By Stephen Applebaum and Alan Demers —
Embedded insurance promises to disrupt insurance distribution as well as product. Moreover, it will help close the “protection gap” – which is roughly 50% of all economic losses not covered by insurance.
Accenture defines embedded insurance as “any insurance that can be purchased within the commercial transaction of another product or service.” That covers an enormous playing field.
Embedded insurance isn’t a new innovation. Purchasing life insurance at the airport before flight departure was “version 1.0” of embedded – a model that turned into an incredibly profitable business. Another evolving embedded model is auto insurance added at point-of-sale together with a new car purchase or lease. Again, not a new concept but a continuous area of interest with more recent insurer/car brand alliances. Such household purchases are one of those major life change moments with an opportunity to switch insurers, hence the constant attention.
Embedded Insurance Market: Big and Getting Bigger
The embedded insurance market size in terms of gross written premiums value is expected to grow from USD 156.06 billion in 2024 to USD 703.44 billion by 2029, at a CAGR of 35.14% during the forecast period (2024-2029).
According to Forrester’s recently released research report ‘Predictions 2025: Insurance’, next year insurers will continue to pass on higher costs of rising claims expenses to customers. Continuing demand for tech and product innovation won’t bear much fruit, despite higher budgets. AI adoption will play a subordinate role to other business priorities. Insurers will increasingly rely on embedded and usage-based products to drive top-line growth and improve customer experience.
The embedded insurance market is gaining traction due to several factors. First, it has offered a way to reach new customer segments and expand insurance coverage by embedding insurance products into popular platforms or products with large user bases. This approach has allowed insurers to tap into existing customer relationships and offer insurance solutions at the point of need or interest. Electronics, portable devices and appliance warranty protection is among the most popular and Allstate, in particular, is dominating the retail space with over 140 million customers since its acquisition of SquareTrade in 2016 for $1.4B. Last month Allstate Protection Plans acquired Kingfisher who repair, trade-in and upgrade mobile devices.
Embedded insurance addresses the issue of underinsurance or lack of awareness by providing coverage that is relevant and easily accessible to customers. Embedded insurance has even more potential to enhance customer engagement and loyalty. Insurers could create personalized and contextually relevant offerings by integrating insurance seamlessly into everyday products or services. Regarding market players, both traditional insurance companies and insurtech startups have been exploring embedded insurance opportunities according to Modor Intelligence research.
Embedded Auto Insurance
Embedded auto insurance integrates insurance offerings into the vehicle purchase journey, expanding the traditional F&I process. It not only makes the buying process easier for customers but also provides advantages for dealerships, from boosting customer retention to additional revenue opportunities. As mentioned, insurance offerings at point-of-sale is not a new concept. Greater digitization, real-time quoting, and ease of billing/payment are newer advancements and are making embedded models more effective.
Embedded Insurance Industry Overview
The embedded insurance market is lightly consolidated, with few players. Some major global players include Lemonade/Metromile, Slice, Hippo, and Root Insurance. In the study period, market players were also involved in mergers and acquisitions, and partnerships focused on expanding their presence in the market. The market is anticipated to present growth opportunities over the forecast period, which will ratchet up competition. Nonetheless, mid-size to smaller businesses are expanding their market presence by landing new contracts and breaking into untapped sectors thanks to product innovation and technology improvement.[1]
Embedded Insurance for the Mobile Connected Revolution
Rapidly evolving mobility trends, advancements in connected technology, and rising customer expectations are contributing to increased volatility in the still young embedded insurance ecosystem. According to Capgemini, the rise of autonomous, connected, electric and shared (ACES) mobility options are projected to reach 40% of the automotive market share by 2030. And 42% of policyholders expect a single policy that covers them regardless of transportation modes.
Per the McKinsey Center for Future Mobility, connected cars are expected to account for 90% of all new U.S. vehicle sales by 2025.2 Advancements in connected car technology are not only reshaping insurance products and distribution but also redefining consumer relationships and expectations. Original equipment manufacturers (OEMs) like Tesla and Toyota now embed insurance directly into new car purchases. According to the 2024 Embedded Car Insurance Study by Polly3, 81% of Millennials and Gen Z desire the option to purchase auto insurance as part of their car buying experience. In fact, 83% of these cohorts reported that they bought some type of embedded insurance with a recent purchase.
Adding or “embedding” insurance products directly into mobility services, including vehicle sales, ridesharing, car rentals, bike-sharing, and even public transportation systems, offers numerous benefits to consumers and service providers alike. Instead of requiring customers to purchase separate insurance policies, coverage is automatically included as part of the service, providing immediate and comprehensive protection. As demand for changing mobility grows, the potential for embedded insurance increases.
Some noteworthy embedded models:
- Liberty Mutual partners with Jaguar Land Rover North America to provide tailored auto insurance solutions for Jaguar vehicle owners in the U.S. during the car buying process
- Tesla comes with built-in insurance features
- Toyota Auto Insurance, underwritten by Toggle, a digital and embedded insurance company that is part of Farmers Insurance
- Carvana and Root: The e-commerce platform Carvana and insurtech carrier Root entered into an exclusive partnership in 2021 to develop integrated auto insurance solutions for Carvana’s online car buying platform
- Uber and INSHUR: INSHUR’s partnership with ride-sharing service Uber, formed in 2018, embeds insurance directly into Uber’s platform, providing on-demand drivers with streamlined, personalized insurance coverage that adapts to driving schedules
- Turo and Liberty Mutual: Turo, a peer-to-peer car-sharing platform, collaborates with Liberty Mutual to offer embedded insurance for its users.
