Embedded Insurance: Coverage When You Need It, Where You Need It

People have a love-hate relationship with insurance. They know they need it — without it, they wouldn’t be able to pay for major car or home repairs, or an extended hospital stay. And yet, it’s often an afterthought, a necessary evil.

Bringing the coverage directly to the consumer at the point of sale with the embedded insurance model is one-way insurers are repositioning coverage as a necessary companion to a purchase.

Embedded insurance is a flexible model in which insurance coverage is offered alongside a product or service purchase. As a result, the customer doesn’t have to go looking for coverage, as they may not even know they need it until they’re offered the opportunity.

As part of a larger move toward embedded finances, embedded insurance is growing in popularity. With property and casualty (P&C) products alone, embedded insurance is expected to account for over $700 Billion in premiums by 2030, or 25% of the total market worldwide, according to “Embedded Insurance,” a report from author Simon Torrance of The New Growth Playbook. Including life and health, embedded insurance could create more than $3 trillion in market value, he writes.

Embedded Insurance Creates Opportunities for Insurers

Why is embedded insurance catching on? Simply put, it puts today’s customers in control.

It’s not hard to imagine this typical scenario: A customer does online product research, compares prices, and subsequently purchases a product. At the point of sale, they’re offered coverage for their new product. While seeking an easy option, something they can secure with just a few clicks from their mobile device, they opt for the coverage, an easy add-on purchase.

Embedded insurance is a win for insurers who are also looking for new avenues to reach customers online. Fully 49% of global consumers and 62% of U.S. shoppers shop even more online now than they did before the pandemic, according to Bazaarvoice, a software technology company.

And yet embedded insurance is nothing new. It’s auto insurance when signing up for a ridesharing service or the recommendation for travel insurance when you book a flight. It’s coverage for that large appliance when at the in-person or online store checkout.

Many non-insurers are taking advantage of the embedded insurance model. Tesla is a case in point. The company began offering auto coverage to Tesla owners in California in 2019. It’s easy to purchase online – in just under a minute — and is cheaper than purchasing coverage from another insurer, an attractive add-on benefit for Tesla buyers. It’s been so successful, in fact, that Tesla projects 30% of its business could be from the insurance business.

Innovation takes time but working with a best-in-class partner can ease the burden. With pre-configured persona-based apps and a catalog of internal and external application programming interfaces (APIs), EIS allows you to maximize existing systems to deliver a customized customer experience quickly and efficiently.

Benefits of Embedded Insurance for Insurers

A flexible model that can offer better, more affordable options directly to those who need them is the goal of embedded insurance. EIS provides the application programming interface (API) that is necessary for this to happen seamlessly. APIs are designed as the building blocks of a digital customer experience and link customers with insurers’ core systems. Other benefits of embedded insurance include:

Closing the protection gap increases coverage. The difference between insured losses and uninsured losses is called the protection gap, and it’s growing wider every year. Offering coverage at the point of sale can help close that gap by making it easy for customers to purchase coverage when it’s convenient for them. For example, although roughly one-third of American tenants have renters’ insurance, according to the Insurance Information Institute, when one real estate services provider partnered with an insurtech company, two-thirds of new tenants purchased renters’ insurance during onboarding.

A flexible approach creates more opportunities. Reaching a greater number of customers more broadly requires a modern approach with creativity and adaptability. EIS offers 1,100 digital APIs that support connections between different components of the EIS suite – billing, claims, customer management – and allow each insurer to offer a unique customer experience. What’s more, APIs help meet customers where they want to be, whether it’s via computer, laptop, mobile device, or even a call center.

Reliance on accurate data reflects the real risks. When a customer is shopping online, there’s already a wealth of data available. Whether that’s transaction or browsing history, or expenditures, utilizing this data to create a customized insurance policy ensures risk information is accurate and updated in real-time. Insurance coverage then reflects the real risk, not the perceived one.

Seamless customer experience, direct at the moment of purchase. An API works behind the scenes to link two separate, independent systems into a single shopping experience for the customer. EIS offers pre-built, production-ready mobile and web apps that serve as templates for creating common processes and customer experiences. The result is an opportunity for the insurer to offer policies and services to prospects directly.

Embedded insurance represents an enormous opportunity for the insurance industry — it’s a promising way to distribute insurance policies more efficiently and effectively to those that need them. Embedded insurance offers customers the ability to secure affordable, relevant, and personalized policies when they need them.

Questions and Answers about Embedded Insurance

What is embedded insurance?

The embedded insurance model bundles insurance coverage with the purchase of a product or service. It is provided as a feature of that product, an incentive to purchase. For example, most car-sharing services come with auto insurance built into the price.

How does it work? How are P&C insurers integrating it into their portfolio of products?

An embedded insurance solution can be integrated into an existing system through an open application program interface (API). The availability of APIs can enable insurers to analyze data and offer relevant policies to customers at the point of sale. Other insurers will need to adopt a digital insurance platform to facilitate the service.

How does Embedded Insurance impact the customer experience?

Embedded insurance is about directing affordable, relevant, and customized insurance to customers when they need it most. Data in the form of browsing and transaction history can provide an accurate profile of the customer in order to streamline underwriting and create the basis for appropriate coverage.

It can be challenging to continuously find the right clients for their products, so embedded insurance offers a unique opportunity for insurers. To learn more about how insurers are adapting to an increasingly digital world and creating synergies to drive growth, contact us.

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