Embedded Insurance

How to take the headache out of Embedded Insurance.

You can't miss it: the phrase Embedded Insurance appears on the scene more and more frequently and is often described as a megatrend, but what's actually behind it? We answer all important questions concerning all aspects of embedding insurance.
Published 01 Feb 2023
Embedded Insurance

What is Embedded Insurance?

Embedded insurance is a new concept for the insurance industry that allows companies to integrate insurance services directly into their own products and services. Companies can thus integrate insurance products directly into their product or service stack, providing their customers with an easier and faster way to get the insurance services they need.

Well, one thing is for sure: according to the embedded insurance concept, traditional insurance policies with inflexible insurance products, outdated technology and a lack of innovation belong to the 90s. And here are the benefits: Companies can use embedded insurance to increase customer satisfaction, reduce costs and generate additional revenue.

Why is now the right time to get into Embedded Insurance?

It's quite simple: digital transformation is here to stay and is obviously also impacting the insurance industry. This also has a major effect on customers' requirements for products and services. Gen Z and Alpha (the generations after Millennials) in particular are placing higher demands on companies than previous generations. These include having more options, a better understanding of insurance offerings, and a more user-friendly buying process. The solution to this is called embedded insurance. Embedded insurance offers new opportunities to reach and engage with customers. That's not all, there are also new ways to protect and support customers in the best possible way. On the one hand, companies can offer all-in-one packages that fully meet customers' needs by integrating insurance products directly into their customer journey. On the other hand, embedded insurance enables companies to reduce costs and improve the efficiency of their insurance business. Joining the embedded insurance movement, therefore, offers a host of advantages, which we will explain in more detail below.

Generally, however, the development is not only taking off in Germany but worldwide. More and more companies are using embedded insurance. This is why now is the perfect time to get involved with this topic so that companies don't miss out on this trend and the opportunities that embedded insurance can offer them.

How does Embedded Insurance work?

So, we know: with embedded insurance, insurance is offered directly together with a product or service. The insurance is embedded in the offering. Let's look at a few examples from a customer's perspective:

  • I buy an e-bike online and take out the appropriate insurance for my new bike directly with one click during the buying process and I no longer have to worry about taking out insurance separately.
  • The new iPhone is finally on the market, and with the right electronics insurance, I'm covered right from the start against damage caused by dropping my phone or moisture.
  • The next vacation is coming up. If I can take out the right travel cancellation and/or international health insurance right away while I'm doing all the planning during the vacation booking process, there's nothing left to do but relax.

These examples show that the embedded insurance solution offers huge potential for making insurance tailored, simple, and accessible to everyone. With the help of API connections or plug-in solutions, insurance is seamlessly integrated into the customer journey. Insurance is offered directly at the point of sale, as an add-on to the product or service. The insurance product acts dynamically and offers insurance that is tailored to the specific situation. Thanks to digital connectivity, ordering, payment, and providing all relevant documents, such as the insurance terms and conditions, take place in real-time for the customer. Claims settlement and customer support are also covered by the insurance companies, all digitally, of course.

This is how the customer journey for embedded insurance could look like:

Embedded Insurance Customer Journey

Embedded insurance for companies: Advantages and challenges

Advantages for companies summarised:

  • Increase market share through cooperation in the B2C and B2B sector
  • Seamless integration into existing infrastructure
  • Expanded offering and 360° service for new and existing customers
  • Expansion of the business field and new revenue streams for companies
  • Level of customisation corresponds to current customer needs
  • Covering financial losses, e.g. in the event of fraud, theft, travel delays, etc.

Whether services or products, embedded insurance gives customers faster and easier access to new, perfectly customised insurance benefits. Embedded insurance services shorten processes, save the company money and offer additional earning opportunities. The concept allows companies to influence and increase customer satisfaction.

Embedded insurance is also brilliant for companies because, according to surveys (in the insurance industry), it corresponds very closely to current customer wishes. They increasingly want products that cover financial losses, fraud and delays (e.g. when travelling). Customers also prefer to take out insurance digitally. Industry experts see a great deal of potential in particular for insurance policies that are rarely taken out (such as worldwide travel insurance), household contents insurance, extended warranties for high-priced consumer goods and insurance against cybercrime. Integrated insurance makes it possible to deepen and reshape relationships with customers and turn them into equal business partners.

