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 new. 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 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 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 is expected to grow from $156.06 billion of gross written premiums in 2024 to more than $700 billion by 2029, a CAGR of 35%.
According to Forrester’s recently released research report "Predictions 2025: Insurance," next year insurers will continue to pass on higher costs of 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. Warrant protection for electronics, portable devices, and appliances is among the most popular; Allstate, in particular, is dominating the retail space with over 140 million customers since its acquisition of SquareTrade in 2016 for $1.4 billion. Last month Allstate Protection Plans acquired Kingfisher, which repairs, trades in, and upgrades 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. Both traditional insurance companies and insurtech startups have been exploring embedded insurance opportunities, according to Modor Intelligence research.
See also: Beyond the Hype on Embedded Insurance
Embedded Auto Insurance
Embedded auto insurance integrates offerings into the vehicle purchase journey, expanding the traditional F&I process. It not only makes the buying process easier for customers but provides advantages for dealerships, from boosting customer retention to additional revenue opportunities. While such offerings are not new, 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, as well as partnerships focused on expanding their presence. The prospects for growth will likely ratchet up competition, but mid-size to smaller businesses are landing new contracts and breaking into untapped sectors thanks to product innovation and technology improvement.
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 by 2030. And 42% of policyholders expect a single policy that covers them regardless of transportation mode.
The McKinsey Center for Future Mobility says connected cars are expected to account for 90% of all new U.S. vehicle sales by 2025. 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 Polly, 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. 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 is underwritten by Toggle, a digital and embedded insurance company that is part of Farmers Insurance
- Carvana entered into an exclusive partnership in 2021 with insurtech carrier Root to develop integrated auto insurance solutions for Carvana’s online car buying platform
- INSHUR formed a partnership with ride-sharing service Uber in 2018 to embed insurance directly into Uber’s platform, providing on-demand drivers with streamlined, personalized insurance coverage that adapts to driving schedules
- 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 revenue opportunities for all stakeholders. Embedded insurance will drive mobility forward.
See also: Embedded Insurance: Challenges and Opportunities
Where Agents Fit In
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. Only 15% conduct their purchase solely online.
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 toward 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.
Headwinds/Tailwinds and Challenges
It is reasonable to question embedded models’ potential distribution channel conflict, the fit for licensed agents, and the viability of the forecasts for enormous embedded premiums. Many wonder just how much of new embedded premiums are a shift from other channels, negating net gains. Will embedded serve as a catalyst for early adopter carriers to take market share from competitors?
Meanwhile, there are threats of channel conflict, which insurance agencies have encountered since the advent of carrier direct phone sales, followed by the explosion of on-line options. 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 challenge for the industry, not to mention the commission compensation paradigms that have to be addressed.
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, including 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.
