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Embedded Insurance: what is it and 5 reasons you should offer it

Blog Sep 13, 2022

Embedded insurance products – or coverages that are built into a product or service at the point of sale – are gaining strong traction in the marketplace among big-name insurers, smaller players, and even companies outside of the financial services realm. These insurer offerings can take the form of complementary add-ons, such as coverage for stolen smartphones, or a solution like built-in collision damage protection for a rental car.

As this is a relatively new way of distribution, there is a significant amount of interest in exploring such embedded offerings. Research shows that in the Asia Pacific region alone, the embedded insurance industry is expected to grow by 32.3% year-on-year to reach over US$50 million in distribution value by 2025. 

To enable these kinds of services, insurance companies are teaming up with underwriters and insurtech partners to integrate and develop these “plug and play” insurance products. This game-changing model is unlocking a wide number of opportunities for insurers of all stripes.

In this article, we’ll discuss how embedded insurance products are creating new opportunities for insurance companies, both large and small, and five reasons why you should consider providing such offerings. 

1. Know thy customer (better)

One of the core pain points that embedded insurance helps insurance companies to address is customer acquisition. In this area, the additional customer touchpoints made available by embedded insurance products and IaaS (Insurance as a Service) solutions serve to provide insurers with a broader arsenal of customer data to work with.   

This kind of data, along with technology tools such as artificial intelligence and real-time assessments, enables insurers to gain a better picture of their target consumer for more efficient lead generation. Insurers can leverage such timely data insights to provide more contextual and relevant insurance product recommendations to the end customer.

2. Customer-centricity brings about stronger conversion rates

Despite the fact that most consumers are aware of the need for insurance coverage, many are still putting off buying such financial solutions due to the process and paperwork involved.

According to research from LIMRA, nearly half of the consumers in the US have admitted to procrastinating when it comes to buying insurance products. Conversely, the same study also shared that 48% of American consumers have indicated that there is a greater likelihood of them buying insurance if the process is made simpler.

In relation to this observation, given that the embedded insurance model is one that tends to have minimal to no underwriting, this in turn reveals the potential breakthrough that the insurance industry can enjoy via such a distribution methodology. By reducing the friction around the underwriting process, there is a greater potential of a stronger conversion ratio that embedded insurance can have over those of insurance products distributed via conventional channels.

3. Every bit counts, towards narrowing the protection gap

While most insurance products aspire to be as comprehensive as possible, there is often a gap between the amount of insurance that should have been bought and how much is actually purchased. This “protection gap” is often found in coverage areas such as business insurance, healthcare, natural disasters, and mortality.

The gap is significant – data from Swiss Re Institute’s research shows that the protection gap is currently worth $1.2 trillion and has more than doubled over the last two decades. This gap is especially prevalent among small business owners, with research showing that only 21% carry much-needed policies such as professional liability insurance, 17% workers comp, and 6% business interruption insurance.

This presents a huge opportunity for more technology-savvy insurers who are capable of identifying where these gaps exist and collaborate with ecosystem partners or insurtechs to embed insurance products inside them, making those products easily discoverable to consumers and eventually, narrowing down the identified protection gaps.

4. For those ready, opportunities for distribution are everywhere

Technology such as open APIs and the clouds are rapidly opening new ecosystem opportunities for insurance companies who are already on future-ready technology stacks. With stronger tech capabilities, insurers can better integrate with ecosystem players such as third-party data sources, distribution partners, and insurtech platforms. This will enable them to roll out embedded insurer offerings seamlessly into partner ecosystems for marketing and distribution across a wider number of consumer touchpoints.

For example, accounting and financial SaaS provider QuickBooks recently partnered with insurance providers to launch an embedded insurance product for small and medium-sized businesses. The AI-powered integration allows the QuickBooks software to utilize customer data to identify and recommend the best insurance policy for QuickBooks’ customers, thereby expediting the application process. After the policy purchase, the customer can then view the details of the insurance policy directly via their QuickBooks account.

This model is a mutually beneficial one to both QuickBooks and its partner insurers as it allows the SaaS platform to have more robust offerings, whilst offering insurance companies access to new customer pools that originate from such non-conventional distribution channels.

Evidently, the advancement of such digital capabilities and the possibilities of deeper integrations between insurers and platform partners now allows for product and underwriting teams to develop more robust embedded insurance product for end customers. Beyond a one-size-fits-all product ethos, insurers can now better contextualize their product offerings to cater to what the customers really need.

5. Building in preparation for Generation Z

Millennials have already surpassed the Baby Boomer generation as the largest adult generation segment today. Also known as Generation Z, the group tends to be faced with a wide variety of insurance product needs at this moment in time, largely led by life transitions that occur at this age, i.e. buying their first car, starting a family, or purchasing a house.  

Insurers need to acknowledge the reality that millennials are steadily becoming the dominant buyer throughout the marketplace and are bringing with them a new set of expectations as to what the insurance industry should be providing.

Among the expectations for these “digital natives” is an online and often self-serve buying experience. A seamless customer experience is critical within a purchase journey and a poor customer experience can easily result in lost business opportunities for insurers. According to a survey, 41% of millennial policyholders surveyed switched insurance providers in a period of six to 12 months, and 76% changed providers within the past five years; with 22% leaving in search of a better customer experience, expanded digital insurer offerings, and even something as basic as payment options.

It’s also important to note that millennials tend to have less brand association when it comes to their familiarity with insurance companies. This is inverse to their ability to recall brands within the retail or lifestyle space, which they tend to encounter and engage with on a more regular basis. Through the advent of embedded insurance solutions, these trusted retail brands, which have a more effective hold on these consumers, have a stronger ability to function as insurance intermediaries to provide add-on embedded coverages; for example, e-commerce giant Shopify providing shipping insurance directly on their digital platform at the point of check out.


The proliferation of embedded insurance models offers a more in-depth understanding of the fast-evolving consumer needs and preferences. These solutions also have the potential to allow insurers access to large customer databases, along with new verticals that they may not have had access to before. For those insurers that are able to capitalize on such opportunities, there is a promise of greater growth on the road ahead. To best enable this vision, it is paramount to have the adequate technology capabilities that these new-age partners will demand. It is not absolutely critical, but with the fast-growing proportion of digital natives, digital readiness and participation will be key in ensuring long-term relevancy within the insurance industry and beyond.