Along with the technical and risk challenges for
Legal requirements can be an obstacle to even starting embedded insurance programs, according to Brian Casey, partner and co-chair of the insurance group at Locke Lord LLP. "Anti-inducement" laws make it difficult to bundle services, he said. "It usually gets into commission sharing laws and referral fee law. It can be challenging, but there are ways around it," he said.
Casey cautioned insurers against junk fees, negative options sales and dark patterns on websites (which means deceptive user interfaces), noting that these can attract attention from banking regulators, the Consumer Financial Protection Bureau and the Federal Trade Commission. "Those concepts could touch embedded insurance operations, so be careful with those," he said.
Insurers need to be conscious of conflicts between distribution channels, such as wholesale, retail and direct, but this is not insurmountable, according to Scott Whitehead, managing director at Markel.
"With embedded, you're inside an ecosystem, a marketplace or an association," he said. "It's not likely that somebody could buy it through their ecosystem, and that they would also shop as an independent agent."
It doesn't make sense for a carrier to refrain from embedding insurance elsewhere under the rationale that they are protecting independent agents, because those agents were not likely to get the business that comes through embedding for distribution, Whitehead explained.
"I look at it as a new opportunity for an alternative distribution, not a conflict," he said.
