Is Selling Embedded Insurance Right for Your Business

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By Laura Knight on Nov 30, 2021

6 min read

A young businesswoman stands next to a large window in a skyscraper and gazes out contemplatively. She is holding a tablet in both hands and smiling slightly.

With more companies taking advantage of the growth opportunity of embedded insurance, you may be wondering if it’s a good option for your business.

Many businesses stand to benefit from offering embedded insurance, particularly those from outside the traditional insurance industry. Like any opportunity, however, some businesses will be a better fit than others. In this article, we’ll take a look at what types of businesses are good candidates for offering embedded insurance, and which might be better off exploring other options.

Why Businesses Should Consider Embedded Insurance

First, let’s take a step back and cover why embedded insurance is such a promising opportunity in the first place:

It’s a potentially large new stream of recurring revenue.

The insurance market is big and getting bigger, with the US property & casualty insurance market projecting $700B in 2021 gross written premiums. With traditional insurance providers frequently falling short of modern consumer expectations, the door is open for new entrants to grab a piece of the pie.

Offering embedded insurance allows businesses to tap into a large and growing market as a new revenue stream. Since insurance customers will pay regular premiums on their policies, this translates into a steady flow of recurring income for the business.

It’s a great way to increase customer retention.

The more customers buy from you, the more they’re likely to keep buying from you. Insurance is also a sticky industry, with an average customer retention rate of 84%. Embedded insurance thus gives businesses a loyalty-building cross-sell product for their existing customers, both deepening the relationship with the customer and increasing the cost to switch.

It’s a valuable differentiator for your business.

Helping your customers protect the things that are important to them is a way to set yourself apart from your competitors, particularly if you’re the first in your industry to offer it. Businesses that get started with embedded insurance early on will have an easier time gaining new customers versus competitors who start later and will have to convince people to switch.

Which Businesses Should Sell Embedded Insurance?

Embedded insurance is a great opportunity, but is it the right opportunity for your company? Embedded insurance is probably right for your business if…

You sell products or services that complement insurance.

You’re already providing your customers with value. Providing them with the means to protect that value is a natural next step. With embedded insurance, you can meet your customers where they already are (at your point of sale!), and offer insurance at the time when they’re most likely to buy it.

For example, a company that sells pet products or services might also sell embedded pet insurance that provides care for its customers' animals. At the moment they’re making a related transaction on the company's website, the customer could click a button and be seamlessly offered a policy tailored to their needs, increasing the probability that they’ll opt to buy. If the customer needs to later research insurance providers and call around for their options, they’re more likely to not buy insurance at all.

This is true for services as well as physical goods. Neobanks, for example, are already selling financial health to their customers. Insurance is a natural complement to products designed to protect and grow consumers’ finances, and offering it alongside the rest of the suite means reaching customers when they’re already thinking about their financial health.

Your business also has an advantage in that your customers already trust you, and thus are more likely to buy from you. In fact, 60% of US customers have indicated they’d prefer to buy insurance from non-insurance companies. Insurance is a relatively easy way to deepen your relationship with your customers, while also increasing your business revenue.

Your business has strong digital distribution.

If your business already has robust online distribution channels selling to a large customer base, embedded insurance is a great opportunity to increase your average revenue per user (ARPU) or customer lifetime value (LTV). Selling embedded insurance adds a valuable new product to your mix, and creates a cross-sell opportunity that may not have existed otherwise.

Since you’re selling to your existing customers, embedded insurance allows you to grow your revenue faster without additional acquisition costs. For many companies, it provides a faster, less costly path to growth than expanding into new customer groups. And since customers tend to be loyal to the brands they frequently buy from, embedded insurance also helps increase the likelihood that your existing customers will turn into repeat buyers.

You’re skilled at launching new products.

If your company has a strong record of successful product launches, it’s a sign that you know how to handle new business opportunities. That agility will help you get up and running quickly with a new embedded insurance offering, and position it to succeed.

