Last updated: Embedded insurance: What it is and the future of customer-centric insurance solutions

Embedded insurance: What it is and the future of customer-centric insurance solutions

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People know they need insurance — and yet, traditionally, it’s often been seen as a cumbersome afterthought or legal necessity that can feel overwhelming and confusing. However, customer experience has become more important than a company’s products or price. Additionally, as more services are purchased through digital channels, the insurance industry is moving from selling insurance to helping consumers buy the insurance that’s best for them.

Perhaps that’s why embedded insurance is forecasted to grow more than six times larger by 2030 – to $722BN in GWP, with most of the growth in North America and China, according to InsTech London.

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What is embedded insurance?

Embedded insurance is the seamless integration of insurance coverage into the purchasing process of non-insurance products or services within the customer journey. Instead of seeking out insurance separately, consumers are offered relevant coverage at the point of sale — such as adding travel insurance when booking a flight or opting for device protection while purchasing a new smartphone online. This innovative approach simplifies the buying experience by bundling insurance directly with products or services, eliminating the need for additional research or separate transactions.

With advancements in technology, businesses can now offer tailored insurance solutions across a variety of platforms and services. This makes insurance more accessible, convenient, and contextualized for consumers, providing personalized coverage when and where they need it most.

Whether it’s including extended warranties with electronics or offering ride-share insurance during a trip, embedded insurance delivers affordable and relevant options that enhance customer satisfaction.

Embedded insurance is about offering affordable, relevant, and customized insurance to customers when they need it most.

Examples of embedded insurance

As part of a larger move toward embedded finances, embedded insurance is growing in popularity. It’s a familiar model in industries like the airline sector, but is catching on across a broad range of industries.

Here are some examples:
  1. Opting for extended protections on a new cellular device
  2. Travel insurance when you book a flight
  3. Coverage for new appliances while checking out – either online or in-store
  4. Airbnb offering Host Protection and Host Guarantee insurance
  5. Car rental companies offering coverage while renting a vehicle

Embedded insurance: Changing how we buy insurance

Embedded insurance is changing how we think about buying insurance. Instead of purchasing it separately, insurance is included with the products and services we already use. This integration improves the customer experience by eliminating the need to deal with multiple providers and complex policies. By offering insurance precisely when it’s needed, embedded insurance makes the process more convenient and relevant.

The insurance industry, like many others, is undergoing significant change due to technological advancements. Digital platforms and mobile devices have reshaped customer expectations, with people now seeking fast, personalized service in all aspects of their lives—including insurance. Embedded insurance allows companies to meet these evolving demands by seamlessly incorporating insurance options into online platforms and services. This approach enables insurers to offer products that are better tailored to customer needs and to respond swiftly to market changes.

Exploring the benefits of embedded insurance

Embedded insurance offers significant advantages for both consumers and businesses. By integrating insurance options directly into the purchasing process, it creates a more streamlined and personalized experience that meets the needs of modern consumers.

Benefits for consumers

1. Enhanced customer experience through seamless integration

Embedded insurance focuses on improving the customer experience by eliminating the need to deal with multiple providers and complex policies. When insurance options are seamlessly integrated into the purchasing journey, customers can find the protection they need without interrupting their buying process. This convenience saves time and effort, providing immediate peace of mind.

2. Customization and flexibility: meeting the needs of the modern consumer

Today’s consumers expect personalized experiences tailored to their unique needs. Embedded insurance allows businesses to offer customized insurance solutions by leveraging data and technology. Customers can adjust coverage levels, add or remove features, and design policies that fit their specific situations. This level of flexibility ensures that consumers only pay for the coverage they truly need.

3. Better coverage, smooth CX: A win-win for consumers

Consider this scenario: A customer is purchasing a new smartphone online. At checkout, they’re offered an option to include a device protection plan. It’s an easy choice—something they can secure with just a few clicks. There’s no need to search elsewhere or make a separate purchase. They get immediate peace of mind, knowing their new device is protected.

Flexible, fast, and convenient, embedded insurance provides the kind of customer experience consumers today expect.

Benefits for businesses and insurers

1. New opportunities, broader reach for insurers

For insurers, embedded insurance opens new avenues 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. This strategy not only expands their customer base but also enhances the relevance of their offerings.

2. Increased customer engagement and loyalty

Businesses that offer embedded insurance add value to their products or services, enhancing the overall customer experience. This added value can lead to increased customer engagement and loyalty, as consumers appreciate the convenience and personalized service. By meeting customers’ needs more effectively, businesses can differentiate themselves in a competitive market.

Other benefits of embedded insurance include:

  • The protection gap – the difference between insured losses and uninsured losses — is growing wider every year. Offering coverage at the point of sale can help narrow that gap by making it easy for customers to purchase coverage.
  • An embedded insurance solution can be integrated into an existing system through an open application program interface (API). APIs can help insurers analyze data and offer the right policy at the point of sale. APIs also enable them to meet customers on the channel of their choice, whether that’s a computer, laptop, mobile device, or call center.
  • Online shopping produces a wealth of data, including transaction and browsing history and expenditures. Using this data to create a customized insurance policy ensures risk information is accurate and updated in real-time.
  • Two separate systems are linked via an API into a single shopping experience for the customer. With pre-built, production-ready mobile and web apps, an insurer can offer policies and services to prospective customers directly.

Embedded insurance could prove a gamechanger for the insurance industry by helping insurers reach the right customers at the right time with the right coverage.

The role of technology in embedded insurance

Technology is at the heart of embedded insurance, enabling seamless integration, customization, and accessibility. Advancements in digital platforms, mobile applications, and data analytics have reshaped customer expectations, with people now seeking fast, personalized service in all aspects of their lives—including insurance.

