'Composable Commerce' Drives Embedded Insurance

Insurance carriers leverage "composable commerce" solutions to accelerate embedded insurance partnerships and digital distribution capabilities.

Lakshman Nanduri

December 27, 2024

Most insurance carriers are focusing on opening new revenue channels by expanding their digital distribution, with particular emphasis on embedded insurance, leveraging their assets built over the years to gain a competitive edge.

According to a recent Gartner report, establishing digital platforms for ecosystem partners and customers is one of the top priorities for insurance CIOs in 2024.

With partnerships driven by application programming interfaces (APIs) becoming increasingly common among large personal and commercial line carriers, insurance CIOs face the challenge of introducing disruptive partnership approaches to the market to achieve a true competitive advantage.

This article discusses embedded insurance use cases, prevalent partnership approaches and technology solutions.

Embedded Insurance Use Cases

Embedded insurance is emerging as a highly effective digital distribution model, gaining traction due to the increasing relevance of ecosystem-based business models. Insurance companies are recognizing the potential of this strategy to drive distribution revenue.

Here are a few examples:

An auto insurance company partnering with another insurer to sell jewelry insurance.
An auto manufacturer collaborating with an insurance carrier to sell auto policies tailored to specific customer segments.
A small business SaaS provider teaming up with an insurer to offer professional liability coverage.
Retailers offering extended warranties as part of product sales.

Partnership Models

The two most prevalent partnership models for embedded insurance are API-driven and co-branding partnerships.

API-Driven Partnerships: APIs are playing a pivotal role in extending a carrier's product value chain capabilities to partners, with quote-and-bind APIs being major revenue drivers. Many carriers are building distribution API platforms that consist of APIs, a partner onboarding portal, a composable service layer and API lifecycle management automation. Partners can leverage these APIs to integrate the carrier's capabilities into their own platforms, enabling a seamless experience. However, this model often requires substantial development effort from the partner's side.
Co-Branding Partnerships: Carriers provide co-branded microsites, which can be embedded directly into a partner's website, offering a seamless, branded experience with minimal effort from the partner.

Disruptive Partnership Models Being Adopted:

Carriers offer quote web themes similar to WordPress themes, enabling independent agents and brokers to integrate them into their websites to enhance the customer experience.

Challenge: Time-to-Market

Due to the lack of an automated or accelerated process for developing and managing co-branded websites, time-to-market is often delayed for both product launches and partner onboarding.

Solution: Composable Commerce

Composable web architecture (also known as composable commerce) not only addresses these challenges but also accelerates product additions and partner onboarding processes.

Composable Commerce Platform: This platform enables partners to build co-branded quoting sites (also referred to as digital storefronts) by using templates and themes provided by the insurance carrier. Partner developers can deploy and test their storefronts after composition.
Microsites and Serverless Workers: Composed sites are deployed as isolated serverless workers, with client-side static content hosted in multi-tenant storage and styling stored in a centralized CMS. Partner-specific metadata is stored in a database, ensuring high availability, fault tolerance and agility in addressing partner concerns. These serverless workers, referred to as micro-front-ends, handle specific business capabilities based on the single responsibility principle. This enhances flexibility and reusability.
Backend for Front-End (BFF): BFF may be implemented if additional composition is required for the front end.
Product APIs: These APIs expose value stream functionalities specific to each product and maintain multi-tenancy at the product level.
Partner Metadata: This is fed by the commerce platform and used by the microsite for partner validation, content retrieval and routing.
CMS Integration: The CMS contains both carrier-specific and partner-specific content, exposed via APIs and consumed by the hosted microsites.
API Portal: A self-service portal that allows partners to subscribe, explore and test APIs independently.
Distribution API Layer: Although an additional wrapper on top of product APIs, this layer resolves quote workflows for partners, decouples partner-specific concerns, and facilitates consumption tracking and monetization.