There has been much buzz around embedded insurance over the last few years, but very little of the conversations enumerate the potential use cases across many industry lines of business. Historically, travel and warranty insurance are classic examples of embedded insurance. Hartford Steam Boiler (HSB) has embedded equipment breakdown insurance into other carriers' policies for decades. And auto dealers have offered insurance at the point of sale for many years. But the premium volumes from these more common examples are very low compared to the U.S. P&C industry, which is expected to top $1 trillion in 2024.
However, there is a great deal of experimentation underway, resulting in many innovative examples of embedded insurance (which can be defined as occurring within the same customer experience as an underlying purchase). Let's explore some of these interesting examples, and then return to the question of how much impact embedded insurance will have over time. Here are ten of many unique use cases of embedded insurance.
1. Aviva, Howden, & Sunsave — UK-based Sunsave provides a solar panel subscription that includes an embedded insurance solution for damage, theft, third-party liability and any financial losses due to the system not working for a prolonged period of time.
2. FirstVet and Fletch — FirstVet, a veterinary telemedicine company, has partnered with Fletch to provide their users with access to multiple pet insurance options that can be purchased through their televet platform.
3. Flippa and CFC — Flippa, an online mergers and acquisitions (M&A) marketplace for small businesses, has partnered with CFC to create an insurance product that protects sellers against risks associated with M&A deals, such as unintentional misrepresentations.
4. GradGuard and universities — Over 500 colleges and universities have partnered with GradGuard to provide tuition insurance to students and parents. Covered expenses include tuition, room and board, and other fees, and the option to purchase this coverage has been embedded into the enrollment process.
5. Gusto and Next Insurance — Gusto, a payroll API for accounting and bookkeeping, offers an embedded pay-as-you-go work comp solution via Next Insurance.
6. GVC Mortgage and Matic — By partnering with Matic, GVC Mortgage customers will be able to shop for customized rates and coverage options as part of their loan closing experience.
7. Shayp and bsurance — Belgium-based startup Shayp has a device that monitors water consumption in commercial buildings and identifies anomalies that may indicate an undetected water leak. They have partnered with bsurance to provide an embedded insurance solution that covers a customer's excess water bill resulting from an undetected leak (due to device failure).
8. Upper Hand and Pattern Insurance — Sports management platform Upper Hand has partnered with embedded insurance startup Pattern Insurance to offer its customers coverage for accident and registration cancellation.
9. uShip and Tint — uShip is an online transport marketplace that has partnered with Tint, an embedded insurance platform, to provide shipping damage protection to customers.
10. Vantage Recreational Finance and Ahoy! — Vantage, a financing company for the marine & RV industries, has partnered with digital MGA Ahoy! to provide embedded boating coverage through their financing platform.
As evidenced by these examples, the embedded proposition is brought about through a partnership of insurance and non-insurance providers. Also of note is that these solutions often extend into new coverage areas, or at least into areas that were previously a low priority for the industry. Since many of these examples would be considered micro-risks, agents and carriers have often ignored them. Now, however, the broad availability of digital platforms and the increasing affordability of deployment have made it feasible to offer solutions for micro-risks and remain profitable.
So, what will be the ultimate impact on the insurance industry? My prediction is that there will be a greater impact on customers than on the insurance industry. What I mean by that is that there are still many gaps in insurance coverage, so many of the exposures that individuals and businesses now effectively self-insure will become available and affordable in the future. From a P&C industry perspective, embedded is an important trend to be sure, and premiums will undoubtedly continue to grow. However, by 2030, we do not expect premiums from embedded models to "disrupt" the industry. That said, agents and carriers should not be complacent and should consider moving into the embedded space if it aligns with their strategy and expertise.
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