Embedded insurance refers to the inclusion of insurance products within the purchase or use of another product or service. One of the most recognizable forms of embedded insurance is collision insurance offered by car rental companies to customers at the time of rental.
Beginning in the 2010s the widespread adoption of e-commerce and app-based services created fertile ground for embedding insurance into transactions seamlessly. Today, technological advancements and consumer demand for convenience have propelled embedded insurance into the mainstream, with market growth accelerating rapidly over the last five years.
Depending on the source, embedded insurance market is expected to grow from approximately $156.06 billion of gross written premiums in 2024 to more than $700 billion by 2029, a CAGR of 35%. With over 100 insurance carriers now underwriting embedded insurance products globally, this innovative approach provides coverage to consumers that is relevant, convenient and easily accessible.
What Is Embedded Insurance?
Unlike traditional insurance models, which require customers to seek coverage independently, embedded insurance simplifies the process by bundling protection into a primary transaction. This approach reduces friction for consumers while opening new opportunities for businesses to add value.
Examples of Embedded Insurance
- Travel Insurance: Ever purchased a plane ticket and been offered travel insurance at checkout? That’s embedded insurance in action.
- Smartphone Theft Insurance: Some smartphone brands, such as Samsung, offer theft insurance directly within their device management apps, allowing users to quickly protect their devices without visiting a separate insurer.
- Concert Ticket Refund Insurance: Event ticketing platforms, like Ticketmaster often include options for refund protection, covering cancellations due to unexpected events.
Types of Embedded Insurance
Embedded insurance can take several forms, tailored to fit the context of the primary product or service.
Product-Related Embedded Insurance
These policies are linked to physical products. For example:
- Subscription Box Insurance: High-value subscription services, like luxury fashion or tech gear boxes, often include embedded insurance for lost or damaged items during transit.
- Electric Vehicle Battery Coverage: Some EV manufacturers embed insurance to cover battery repairs or replacements, addressing one of the most expensive components of electric vehicles.
- Extended Warranties: Electronics or appliances often come with the option to purchase embedded insurance for repairs or replacements.
- Auto Insurance: Car dealerships may bundle an initial period of insurance coverage with vehicle purchases.
Service-Related Embedded Insurance
This type of embedded insurance supports services rather than physical goods. Examples include:
- Coverage for Gig Workers: Platforms like rideshare or delivery apps embed insurance to protect workers against injuries or vehicle damage while on the job.
- Telemedicine App Coverage: Digital healthcare platforms embed insurance to cover virtual consultations and prescription deliveries, providing users with accessible and affordable care.
- Fitness Equipment Insurance: High-end fitness equipment brands now embed insurance to cover damage or malfunction, enhancing customer confidence in their purchase.
Who Are the Biggest Embedded Insurers?
Embedded insurance has seen significant adoption across various industries, with key players emerging as leaders in this space. Below are some of the largest embedded insurance providers, along with their specialties and revenue insights:
- Cover Genius: This global insurer specializes in e-commerce and travel industries, offering embedded insurance products such as shipping protection and travel coverage. In 2023, the company reported gross written premiums exceeding $1 billion, making it a leader in scalable embedded solutions.
- Trov: Known for its flexible and on-demand insurance solutions, Trov partners with tech and gig-economy platforms to embed coverage for personal items, vehicles, and even liability insurance. Their partnerships with platforms like Waymo highlight their focus on innovation in mobility insurance.
- Next Insurance: Focusing on small businesses, Next Insurance embeds tailored insurance products directly into partner platforms like Intuit QuickBooks. This specialization in business liability and worker’s compensation insurance has helped the company reach a valuation of over $4 billion.
- Zego: A UK-based provider, Zego specializes in embedded insurance for gig-economy workers and fleet operators. With a strong presence in Europe, their product offerings include pay-as-you-go motor insurance designed for rideshare and delivery drivers.
- Blink Parametric: Focusing on parametric insurance, Blink integrates products like travel delay coverage into platforms such as airlines and travel booking sites. Their use of real-time data to trigger claims payouts makes them a unique player in the embedded insurance market.
Compliance Challenges in Embedded Insurance
While the opportunities are vast, embedded insurance also presents unique corporate compliance challenges. Businesses entering this space must navigate a complex regulatory landscape to ensure success.
Licensing Requirements
Non-traditional distributors, such as retailers or tech companies, may need specific licenses to offer embedded insurance. Compliance teams must stay vigilant in understanding state-by-state requirements.
Disclosure Obligations and Consumer Protections
Insurance laws and regulations require clear and transparent communication about insurance terms, ensuring consumers understand their coverage. Non-compliance can result in fines and damage to reputation.
Case Studies of Embedded Insurance Success
Several companies have mastered the art of embedding insurance into their offerings, setting benchmarks for the industry:
- Retail Giants: E-commerce platforms integrate insurance options during the checkout process, enhancing customer trust.
- Ride-Hailing Platforms: Leading rideshare companies provide embedded insurance to drivers, balancing operational risk and worker protection.
How Compliance Tools Ensure Success
Navigating the embedded insurance landscape is no small feat, but compliance tools can make all the difference:
- License Management: Automated systems track licensing requirements across states, ensuring your distributors remain compliant.
- Regulatory Tracking: Modern compliance software helps monitor changes in state and federal regulations, reducing the risk of oversights.
Conclusion
Embedded insurance represents a significant growth opportunity for businesses willing to innovate. By integrating insurance seamlessly into products and services, companies can enhance customer experiences and open new revenue streams. However, success in this dynamic space hinges on maintaining strict compliance with evolving regulations.
For insurance agency owners, license administrators, and compliance managers, understanding embedded insurance’s potential and challenges is key to staying ahead in this evolving market. With the right strategies and tools, your business can unlock new possibilities while ensuring regulatory compliance every step of the way.