Insurance is a product like anything else - it needs organizational support to thrive and reach its full potential. Companies that regularly launch new initiatives and have strong internal processes to drive successful new products are particularly well-suited to adding ancillary revenue streams like insurance.

Which Businesses Should NOT Sell Embedded Insurance?

As we’ve seen, selling fully-embedded insurance is a great opportunity for many businesses - but it’s not for everyone. For some companies, other paths to growth may be a better fit for their markets and objectives. Embedded insurance probably isn’t right for you if…

Your business is not willing to meet compliance requirements.

Like many financial sectors, the insurance space is heavily regulated. This provides important protection to both consumers and businesses, but it does mean the insurance market is less open to new entrants. With software, you can simply set up a website and start selling the product. With insurance, there are rules that need to be followed first.

With a supportive insurance partner to help you navigate the landscape, staying compliant doesn’t have to be difficult. A good partner will help you determine what you need to do to get started (for example, you may want to get an insurance license for someone at your company), and will help you stay compliant once you’re in the market.

While your partner can help simplify compliance processes, ultimately your company will still need to take the necessary steps to meet them. If your company is unable (or unwilling) to follow the rules of the road, insurance won’t be a good fit for your business.

You plan to treat embedded insurance like a plug-in.

While embedded insurance can deliver a lucrative income stream, you can’t simply add a link on your website and wait for the revenue to start piling up. As we’ve seen, adding digital insurance can be a faster, easier path to growth than new customer acquisition. However, it still requires work on your part in order to be successful.

While the launch window is obviously very important, the resourcing need doesn’t end there. Like any product, your embedded insurance offering will need to be appropriately supported by marketing, product management, and other go-to-market resources, as long as you offer it. If your company isn’t able to provide that ongoing support, you’re unlikely to get significant results.

Your business is mostly non-digital.

One of the biggest drivers of embedded insurance adoption is how seamless it is for the customer. Your company offers the digital insurance products in your own experience when the customer is buying other goods and services from you, and the customer can then buy a policy with little-to-no friction. The ability to meet the customer with the right insurance product at the right time is a major reason why the customer is likely to buy in the first place.

If digital sales aren’t a big part of your business, then you lose a lot of that potential. If you can’t incorporate your insurance offering into a digital experience, it’s much harder to achieve the right time/right place factor that plays a big role in embedded insurance success. Without the point-of-sale convenience, your customers are stuck in the same routine as with traditional insurance: having to research and pursue an insurance opportunity after the fact.

If you believe embedded insurance could be a good fit for your business, explore what to look for in an embedded insurance partner or get started with Boost today. Still not sure? Here at Boost, we’re always happy to consult. You can drop us a note any time.

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Ready for Liftoff: BHMS Backs Boost

