Insurers are crafty. They don’t wait for the consumer to contact them. Instead, they insert their product at the moment of purchase online, or bundle a service in with another company’s product line, so buying becomes a barely conscious act by the consumer.

This is embedded insurance.

You’ll see it if you fly Ryanair. The option to add insurance appears at checkout. It’s just a click to buy, with a prompt to nag consumers. Or take out a Monzo Premier bank account and you’ll receive free mobile phone insurance – no action required.

Embedded insurance is so well positioned you’ll barely notice you are acquiring it.

So why is embedded insurance such a hot topic? And is it good value for the consumer?

Information Age asked five leading industry experts to explain the spectacular growth of the marketing tactic changing the entire insurance industry.

Q: What are the best examples of embedded insurance?

Caleb Rockstone, Head of Insurance Vertical, EMEA, FIS:

“Major insurance companies like AXA, Allianz and Aviva are already taking advantage of this trend and collaborating with tech firms and e-commerce platforms to expand their reach and innovate their offerings. But at the very forefront of the embedded finance revolution are insurtech startups, who use AI and machine learning to create bespoke insurance solutions that integrate smoothly into consumer services.

The sectors that are the best examples of embedded insurance are:

Motor: Companies such as Tesla integrate insurance based on real-time driving data to offer personalized premiums.

Property: Platforms like Zillow and Redfin embed insurance directly into their real estate checkout processes.

Life and health: E-commerce platforms, especially those selling wellness products, offer life and health insurance at the point of sale.

Pet: Retailers such as Petco provide instant insurance options for pet-related product purchases.

Travel: Booking sites like Expedia integrate travel insurance directly into their booking systems.”

Q: How big is embedded insurance going to be?

Rory Yates, Chief Strategy Officer EIS, a global core technology platform provider for the insurance sector:

“Our research suggests it’s a $trillion opportunity. When I ran the aa.com, I conducted over 300 focus groups and nearly 1,000 in-depth interviews on how people buy insurance. We learned that you can increase conversion or purchase, but conversely it can result in a drop in satisfaction and importantly, understanding.

This taught us that friction can be important when delivered in a low cognitive-load experience that makes customers feel more certain about what they’re buying and acknowledged as people.

But embedded insurance is more than just the convergence of insurance with non-insurance products at the point of sale. It’s about embedding insurance into people’s lives. Embedded 2.0 is where the real opportunity lies.

In this next wave, we’re going to see exchanges of real-time data that impact the price of coverage, mitigate risk, and change the relationship between insurer and insured.  

A good example is embedding car insurance into our cars, to provide usage-based options, and risk-mitigating information, from the wear and tear of brakes and tyres, to highlighting safe places to park.

Another is tracking life changes like the purchase of a new house, which will directly impact the insurance needs of the customer, and ensuring the insurer can act on that change.

From the customer’s perspective, there’s real value. Communication from the insurer through mobile apps, text, portals, and dashboards can be used to mitigate risk, reward, and influence behaviour, lower insurance maintenance and operating costs, and reduce marketing noise.

Performance metrics, comparisons, rewards, and other gamification techniques will create even more customer engagement.”

Q: Do consumers really get good value from embedded insurance?

René Schoenauer, Director of EMEA Product Marketing at Guidewire:

“As with insurance policies sold through more traditional distribution channels, embedded insurance providers remain entirely focused on underwriting accuracy and efficient pricing. Indeed, given the lower cost of acquiring customers and the increasingly specialist nature of the insurance carriers that underwrite the risk, there is an argument that embedded insurance should be able to deliver lower expense ratios for insurers who, accordingly, will be able to offer customers better value whilst building a healthy book of business.

Another benefit to embedded insurance is that consumers can pick and choose the items that they want to insure. People may not want to pay for home contents insurance, but know that it is important to be able to insure their boiler, laptop, and television. Instead of choosing between having a home insurance policy or not, embedded insurance can deliver cover for those specific items at a lower cost.”

Q: Can consumers trust embedded insurance, when it is sold so subtly?

Nelson Castellanos, Chief Partnerships Officer (International) at HDI Embedded:

“Consumers get good value with embedded insurance for two main reasons. The first is trust. Customers want to buy insurance products from their trusted brands, not financial services and insurance organisations. Through embedded solutions, customers can stick to shopping with and purchasing from the brands they love and trust.

There is also no need to head to a physical outlet to buy insurance – customers get protection at the exact point of sale and the service or product will be covered instantly. There is a lot of value in this ease and simplicity. Embedded solutions do a lot of the hard work and it means safeguarding what you care about is no more complicated than ticking a box on purchase.

The second reason is data. Embedded insurance utilises customer data to provide bespoke costs and policies. Thanks to technology such as open banking APIs (which facilitate the data transfer between entities), tech players can assess the preferences of users, their needs and financial behaviour. Embedded insurance platforms can therefore make informed decisions and provide diverse and tailored offerings to consumers based on their risk profiles. With data being used to personalise policies, customers can obtain greater value through an embedded solution – which means that the ‘impulse purchase’ can often be the most cost-effective one.”