Embedded Insurance 2.0 (EI 2.0) represents an innovative approach to partnering and collaborating with various third-party brands, regardless of their size, to assist them in expanding their businesses, developing attractive new protection options for clients, and ultimately bridging coverage gaps. It leverages digital technology and data in novel ways to enhance underwriting models. This results in improved customer experiences, more effective marketing, better risk assessment, optimized pricing, and favorable unit economics. Read on for a full breakdown.
A New Blueprint for Brand Collaboration
Embedded insurance complements partnership programs but differs in several fundamental ways:
Purpose: Its main goal is to help brands and customers find multiple specific solutions from many different sources beyond buying standard risk transfer products from a single provider.
Technology: Using a new operating system design that can connect consumer demands with supplies from multiple providers.
Skills: A new direction requires building digital marketing and sales skills, plus bringing greater ease to data analysis and product creation alongside digital underwriting.
Monetization: The model consists of a Software-as-a-Service fee included in Gross Written Premium and Assets under Management revenue sharing.
The Macro Forces Behind the Shift in Insurance Integration
Embedded insurance is a component of the larger movement known as ‘Embedded Finance,’ which is rapidly growing in various industries due to four main influences:
Technology Sophistication:
Organizations can split and turn their financial service capabilities into software tools so outside teams and product owners can design modern digital solutions faster at affordable prices.
Increasing Commercial Demand:
Traditional businesses find it hard to succeed digitally, which pushes third-party brands to market digital financial services for higher profits and better customer satisfaction. Tesla and other firms are looking into creating their own insurance departments as they try to design a complete brand experience with all related benefits.
Growing Societal Need:
Protection gaps grow larger each day between what people and companies own and what they need for secure financial survival because social and technical changes make safety needs harder to meet worldwide.
Investors Seeking Safer Returns:
Intelligent investments are moving towards more sustainable “B2B infrastructure” opportunities, shifting away from the riskier direct-to-consumer ventures.
The Rise of Operating Systems as the New Value Control Point
A new ‘value stack’ is emerging in the insurance sector, with the ‘Operating System’ layer becoming the main control point. This layer will manage various modular products and services for brands, online platforms, and customers.
Operating Systems will increasingly leverage real-time data to enhance the matching of solutions to clients at optimal moments. The market is still developing, driven by start-ups experimenting with diverse business models. Some larger start-ups have secured significant contracts from traditional players, especially digitally native companies seeking innovative, tech-centric protection options.
This value stack is expected to mature in the next five years. The key players are those who manage operating systems, which are less capital-intensive than traditional risk-bearing businesses. However, established insurers currently lack the expertise needed to create and manage these systems and must acquire it quickly.
The Growth Outlook for Platform-Integrated Insurance
The analysis indicates that approximately 60% of the non-life insurance sector (including property and casualty, business, and commercial) and 30% of the life insurance companies (comprising life coverage, pensions, and annuities) are accessible to platform-integrated protection.
Based on the discussed trends, it is projected that by 2032, embedded warranty could represent around 16% of the global distribution market, equating to about $1.5 trillion in gross written premium.
Particularly in certain Property and Casualty markets, this share could be closer to 30% of the total, primarily at the expense of tied agents and branch channels.
In the United States, the market for embedded insurance may reach $150 billion within the next five years, increasing to $500 billion by 2032. In Europe and China, estimates suggest that the market could reach approximately $60 billion by 2027 and $200 billion by 2032 in each region.
Additionally, platform-integrated protection is believed to have the capability to expand the overall insurance market as a proportion of global Gross Domestic Product, potentially contributing an extra $1 trillion in net new gross written premium to the industry by the end of the decade, largely by utilizing the outreach of digital platforms in emerging markets.
In key regions, this industry is set to capture a significant market share by 2032. See the table below, which indicates the estimated market share of different regions by 2027 and 2023.
Region | 2027 Estimate | 2032 Estimate |
United States | $150B | $500B |
Europe | $60B | $200B |
China | $60B | $200B |
Source: Simon Torrance. 2022
Unlocking Value Across the Ecosystem
As embedded insurance becomes more pervasive, it will bring significant benefits to multiple parties, as follows:
Brands (across all sizes, sectors, and regions): Innovative policies and risk management solutions will enhance customer offerings, differentiate brands, create recurring revenue streams, and improve business models. New operating systems will enable faster, simpler, and more cost-effective platform-integrated protection.
End consumers (both general public and businesses): Better access to straightforward, affordable, and convenient options that are more aligned with their changing needs and circumstances, as well as available and usable at contextually relevant times.
Insurers: They will gain increased adoption of insurance and risk mitigation by a broader range of individuals, businesses, and customer segments. They will also experience reduced costs for accessing real-time third-party data to enhance underwriting models. Opportunities to develop new, higher-margin revenue streams will arise. There will be a chance for expedited learning on how to operate software-driven business models. Additionally, insurers can attract new entrepreneurial and digital talent, along with increased investment in their solution.
Investors: Greater assurance and improved returns as the insurance sector showcases a novel approach to innovation and growth, with new business models validated and economic profitability on the rise.
Authorities and communities: An increasing number of individuals and enterprises receive improved protection, and potential policy gaps can be tackled more efficiently.