Challenges for companies summarised

  • Possible excessive demands on customers must be avoided through clear integration
  • Human resources required
  • Level of individualisation must not be disregarded, offers must be tailored to customers and products
  • Requirements for the partner company's IT landscape must be fulfilled

However, offering product insurance directly with the purchase of the product can overwhelm customers. Clear implementation and integration are crucial here. However, companies also face challenges when implementing such a programme. For example, they need a lot of financial and human resources. If a ready-made solution already exists, it may not be as personalised to the customer as it needs to be. Ideally, integrated insurance should complement the services or products offered, but it could also lead to standardisation and mass processing. This means that the individuality that was intended is lost.

In addition, the IT landscape in many companies is not yet prepared for the processing of embedded insurance. Often there are still no strategic solutions that can be transferred to entire business areas. Instead, embedded insurance solutions are mainly offered by start-ups that are active in niche areas. 

Embedded insurance for insurers: advantages and challenges

Even if one might have the impression, that integrated insurance products are not a new invention. They have been offered as additional products when buying bicycles, glasses or smartphones for years. Whether the additional insurance made sense was a question that customers always had to answer for themselves. They often aroused disapproval because they seemed forced. As digitalisation progresses ever faster, insurance products can be integrated into the purchasing process as a matter of course so that customers no longer see them as a nuisance. The more precisely the insurance policy is tailored to the customer's needs, the easier it is for consumers to recognise their benefits.

Embedded insurance products save customers who decide to buy a bicycle, for example, from having to go to another provider to obtain the desired or extended insurance cover, for example against theft. Although bicycles and e-bikes are also covered by household contents insurance, separate insurance policies often offer extended cover. To do this, you take out the insurance policy directly when you buy the bike. They therefore receive the desired insurance coverage at the exact time they need it. This offer suits them, but also harbours the risk of "liability issues". After all, insurance coverage does not mean payment in every case. The first step is to clarify whether the manufacturer or, in the case of a bicycle for example, the household first has to provide cover.

The insurance industry hopes that embedded insurance will open up a huge new customer market. Especially in the banking sector, where trust plays a key role, integrated insurance strengthens the relationship of trust with the customer. Travel and insurance in particular seem to be two products that fit together quite naturally. Embedded insurance promises enormous growth potential, but also poses challenges for insurers.

Accelerated digitalisation is also opening up new opportunities for manufacturers of consumer and luxury goods, so they are keen to take full advantage of them too. This means that manufacturers could become competitors to insurers. Like other brands, Tesla wants to significantly expand its insurance activities and offers suitable insurance policies against damage when purchasing a car.

Comparison of the advantages of embedded insurance

Another problem is the underdeveloped IT infrastructure of many companies, especially large insurance companies when it comes to integrated insurance products. Many of the newly founded start-ups are streets ahead of traditional insurance companies in this respect. This can be seen very clearly in the travel industry. Almost all travel providers have already suffered from the sharp decline in bookings as a result of the coronavirus pandemic and are now having to rethink their distribution channels. Another disadvantage that insurers are accepting: As the insurance product is integrated and offered on a partner site, the insurer has no initial contact with the end customer. Customers often only come into contact with the company offering the product or service when making a purchase. The insurance company is, so to speak, invisible to the customer. Insurance companies are therefore also known as "invisible insurers".

In the eyes of some insurance companies, the biggest challenge is that customers must continue to be willing to share their data with them. This is because the fear of data abuse is growing, especially in Germany. Especially with subscriptions, payments are regularly triggered and sensitive data is exchanged. Insurers can counteract this by promising GDPR compliance and thus making a legal commitment to handle their customer data securely by the regulations. This can create trust with both the partner company and the customer.


All signs point towards embedded insurance - you can see and hear it everywhere. Digital transformation means that the insurance industry is also changing. Customers' requirements are changing towards "insurance at one click". They demand simple and digital insurance offerings, as well as a smooth purchasing process. With the help of embedded insurance, companies can meet these requirements.

The concept of embedded insurance offers companies the opportunity to easily and digitally integrate insurance into any existing booking processes and online shops. Companies can benefit in many ways by offering an all-in-one package: they can generate new revenue potential, save costs and efficiency, increase customer satisfaction and differentiate themselves from the competition.

One last question remains: What happens if companies miss out on jumping on the embedded insurance trend?

The situation is quite clear: it seems that the embedded insurance trend is becoming more and more important. Companies that stick to old traditions and miss out on embedded insurance may run the risk of not being able to maintain their market position in the future.

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