What Is Embedded Insurance? (Plus: How It Works)
Embedded insurance growing in popularity and interest in the digital insurance space and is a huge revenue growth opportunity. However, for businesses outside of the insurance industry, it’s not always clear what embedded insurance actually means. We’ll go over what embedded insurance is, how it works, and why it matters for your business.
Embedded Insurance Definition
“Embedded insurance” gets its name from being embedded into an existing purchasing experience, allowing customers to buy digital insurance without requiring them to go elsewhere to complete the transaction.
This is part of a growing trend of “embedded finance,” wherein customers are able to buy, sell, access credit, and interact with their bank through the platforms of non-financial companies. If you’ve ever ordered something from an app and paid for it without leaving the app experience, you’ve used embedded finance.
How Does Embedded Insurance Work?
Embedded insurance has a similar function and addresses many of the inconveniences that a consumer might face in a more traditional insurance-buying process. Typically, buying traditional insurance includes numerous disjointed, repetitive steps, such as navigating multiple websites, submitting documents multiple times, and even offline components, like calling an agent or faxing in forms.
In contrast, embedded insurance is available to buy when and where the customer needs it - usually when they’re making a related purchase. Rather than having to bounce between separate providers or experiences, embedded insurance allows customers to easily provide their information, get a quote, and receive their policy right from the website or app of the business they’re already transacting with. This ultimately makes the digital insurance purchase process easier for both the business and the customer.
Embedded Insurance Examples in the Real World
If you’ve ever bought a plane ticket online, you have probably been offered a protection plan or travel insurance policy as part of the checkout process. That's an example of a real-life embedded insurance product. Without leaving the airline’s purchase flow, you can buy insurance as part of the same transaction as your tickets. By simply checking a box, the price is added to your total cost, your trip is protected, and you’re sent an email with details on how to file a claim. That’s the convenience of embedded insurance for consumers.
Travel insurance is a common example that many people have encountered in their daily lives, but embedded insurance is actually on the rise across a variety of industries, including both B2B and B2C. Regardless of the type of business offering embedded insurance, the process is very similar: the customer is offered a way to seamlessly buy the insurance, at a time they’re likely to be interested.
Here’s another example, for a very different business type.
Let’s say John owns a certain amount of cryptocurrency, which he stores in a digital wallet on an exchange. With crypto theft increasing and few protection options available for the average consumer, John is rightfully concerned about the safety of his digital crypto wallet. One day, while John is checking his balance on the exchange website, he gets a pop-up notification about new crypto insurance coverage. He clicks on the pop-up and is taken to a product page within the same exchange website. He fills out a form, makes his first premium payment, and goes back to checking crypto prices.
The whole process takes him less than ten minutes, and now John’s crypto wallet is protected with the coverage that he needs in case of a breach. Meanwhile, the exchange has collected John’s customer data, set up recurring payments, and built a deeper customer relationship.
Why Embedded Insurance Works
If you’re looking for ways to increase your revenue and/or deepen your customer relationships, offering embedded insurance as a complement to your existing products or services is a great business opportunity. You may not be selling plane tickets or crypto, but chances are you’re offering something that could be protected by insurance.
If your company caters to pet owners, you could offer white-label pet insurance, and help your customers protect their pets’ health when they’re already making a pet-related purchase. If you manage a cryptocurrency exchange platform, you could offer crypto wallet insurance to help your retail clients enhance the safety of their digital assets. If you provide HR services to SMEs, you could offer parental leave insurance to help your clients affordably offer this highly desirable benefit, while you’re already helping your clients set up their benefits packages. The options are plentiful.
The greatest advantage that embedded insurance offers to your customers is convenience—they can easily get the protection they need for just a slight extra cost, and no extra effort.
The greatest advantage that embedded insurance offers to you is that it works to grow your revenue. By offering your customers a quick, easy, and beneficial product, you can tap into a new stream of revenue. And, by applying your knowledge of your customers’ needs and purchasing behaviors, you can get ahead of their concerns, offer them a valuable solution, and ultimately, increase their brand loyalty.
What Is White-Labeling for Insurance?
While there are multiple ways to approach embedded insurance, the fast and most cost-effective approach is usually white-labeling insurance products.
The concept of “white-labeling” is not unique to embedded insurance. A white-label product is a product or service that is manufactured by one company and then rebranded and sold by other companies.
For example, when you see food items sold with the Trader Joe’s logo on them, those products were most likely not produced by Trader Joe’s. They were white-labeled and then sold under the Trader Joe’s brand.
The reason for white labeling is that it saves the company a lot of work. Instead of Trader Joe’s having to produce every frozen spring roll themselves, own vineyards to source each bottle of wine, and employ all the people involved in manufacturing each product, they outsource that work to companies that specialize in producing those things, then white-label and sell the products that those other companies create for them.
With white-label insurance, the same idea applies. It’s theoretically possible for a company to build its own insurance product, but in most cases, it makes more sense to outsource that labor. Developing an insurance product is a complicated, expensive, and lengthy process with different legal requirements in each state. Instead of trying to take that on yourself, you could work with a company like Boost, who’s already done that work for you.