Jul 31, 2024

Friends of Boost, Today Boost is thrilled to announce that we have secured a significant equity investment from BHMS Investments, setting the stage for an incredibly exciting next phase for this company and the amazing team that has built it brick-by-brick over the past seven years. With a rock-solid foundation firmly in place, this partnership is going to supercharge our growth, fuel more innovation, and cement Boost’s position as the go-to infrastructure platform in insurance. We are on a mission to empower MGAs, insurtechs, independent brokers and agents, wholesalers, embedded insurance providers, and really any company that just wants to build, transact, and operate more efficiently in this technology-enabled world of ours. While capital is great, today is about hard-earned validation for our team doing that the right way since Day 1. BHMS is the perfect capital partner for Boost in terms of their insurance expertise and unquestionable track record in the space, but more importantly, they are fantastic people that share both our views on the industry and our principles of company building. The market is dangerously fixed for early and growth stage companies right now (and I say “fixed” intentionally). It’s incredibly easy to get picked off in an environment like that, so it takes a rare mix of both intellect and character to do the right thing when you’re on the capital side of that equation - and even more to be truly value-add to your portfolio companies. BHMS has that mix in spades and appreciated Boost for what it is, what it has accomplished, and what remains an incredibly high ceiling for this company vs. playing short-term charades with the herd. That’s our kind of investor. This investment isn’t just about the money—it's a resounding endorsement of Boost’s strength, credibility, and potential to make a truly meaningful impact on the insurance industry at scale. With BHMS now on board, alongside an incredible group of long-time strategic backers like Markel, RenaissanceRe, and Canopius, we’re ready to take our game to the next level. Our mission has always been to disrupt the insurance space with cutting-edge tech and unparalleled service, and this backing proves that disrupting responsibly is the only approach that works in our industry. Anyone can grow fast if they don’t care about quality or long-term credibility. At Boost, we underwrite profitably, we respect compliance, and we always - always - take a collaborative approach with our stakeholders across the entire value chain. As someone with literally zero patience, I can personally attest to that being incredibly difficult to do at times - but it scales. Even with the market’s ups and downs, Boost has been a powerhouse of innovation in the insurtech landscape with equal commitment to disruption and reliability. Doing things the right way does not mean you cannot innovate - or even disrupt - and leveraging best-in-class technology is not a right reserved for #insurtechs. Our platform has always been a one-stop shop for insurtechs and embedded insurance providers and MGAs, independent agents and brokers, and wholesalers alike - offering everything from product development to underwriting and program management to claims administration and reinsurance capacity. With our proprietary tech and a dream team of industry pros, we’re delivering smarter, more efficient solutions than ever before. Since our first program launched in 2019, we’ve underwritten over $200 billion in coverage, which is a somewhat staggering figure in hindsight. Today we’re proud to support programs for giants like Amwins along with trailblazers like Cowbell, Newfront, and Wagmo, and we’re grateful for all of the companies that chose to build with Boost even when Boost itself was just getting started. Our steady, disciplined approach has kept our portfolio profitable and we like to think that has kept our partners in front of us very happy as well. All of Boost’s success is thanks to what is hands down the best team in the industry. Hard stop. Their grit, dedication, and willingness to tackle tough challenges head-on has been crucial. Boost’s commitment to quality starts with our team and is reflected in them every single day. We keep things lean at Boost because that quality always outperforms quantity. Even if that approach always requires more from each individual and makes the stakes a bit higher, working with the right people makes the returns on each long hour invested that much more gratifying. Few people exemplify those principles or have demonstrated such an unwavering commitment to Boost more than Jeremy Deitch, so I am also thrilled to announce that Jeremy has been promoted to President at Boost and will join me on our Board of Directors. Jeremy’s leadership has been critical since the day he started at Boost almost 6 years ago, following probably the most grueling interview process in our company’s history - one he is always happy to dramatize even more if you ever ask him. ;) I couldn’t be more grateful to have a partner like him as Boost soars to new heights. With this new investment, we’re geared up to boost (pun intended) our growth and expand our tech offerings. We’re planning to scale our MGA programs, roll out new products, and snap up some strategic acquisitions. Our goal? To make building a business in insurance easier, faster, and more efficient for everyone so they can better serve their customers. We’re more fired up than ever about our mission to empower insurance providers with the tech and infrastructure they need to thrive. This partnership with BHMS is just the beginning. The future is bright, and we’re ready to lead the charge. Thank you to everyone who has been part of our journey thus far. Let's all keep pushing boundaries together - because the best is yet to come. Special thanks to the team at Howden Capital Markets & Advisory for helping Boost always say what it’ll do and do what it says. You can find our full press release here and, more importantly, can start joining our platform here. All my best, Alex Maffeo CEO & Founder Boost Insurance

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What is a Cell Captive?