Technological advancements enhancing accessibility

User-friendly digital platforms and mobile apps allow customers to explore insurance options, compare quotes, and purchase coverage quickly and effortlessly. Real-time data updates empower insurers to provide personalized recommendations based on user behavior and preferences. This level of accessibility ensures that customers can find the right coverage at the right time.

Innovations shaping the future of embedded insurance

The insurance industry is experiencing a surge in technological innovations that are transforming how insurance is delivered and experienced. Key technologies driving this transformation include:

  • Artificial Intelligence (AI): Automating claims processing, fraud detection, and personalized risk assessments. AI enables insurers to analyze vast amounts of data to offer tailored policies and pricing.
  • Internet of Things (IoT): Real-time data collection through connected devices allows for usage-based insurance and preventive measures. For example, telematics devices in cars can provide data for personalized auto insurance premiums.
  • Blockchain technology: Enhancing transparency, security, and efficiency in insurance transactions. Blockchain can streamline processes like claims management and policy administration, reducing costs and errors.

These advancements are revolutionizing the entire insurance value chain, making embedded insurance more sophisticated and integral to how consumers perceive and interact with insurance in their daily lives.

The future of insurance solutions

As consumer needs evolve and technology continues to advance, embedded insurance stands at the forefront of the insurance industry’s transformation. Its customer-centric approach and intelligent use of data position it as a powerful force shaping the future of insurance solutions.

The evolution of insurance in the digital age

Embedded insurance is more than a trend—it’s a response to the shifting landscape of consumer expectations and technological capabilities. By seamlessly integrating insurance into everyday transactions, it aligns with the demand for convenience, personalization, and immediacy.

Businesses that embrace embedded insurance can stay ahead of the curve, offering innovative solutions that resonate with modern consumers. As technology evolves, we can expect embedded insurance to become even more sophisticated, utilizing AI chatbots, virtual assistants, and other emerging technologies to enhance the customer experience further.

Embracing embedded insurance: A path forward

Embedded insurance represents a significant opportunity for both insurers and businesses to meet the evolving needs of consumers in the digital age. By focusing on seamless integration, personalization, and leveraging technological innovations, embedded insurance can deliver enhanced value and convenience.

For consumers, it means accessible, tailored coverage that fits seamlessly into their lives. For businesses and insurers, it opens new avenues for engagement, growth, and differentiation in a competitive market.

As the insurance industry continues to evolve, embracing embedded insurance can be a strategic path forward—one that aligns with the future of customer-centric solutions and positions companies at the forefront of innovation.

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Frequently asked questions (FAQs):

Embedded in health insurance typically refers to the inclusion of additional coverage within a primary health insurance policy. For example, a family health insurance policy may have embedded individual policies for each member of the family. This means that each member has their own coverage, but it is all included within the larger family policy.

An embedded deductible is defined as a type of deductible used in family health insurance plans where each family member has an individual deductible within the overall family deductible. This means that when a family member incurs healthcare expenses, those expenses count towards their individual deductible, and once that individual deductible is met, their health insurance coverage will begin to pay for their healthcare expenses.

Embedded vs. non-embedded in insurance refers to how insurance coverage is bundled and applied to policies. In the context of health insurance, for example, embedded deductibles refer to deductibles that are applied to individual members within a family policy, while non-embedded deductibles require that the entire family deductible be met before coverage kicks in for any family member.

In a general sense however, embedded insurance refers to insurance products that are seamlessly integrated into a customer’s buying experience, such as offering travel insurance when booking a flight or car insurance when renting a car. Non-embedded insurance, on the other hand, refers to insurance products that are sold separately from the primary purchase, such as purchasing home insurance separately from a mortgage or car insurance separately from a car purchase.

Aggregate insurance and embedded insurance are two different approaches to providing insurance coverage. Embedded insurance is a type of insurance that is seamlessly integrated into a customer’s buying experience, whether it be through a product, service, or platform. Aggregate insurance, on the other hand, is a type of insurance that provides coverage for multiple, related events or losses under a single policy.

Embedded insurance can be offered as an add-on at the time of purchase or as part of a subscription or membership package. The goal of embedded insurance is to provide a more convenient and streamlined customer experience while also increasing insurance uptake and coverage. In contrast aggregate insurance typically has a higher coverage limit than individual policies and is designed to provide coverage for catastrophic events that may affect multiple parties at once, such as natural disasters, cyber-attacks, or mass liability claims. The coverage limit for aggregate insurance applies to the total amount of claims made under the policy, rather than to each individual event or loss.

Embedded insurance works by seamlessly integrating insurance products or coverage options into a customer’s buying experience, typically at the point of sale. This can be done through partnerships between insurance companies and other businesses, such as retailers, travel companies, or car-sharing services.

As an example, when a customer is booking a flight, they may be offered the option to purchase travel insurance as an add-on at the time of purchase. The travel insurance is embedded into the buying experience, making it easy for the customer to purchase coverage without having to seek it out separately.

Embedded insurance is different from traditional insurance in several ways; some of the key differences are:

  • Buying experience: embedded insurance is integrated into a customer’s buying experience, often offered as an add-on at the time of purchase or as part of a subscription or membership package. Traditional insurance, on the other hand, is sold separately from the primary purchase, requiring customers to actively seek out coverage.
  • Customization: Embedded insurance can be customized to meet the specific needs of the customer based on their purchase history or other data. Traditional insurance is typically a one-size-fits-all product.
  • Convenience: Embedded insurance is designed to be convenient for customers, providing them with a streamlined experience and reducing the need for separate insurance purchases. Traditional insurance may require more time and effort on the part of the customer to research and purchase.
  • Accessibility: Embedded insurance can be more accessible to customers who may not have considered purchasing insurance otherwise. 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.

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