The growth potential of embedded insurance is significant, with projections suggesting a Compounded Annual Growth Rate of 25% until 2030, potentially reaching over $500 billion in global premiums. 

This growth is driven by digital adoption and strategic partnerships between insurers and non-insurers, to leverage economies of scale and improve customer experience.

But where is the market going, and how are insurance and non-insurance brands alike approaching embedded innovation?

CEO of Root insurance platform Charlotte Koep says there are numerous examples of embedded insurance across sectors, and exploring them helps bring the concept and its potential to life.

Smart devices

“One compelling application of embedded insurance involves smart home devices like security cameras and water leak detectors, which can be bundled with property protection insurance. For instance, if a water leak is detected, the insurance coverage automatically covers the repair costs,” she notes.

Similarly, in commercial leases, landlords can embed liability insurance to safeguard tenants against injury or property damage claims. In the auto sector, ride-sharing companies are exploring embedded insurance to provide coverage for drivers and passengers during trips.

More than personal

Koep emphasises that embedded insurance extends beyond personal lines; for instance, specialist insurance provider CFC has launched transaction liability insurance embedded into online M&A platforms like Flippa.com. This enhances risk management for smaller businesses during mergers or acquisitions.

Another example is Nubank, a digital banking pioneer founded in Brazil in 2013, which serves over 40 million users across Latin America with a range of services including personal and business accounts, credit cards, investing, loans, and insurance. 

Nubank leverages its technological focus and customer trust to seamlessly integrate embedded insurance into its offerings through its partnership with insurer Chubb. Detailed customer data is used to create personalised insurance recommendations.

“Despite only 20% of customers initially having life insurance, over 70% expressed interest in obtaining coverage. Nubank has, in the process, differentiated itself from other online banks, deepened customer engagement, fostered brand loyalty, and generated additional revenue,” says Koep.

Keep it fair

She cautions that despite its promise, embedded insurance presents challenges, particularly regarding regulatory compliance and the ethical use of AI in risk assessment. Transparency is crucial to building consumer trust and ensuring fair treatment, she says.

“Looking ahead, embedded insurance represents a transformative force in the industry, and demands attention in boardroom discussions as a catalyst for growth and revenue diversification. By embracing this trend and fostering strategic collaborations, insurers and non-insurance brands can secure their relevance and leadership,” Koep concludes.

 “Those who choose to innovate boldly, by putting the relevance of the insurance products and the value they will deliver to the customer front and centre, will see the difference in their balance sheet.”