May 23, 2024

A captive is an insurance entity that a business creates, rents, or owns in order to self-insure risks. A cell captive, sometimes also called a protected cell captive or segregated cell captive, is a specific insurance captive structure that allows an entity to segment or separate business in one cell from that in another cell, so that a particular cell’s assets and liabilities are insulated from anything that happens in another cell (even if both cells are part of the same overall captive facility). Using captives to self-insure risk offers businesses a number of benefits: they can participate in some or all of their program’s underwriting profitability, maintain end-to-end control over risk (including pricing and claims handling), and avoid paying significant overhead fees to a “middleman” insurer. Companies have several options for structuring and utilizing an insurance captive. They might build a single-parent captive, pool risk in a group captive, or make use of a cell captive. In this blog, we’ll take a look at each. In a single-parent captive, a company will often partner with a fronting carrier to reinsure at least part of their own risk. These are most commonly used by very large companies with exposure to multiple lines of business, which they can insure through the same captive entity. Example: A national food-delivery business wants to provide insurance to its restaurant partners, to protect against the risk of lawsuits related to food safety for meals delivered through the service. It discusses partnerships with several major insurance carriers, but none are willing to provide the level of coverage that the business is looking for at a reasonable price. To get what it needs, the food-delivery business sets up a captive to reinsure a fronting carrier partner, enabling the business to insure its own risk and provide the coverage it needs to its restaurant partners. Setting up a single-parent captive is a considerable undertaking with high capital requirements and a complex setup, with significant ongoing operational requirements going forward. In order to make sense financially, it usually requires a high volume of premium. For that reason, this option is usually only viable for very large businesses. For businesses that can’t afford (either in time or in money) to set up their own captive, a second option is to partner with other businesses in a related industry to set up a group captive. In this scenario, a single captive maintains portfolio capacity that can be shared by a group of entities. The entities can then pool risk together in the single captive. Example: Several real estate companies form a partnership to share a group captive to pool their similar risks. Each company contributes a certain amount of capital to fund the captive, and the capacity is shared among the partners. The participating real estate firms are then able to leverage the captive’s capacity to exercise greater control over their risk, and avoid paying high fees to middlemen. This can allow the partner businesses to share risk (and benefits) between them, and works well for trade associations and other groups of companies in related industries, that share similar risks. However, since the fund is shared between partners as well, one partner’s negative returns can impact the other partners involved. In a cell captive, the business first sets up an entity called a core, which is a similar process to setting up a single-parent captive. Once the core entity is complete, however, the business can much more easily spin up additional cells within the captive structure. The financials for those individual cells are separate from each other, rather than the combined funding of a single-parent or group captive. For many companies, however, using a cell captive doesn’t mean building one themselves. While there are use cases for single-parent cell captives, most businesses that create them then rent out cells to other businesses. Using a cell in another company’s captive entity (also called captive-as-a-service) allows a business to reap the benefits of an insurance captive at a much lower cost. We’ll look at some examples in the next section. The first step in creating a cell captive is to create the “Core” entity. This process is similar to building a single-parent captive: Once the core captive entity has been created and adequately funded, the owner can spin up individual cells within the captive’s structure to support different lines of business, segments, or partners. The Department of Insurance will still need to approve all new cells, but the process is much more streamlined than in prior cases. New cells can often be set up in weeks instead of the months or years typically needed for entirely new captive entities. Captive cells’ assets and liabilities are then statutorily protected from each other (which is where the ‘protected cell captive’ name comes from). This means that if one cell has a difficult year and experiences significant underwriting loss, the assets of the neighboring cells can’t be used to fund that loss. There are multiple ways that cell captives are used, including offering captive-as-a-service (also called rent-a-captive) to other partners or businesses, and separating different parts of the parent company’s business for performance tracking. In a captive-as-a-service or rent-a-captive scenario, the company that owns the captive core would allow other businesses to use cells in its captive. For a fee, the owner can set up a new cell specifically for the partner business, and manage it on their behalf. This lets the partner business leverage the owner’s infrastructure to achieve many of the same benefits of a single-parent captive, without the cost and complexity of creating one. Example: An insurtech specializing in commercial insurance has built a very strong customer base, and wants to further grow its business by participating in some of its own risk. However, building a full captive is too resource-intensive for the insurtech to take on. Instead, the insurtech partners with a CaaS provider and rents a captive cell. The insurtech then uses the cell to self-insure some of its risks, enabling it to participate in the underwriting returns and further scale towards a full-stack insurance business. While the most common reason for building a cell captive is to rent out cells to other businesses, there are a few reasons a company might build one for its own use. Because the cells’ financials are statutorily separated from each other, a cell captive allows a large enterprise to delineate between different lines of business or geographic regions, and monitor their performance separately. Example: A nationwide property management company offers several insurance products to its customers to help protect their personal property and finances. For planning and budgeting purposes, each line is supported by an individual cell in the management company’s cell captive. Over the course of the fiscal year, several lines perform over their targets, while one line significantly underperforms. The other LOBs’ budgets are unaffected by the low-performing LOB’s losses, and the company has clear visibility into which of its products are doing well and which may need a course correction. Cell captives provide a number of benefits to both their owners and the end users: Cell captives are popular for a reason: they offer significant value to both the companies with the resources to build them, and the companies that would rather rent a cell than build a single-parent entity from scratch. To learn more about Captive-as-a-Service with Boost, contact us.

