Since I first wrote about embedded insurance several years ago, the category has taken off and taken hold, demonstrating real staying power even in 2022’s chaotic global economy. PR Newswire reported that Europe's embedded insurance market will increase from $10+ billion in 2022 to $25+ billion by 2029, noting that to stay competitive this opportunity space will require special attention and focus on the customer and a continued dedication to expanding its distribution channels. But in addition to its predicted growth, what’s coming next for embedded?
Accenture defines embedded insurance as “any insurance that can be purchased within the commercial transaction of another product or service.” I would further add that for insurance to truly qualify as embedded today, the purchase must be transacted digitally, with an opt out feature for the customer.
Embedded has evolved quickly over a short space of time. Its earliest incarnations largely involved bundling insurance covers with a specific product or service at the point of purchase. Embedded 2.0 allowed for a new wave of data-driven, transparent and flexible FinTech and InsurTech product solutions, tailor-made for use within digital ecosystems. These offerings combined open-APIs with on-demand insurance products to give customers cost-effective and seamless coverage.
There’s little arguing that the insurance landscape is experiencing a massive shift. Customers are changing, both in their behaviors and in their expectations. Convenience is king. Personalization is preferred. On-demand is a must – no longer a nice-to-have. These preferences have pushed incumbents to not only think about tailoring their approach to buying and selling insurance, but also to look at their entire ecosystem of selling partners differently – or risk losing their relevance to the next generation of customers.
As one such illustration of changing consumer preference, young professionals are owning homes, cars, and property with far less frequency than their predecessors, often preferring subscription-based models to outright ownership. For these customers, embedded solutions are particularly well-suited to their needs, as they can be quickly adapted for products, services or platforms that run on a pay-as-you-go model.
Today, embedded is a crowded field, with established incumbents and startups all in the fray. One of the best known startups in the embedded space is Cover Genius, which endeavors to meet customers’ growing demand for convenience by co-creating insurance policies and benefits for some of the world’s largest digital companies. Different models for embedded abound, like the Managing General Agent (MGA) model, which allows insurers to act as the risk carrier while the MGA leverages their own technical, embedded platform, and the InsurTech model, which lets insurers distribute their products in the customer journeys of other strategic partners. Many additional models, from traditional to emerging, also exist.
So in terms of global embedded domination, no single player or model has yet to emerge. Overall, however, the opportunity for embedded insurance remains sizable. As we look toward the next generation of embedded products, we should expect to see insurers and startups looking for novel ways to make their value propositions even more relevant to end customers, taking care not to over-insure their customers for the sake of it, offering instead real solutions where there is a demonstrated need.