Embedded Insurance

A dive into a personalized, integrated, and customized offering of Insurance

Various conversations at the InsurTech Connect conference in Las Vegas a few weeks ago sparked my interest in the Embedded Insurance space. The $3 trillion opportunity to create more relevant, personalized and affordable solutions for moments when people need it most is a natural extension to what the InsurTech industry at large is already doing: innovating. 

Broadly speaking, embedded insurance offers the functionality to include the cost of insurance into the unit price of an item. In most cases, this is done through third-party product or service providers that integrate insurance into a company’s customer experience and brand value proposition. By providing insurance at the point of purchase, customers are protected during unpredictable moments. 

The Growth 

Technology is driving the compounding growth in this market, and consumer demands are changing. While wearable technology and IoT sensors create new avenues of data sourcing, consumers are no longer interested in longer-term policies and fixed prices when it comes to insurance solutions. Increasingly, customers are demanding customization in their insurance products, as evidenced by the growing number of solutions that target more and more niche groups of customers. 

Embedded insurance is projected to grow by 6x or $722 billion in gross written premiums by 2030. This translates to a $3.6 trillion market opportunity today. Driven by mostly China and the United States, property and casualty embedded solutions could account for 25% of the total market worldwide. However, with new technologies and consumer demand providing further incentives for implementation, the industry is projected to be worth $7.2 trillion by 2030. In fact, a presentation by CoverGenius at InsurTech Connect touched on some of the changing customer demands which drive this industry forward. Through research, they found that 60% of customers prefer to buy protection from their favorite online retailers, and 48% of consumers purchase more if they were offered protection at checkout. The $7.2 trillion market is composed of embedded insurance, lending, and payment solutions, showcasing the growth and demand for embedded solutions across industries. 

The Protection Gap

Embedded insurance is especially effective in closing the large protection gap that exists across the insurance industry. The protection gap refers to the difference in the insurance coverage that is needed and what is actually bought by consumers. Today, the gap is estimated to be over $20 trillion worldwide driven by legacy players’ inability to match supply with demand and offer customized solutions. While embedded insurance by no means absolves the protection gap, it does offer solutions that would lead to improvements in existing business models accelerating the industry’s transformation. Through embedded insurance, customers would be provided insurance at the point of purchase easing existing supply and demand issues for insurance providers. 

Interestingly, studies conducted by CoverGenius highlight banks as a vehicle to bridge the protection gap. According to their studies, 45% of consumers indicated interest in bank-embedded insurance offers, but that number jumps significantly for customers who already get insurance from their banks. This trend is consistent across other areas where customers prefer their bank to offer embedded insurance solutions for purchases. Across the board, this study found that convenience was the primary factor in bank-embedded insurance. Trust was another notable factor in choosing bank-embedded insurance solutions as 49% of respondents stated they would trust their banks to protect data. As the growing number of individuals with bank-offered insurance increases, embedded solutions for customers are becoming an important consideration in continuing existing banking relationships. 

Post-Pandemic Impacts 

One of the primary discussions at the InsurTech Connect conference was the increased demand for embedded solutions following the pandemic. Research found that because many customers experienced the inconvenience of cancelled flights, reservations, shipments, along with widespread closures and delayed response times throughout the pandemic, the importance of having protection was fully realized. The unexpected inconvenience created when the pandemic hit last year, and the uncertainty the pandemic continues to have has caused more and more consumers to look for insurance solutions that can back their purchases. Many insurance providers, including CoverGenius, see this trend continuing post-pandemic as consumers now understand the meaning of and are afraid to experience again the “unanticipated events” that can create a sudden need for protection. 

Current Solutions 

The primary example of embedded insurance most people know most is AppleCare. With the purchase of an iPhone, customers are protected if there is any damage to the phone during a limited window of time. The price of this coverage is embedded into the unit price of an Apple product, but customers have the option to expand coverage depending on their needs. In general, this option has contributed to the increased brand loyalty and positive customer experience many Apple users share. Today, CoverGenius has established itself as the leader in all embedded insurance solutions. In conversations with Chris Bayley at the InsurTech Connect conference, he shared his company’s unique approach to the space and their steady expansion in coverage worldwide. With the array of successful partnerships they already hold, CoverGenius has already established itself as the leader in embedded solutions. 

In all, embedded insurance solutions meet customers when they need insurance most, creating more satisfaction, affordability, and personalized solutions in a brand’s proposition and overall experience. Further, my experience at the InsurTech Connect Conference was fantastic! Through various conversations with company founders and investors, I was able to further my knowledge and interest in insurance solutions at large. In particular, I am excited by all that I was able to learn about embedded insurance at the conference and I look forward to following the future of this industry’s growth.