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, as the customer experience becomes more important and more purchases are made digitally, the insurance industry is moving from selling insurance to helping consumers buy 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.
What is embedded insurance?
Embedded insurance is a type of bundling and sale of insurance coverage or protection while a consumer is purchasing a product or service, bringing the coverage directly to the consumer at the point of sale.
As a result, the customer doesn’t have to go looking for coverage – and they may not even know they need it until they’re offered the opportunity.
Embedded insurance is about offering affordable, relevant, and customized insurance to customers when they need it most.
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:
Opting for extended protections on a new cellular device
Travel insurance when you book a flight
Coverage for new appliances while checking out – either online or in-store
Airbnb offering Host Protection and Host Guarantee insurance
Car rental companies offering coverage while renting a vehicle
Better coverage, smooth CX: A win-win for consumers
Why is embedded insurance taking off? Simply put, it puts customers in control.
Consider this scenario: A customer researches a product online, compares prices, and then purchases a product. At the point of sale, they’re offered coverage for their new product.
It’s an easy option — something they can secure with just a few clicks from their mobile device, so they opt for the coverage. There’s no need to hunt elsewhere and make a separate purchase. They get immediate peace of mind.
Flexible, fast, and convenient, embedded insurance provides the kind of customer experience consumers today expect.
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.
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.
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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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