Problems and Opportunities
Risk mitigation is essential for economic stability and supports the UN’s Sustainable Development Goals. However, the industry’s current value creation model fails many stakeholders. EI 2.0 offers a new approach to tackling these challenges:
Low Adoption and Negative Perception
Problem:
End customers often view insurance as:
Complex, expensive, and difficult to navigate
Frustrating, especially during the claims process
Outdated, compared to their rising digital expectations
Opportunity:
You can partner with trusted brands to deliver:
Simple, affordable, and contextual protection options
Intuitive, virtual, native experiences
Greater awareness and understanding, especially in underserved markets
Growing Protection Gaps
Problem:
Global risks are becoming more complex due to:
Aging populations
Climate change and natural disasters
Evolving work patterns and economic volatility
Opportunity:
Use embedded insurance to reach new segments and close coverage gaps through:
Real-time data
Flexible digital distribution
Scalable embedded models in both developed and emerging markets
Brands Are Struggling with Digital Transformation
Problem:
Big and small brands alike face:
Shrinking profit margins
Pressure to differentiate and retain customers
Rising service delivery costs
Opportunity:
Enable new monetization models by:
Embedding value-added protection products
Enhancing loyalty and retention through better buyer journeys
Leveraging Operating Systems that reduce time, cost, and complexity
Insurers Lack Growth and Digital Expertise
Problem:
Traditional insurers struggle to:
Find profitable online channels
Access real-time customer data
Partner effectively beyond basic distribution
Opportunity:
Reimagine value creation by:
Collaborating more deeply with brands
Investing in digital underwriting, marketing, and analytics
Accelerating shift to software-driven models with higher margins
Real-World Examples of Embedded Insurance in Action
An example of embedded insurance is represented by Alipay, developed by Ant Group, which collaborates with over 90 providers to provide 2000 affordable plans for 100 million uninsured rural Chinese. This year, it made over $8 billion by selling data analytics to Chinese firms, including bespoke savings plans such as ‘Quanminbao’ (a pension annuity for 15 cents) and ‘Haoyibao’ (lifetime cancer insurance for around $15 per year).
Ant’s insurtech features are integrated into Alibaba’s Taobao, offering small businesses cost-effective shipping and a return warranty. Following the onset of the COVID-19 pandemic, Ant has sold many business interruption policies to offline retailers for quick payouts.
This strategy boosts insurance adoption and addresses local protection gaps, making Ant the largest online insurer in China with over 500 million consumers. Insurers benefit from low-cost access to clients, innovative product development, improved pricing, and enhanced claims management through advanced technologies like Natural Language Processing and Machine Learning.
What Sets Successful Platform-Driven Insurtechs Apart
Successful embedded warranty start-ups combine strong tech talent with underwriting expertise and invest heavily in data science and digital marketing to serve customers in innovative ways. For instance, Tesla is hiring actuaries and asking them to come up with policies that bring down prices based on driving behavior.
Many platform-integrated protection innovators are building their technology stacks for a competitive edge. Branch quickly bundles home and auto coverage with its custom stack, while Cover Genius’s X-Cover platform enables unique solution bundles from various insurers. In India, Riskcovry offers an ‘Insurance in a box’ platform linking over 70 brands with 50 carriers for under $3 million.
Product Agnostic
An all-encompassing API streamlines the launch of comprehensive programs. Recently, BoltTech helped an Asian fintech launch 12 offerings within weeks, while REIN enabled insurers to release new solutions through digital channels in the same time frame.
Omnichannel
EI 2.0 leverages advanced virtual technology to enhance consumer engagement. Insuritas provides white-labelled insurance agencies for over 250 small US banks and credit unions, improving sales and claims through integration with bank CRM systems.
Rapid Solution Testing and Launching
Integrating products into customer journeys can take years. Smaller, non-digital brands need cost-effective tools for a quick ‘product-market fit.’ For instance, Qover enabled an e-bike retailer to introduce a point-of-sale package, increasing earnings before interest, taxes, depreciation, and amortization by 25% within months.
3rd Party Data Utilization
Insurtechs can reduce costs and price risk better with unique, real-time data. For instance, a US insurtech company specializing in liability has a loss ratio half that of traditional carriers in the same country, and a healthcare insurtech in Asia can keep loss ratios below 30% through better targeting.
Managing Risk Carrier Supply
Leading insurtechs coordinate multiple carriers and may develop their software when requirements are unmet. Companies like BoltTech and Cover Genius maintain balance sheets for flexibility, while MIC Global has its Lloyd’s syndicate to creatively price new risk solutions.
Growth of Embedded Insurance Investments
These strategies have made embedded insurance the fastest-growing segment in insurtech, with a Compound Annual Growth Rate (CAGR) exceeding 70%. The table below shows investment increases over the years (in USD millions), demonstrating a shift towards B2B infrastructure over direct-to-consumer models:
Year | Investment (USD Millions) |
2015 | 0 |
2016 | 40 |
2017 | 78 |
2018 | 189 |
2019 | 302 |
2020 | 503 |
2021 | 717 |
Source: Embedded Insurance 2.0 Market Map
Conclusion
The discussion about embedded insurance focuses on how brands and clients can better manage risk while also preserving existing niche products. As awareness of these opportunities grows, demand for integrated protection platforms will rise, coming from both new companies and traditional insurance providers.
Although still in its early stages, the innovation ecosystem—often referred to as the ‘EI 2.0 Continuum’—is being led by agile start-ups. With the new operating systems, brands can combine different policies, create new revenue streams, enhance customer experiences, ensure compliance with regulations, and build customer loyalty.