As technology continues to advance and the mobility sector evolves, the direct integration of insurance products into mobility services will become increasingly common, offering enhanced convenience, personalized coverage, and new revenue opportunities for all stakeholders. Embedded insurance will be a transformative force driving mobility forward.
Where agents fit into an embedded insurance experience
Through our research on the insurance consumer, we’ve learned that while customers are increasingly comfortable with learning about insurance and comparing options online, they are often not ready to make a purchase before consulting with a human agent. Most customers still pick up the phone to a call center.
According to Accenture’s Insurance Consumer Study, 85% of consumers prefer to interact with a human when asking for advice on products or offerings and only 15% conduct their purchase solely online.[2]
If consumers are looking for human touchpoints when purchasing just one insurance product, they increasingly need guidance when combining multiple, more complex products. As the risk of being wrong about the type of coverage they need multiplies, customers want to be able to rely on a single source of truth to help them sort out their exposure and figure out how to be adequately covered.
We are sure that agents still have a significant role to play even as some products move towards embedded 3.0. Specifically, we believe that role includes helping customers understand their risk profile and how the coverages and products they buy explicitly or implicitly cover them—including where there might be overlaps in coverage. We feel insurers should pay attention to the relationship between agent and embedded, and the implications for carriers, agents and embedded distributors.[3]
Headwinds/Tailwinds and Challenges
It is reasonable to question embedded models’ potential distribution channel conflict, aforementioned licensed agent fit as well as the viability of enormous forecasted embedded premiums. Many are wondering just how much of new embedded premiums are a shift from other channels, thus negating net new gains. Or, will embedded serve as a catalyst for early adopter carriers to take market share from competitors? Meanwhile, threats of creating channel conflict which insurance agencies have encountered since the advent of carrier direct phone sales followed by the explosion of on-line options could be around the corner. Either way, agents are not only required to legally sell insurance, they are vital in navigating a myriad of insurance complexities and need to be included in embedded insurance model designs. This issue alone is a go-forward challenge for the industry, not to mention commission compensation paradigms to address.
The growing protection gap has never been more evident and is anticipated to accelerate. This has been widely demonstrated throughout the last several years with lack of flood insurance. Currently, insurers are re-tooling insurance policies to limit or exclude coverages in reaction to soaring loss costs and part of multi-pronged strategies to restore profits. Consumers and businesses alike are raising deductibles, dropping coverage and “self-insuring” to blunt the impact of seemingly endless premium rate increases. These tectonic changes set the stage for new insurance products ranging from parametric and interval coverage, gap protection and yet to be developed solutions – all of which are likely to be added on and outside of existing policies. The protection gap alone creates significant tailwinds for forward-minded carriers, MGAs and insurtechs willing to enter the P&C space.
Looking Ahead
Whether you are an insurer, insurtech, agent, broker, MGA, retailer, wholesaler or anywhere else in the insurance ecosystem and supply chain, you must invest now in learning how your business can participate in the embedded economy of the future.
References
1. Mordor Intelligence™: Embedded Insurance Market Size & Share Analysis – Growth Trends & Forecast (2024-2029).
2. Accenture Insurance Consumer Study: Guide insurance customers to safety and well-being (Jan. 20, 2021).
3. Accenture blog: Embedded Insurance: A Brief Overview.
About the Authors
Stephen E. Applebaum, Managing Partner, Insurance Solutions Group, is a subject matter expert and thought leader providing consulting, advisory, research and strategic M&A services to participants across the entire North American property/casualty insurance ecosystem focused on insurance information technology, claims, innovation, disruption, supply chain, vendor and performance management. Mr. Applebaum is also a Senior Advisor to Waller Helms Advisors. WHA is the premier investment banking boutique focused on the crossroads of the Insurance, Healthcare and Investment Services sectors.
Stephen is a frequent chairman, guest speaker and panelist at insurance industry conferences and contributor to major insurance industry publications and has a passion for coaching, mentoring, business process innovation and constructive transformation, applying disruptive technology, and managing organizational change in the North American property/casualty insurance industry and trading partner communities. He can be reached at [email protected].
Alan Demers is founder and president of InsurTech Consulting LLC, with 30 years of P&C insurance claims experience, providing consultative services focused on innovating claims. After initiating and leading claims innovation at Nationwide, Demers collaborates in the forefront of InsurTech, partnering with insurance leaders, startups, design thinking experts and service providers to modernize personal, commercial and specialty claims.
As Vice President of Claims Innovation at Nationwide, Alan conceptualized a vision and road map to build next-generation claims, automating and digitizing claims experiences, progressing from inception through prototype testing. He served as a founding member of the Corporate Innovation Council and played a key leadership role in establishing goals, practices and an innovative culture at Nationwide.
Alan is an accomplished executive leader and has worked for two separate Fortune 100 insurance companies in a number of corporate, national and regional leadership roles among personal, commercial, non-standard and specialty lines claims. Prior to leading claims innovation, he served as head of claims for Nationwide’s commercial agribusiness and non-standard claims. Other noteworthy roles include: field vice president, regional claims officer and national catastrophe director, quality assurance director.
Alan began his career with Aetna as a claim adjuster and advanced to a corporate claim consultant, prior to joining Nationwide in 1995.