insurance works

Embedded Insurance - Bringing Insurance to You

Types of embedded insurance

Embedded insurance benefits

Further reading