Embedded insurance, generally defined as any digital insurance purchase bundled within the commercial transaction of a different (non-insurance related) product or service, has been a persistent hot topic in insurance for the last several years. Recent predictions still project massive numbers and significant growth potential for embedded (Deloitte forecasted embedded sales in P&C alone would reach US $700 billion globally by 2030). However, challenges remain, especially when it comes to regulatory concerns around data protection, privacy and consumer complaints. Which begs the question: is the market for embedded actually as big as some addressable market calculations suggest? Let’s take a closer look at what’s happening in Embedded Insurance today.
Embedded has always had ample use cases in the automotive and mobility insurance sector. In part, this is because automotive insurance makes up the bulk of P&C premiums written, but also because selling insurance when a car is purchased is already status quo, meaning consumers are primed to make that purchase. Experts predict as much as 1 ⁄ 5 of all personal auto insurance could be embedded in vehicle sales by 2030, a potentially heavy blow to traditional distribution channels like national brand insurers and independent agents, with sales volume potentially filtering through auto dealers and OEMs offering their own embedded policies and underwriting operations.
Early embedded examples have been around for a long time, made possible through models where banks assume responsibility for distribution. However, these models are notoriously slow and cumbersome, and were not widely adopted as a result. But today there are a slew of other non-insurance products and service providers who see embedded as a way to offer peace of mind to consumers while introducing additional revenue streams at proprietary touchpoints. These non-insurance companies are taking advantage of digitization and the burgeoning era of open insurance and APIs to rethink the entire insurance value chain. The result? Tech-enabled embedded insurance products and microservices are increasingly being integrated into an ever-growing range of digital platforms.
One such embedded insurance startup, Mulberri, has partnered with global cybersecurity firm Acronis to provide cyber insurance to SMBs across the US.
Another interesting embedded partnership is from Qover, an insurtech specializing in embedded insurance orchestration, and credit card fintech, Yonder. Together, with underwriter Lloyd’s of London, they are offering members embedded travel insurance for a range of travel and accommodation expenses that have been paid for with their Yonder card, including delayed departures, cancellations, winter sports, lost or stolen baggage, personal liability and more.
Modern embedded insurance products still offer many benefits when compared to traditional distribution channels: streamlined onboarding and claims processing, enhanced customer experience, real-time, personalized offerings, novel revenue streams and customer segments. AI-driven platforms are also making it possible to use data for predictive analytics and customer behavior insights – reducing fraud, assessing risks more accurately and then tailoring embedded products and pricing accordingly. For insurers, these are very real advantages that make a strong case for strengthening their role as embedded service partners.
While questions about the future of Embedded Insurance remain (e.g. will it be profitable for all members of the insurance value chain? Is the value proposition attractive enough for the end consumer to influence adoption?), market projections and industry chatter still strongly suggest its staying power. The industry’s regulatory complexities remain challenging and may slow integration and scalability of insurance products into some non-insurance arenas. However, as we look into the future, embedded insurance is likely to continue on its growth trajectory, using data to transform from a tool for distribution and extend into something more comprehensive and integrated that also includes underwriting, policy management, and claims processing. For incumbent insurers, that makes serious engagement now, and in the future, absolutely essential.