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Partnerships and Focus: Big Trends at Money20/20

Nov 3, 2021

It was a busy October for the team at Boost Insurance, wrapping up with one of our favorite industry events: Money20/20. The conference was a super interesting contrast to ITC which was laser-focused on insurance, while Money 20/20 was more about fintech in general and much, much bigger! With fintech about ten years ahead of insurtech in terms of maturity, it’s interesting to see the level of innovation and diversity of companies in our big brother industry. Here are some of the big trends we noticed. One of the really interesting trends that kept being repeated at Money20/20 was a shift in mindset among both fintechs and banks. In the past, they have tended to see each other as competition for consumers’ business and attention but now everyone is moving towards viewing each other as complementary vs. competitive. We saw multiple collaborative efforts between the upstarts and the established, working together to create a better customer experience. This works because they each have a specialization (fintechs excel at meeting modern consumer expectations and banks are experts in profitably navigating a very regulated, very complex business), and partnership lets them bring both those strengths to the table. This was extra interesting to us at Boost because it reflects what we see in insurance, with insurtechs and carriers working together and bringing their own strengths together to meet modern consumer needs and expectations. For example - Boost has built a modern tech platform making various insurance products available via API but partners with established reinsurance companies to facilitate risk transfer. There will still be winners and losers between the incumbents and the upstarts, but as collaboration and competition continue consumers will be the clear winners. A trend I’ve written about before, and one that we continue to see play out, is tech companies’ focus on affinity groups. Fintechs are springing up all over with explicit goals of serving a relatively narrow group of people and serving them well. Companies like Paceline for people focused on health and wellness, Daylight for the LGBTQ+ community, and First Boulevard for African-Americans are just some of the fintechs concentrating on being the best option for a specific set of consumers. This is pretty much the opposite of traditional one-size-fits-all programs - instead of creating something broad that can be good enough for the biggest slice of people, creating something very targeted that can be great for a specific niche. This trend is great news for consumers who traditionally have not been served well by financial services in general. At Boost we’re starting to work with more affinity-focused companies because our modular, customizable product structure allows partners to tailor insurance for their customer needs. It’s exciting to be part of making insurance more accessible to all groups of people! Finally, it was really exciting and validating to see so much interest in new approaches to traditional industries. Finance and insurance have historically had a reputation for being very slow to change, sometimes for good reason (highly regulated, handling people’s money is a big responsibility, etc). This year though there’s a ton of interest in potential innovations, look no further than the enormous presence of blockchain and crypto-focused companies at Money20/20! Boost met with a TON of different companies during the show, and we cannot talk about anything yet but be on the lookout for some very interesting things coming in the near future! Money2020 was a heck of a conference and while my conference year is wrapped, the Boost team will be out and about at shows the rest of the year. We are looking forward to more opportunities to meet people in 2022, so if you did not get a chance to connect with us at Money2020, just drop us a line.