Embedded Insurance 2.0: An Ecosystem in Evolution

Sibylle Fischer
June 29, 2021
Native, embedded and Insurance-as-a-Service (IaaS) offerings are continuing to change the way insurance products are bought, sold and distributed to customers.

Embedded insurance is everywhere. As technological advances continue to make industry entry less complex and costly, both new businesses and incumbents are introducing native, embedded and “Insurance-as-a-Service” (IaaS) options within their digital ecosystems. And it’s not just fintech disruptors and startups giving IaaS and embedded a try. Big and small brands (including many institutions outside of mainstream financial services) are adding partner insurance products and services to their lineup. Why? As the first wave of embedded products showed us, insurance doesn’t need to only be sold by incumbents with need for service initiated by the consumer. Trusted brands and non-insurers alike can partner with underwriters to embed insurance products and services at the point of purchase or natively within a product itself  changing the fabric of the traditional insurance distribution model and evolving the way customers experience insurance altogether.

Embedded insurance offerings on the rise

As businesses and consumers continue to accelerate their reliance on digital services, embedded insurance offerings are appearing in new and unexpected places. Because the embedded insurance model offers coverage or protections bundled within the purchase of a product, service, or platform (usually at point-of-sale or else as a native feature of whatever is being purchased) insurers and partners are able to serve or cross-sell relevant products seamlessly and broadly  virtually anywhere there is risk. The potential for embedded products, therefore, is similarly massive  with an insurance cover around practically every corner.

The Insurance-as-a-Service model

We already know embedded insurance allows incumbents to work collaboratively on platforms to differentiate, scale, and expand their offerings into new and emerging ecosystems. But as the Insurance-as-a-Service (IaaS) model grows in influence, an increasing number of non-insurers are offering direct sales of partner insurance products to their customers. IaaS is a completely digital, subscription-based offering that helps streamline aspects of the backend insurance infrastructure allowing non-insurers or other brands to offer easy-to-implement, pre-built, “plug-and-play” insurance products and services on their own platforms. Thimble is an example of an Insurtech company offering on-demand IaaS, allowing consumers to purchase insurance coverage for small business general liabilities, protecting against the risk of accidents like bodily injury and property damage that happen to a third party on a work site. Here, purchases happen through mobile devices with policies issued “in 60-seconds” and the ability to cancel or pause coverage at any time. Fintech company Credit Karma, meanwhile, is an example of a non-insurer expanding into the insurance space by offering discounted auto insurance policies (via their underwriting partner) based on usage of their 30-day driving trial, which provides real-time feedback on their driving through a proprietary app.

Embedded 2.0: open, innovative and on-demand

Open-APIs are an important piece of the burgeoning growth of IaaS. Open-APIs have been instrumental in creating novel products, microservices and business models that give insurers, insurtechs, banks and other start-ups the ability to create innovative experiences and revenue streams through the sharing of data. Lemonade, as one such example, leverages API-fication as part of its embedded offering, sharing its API for easy integration into any app or website. The combination of open-APIs with on-demand insurance products is contributing to the growing prevalence of a new kind of embedded solution that not only drives revenue and expands distribution efforts, but which also satisfies customers with cost-effective and seamless protections. Kasko, Flock, Ember, and Axle are all part of what we are calling Embedded 2.0 a new wave of data-driven, transparent and flexible Fintech and Insurtech product solutions, tailor-made for use within digital ecosystems. 

The upshot: while embedded services are changing and growing, the model and offering have more than proven their value. As we look to the future of embedded 2.0, expect to see companies both inside and outside of traditional insurance continuing to innovate to find new ways to service their customers better and more cost-effectively through personalization, automation, on-demand and embedded financial services.