Product Distribution
  • Articles
  • December 2023
  • 4 minutes

Embedded Insurance: Closing the protection gap, one step at a time

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In Brief

The next generation of consumers appears primed to engage with embedded insurance products. Explore the opportunities and challenges around launching embedded products.

One of the strongest digital distribution strategies to emerge in recent years is embedded insurance, or the bundling of insurance with the sale of another product or service. This article revisits the typical structure and form of embedded insurance options, explores remaining challenges around launching embedded products, and offers case studies that have resulted in significant wins for both insurers and their third-party partners.  


A byproduct of the widespread digitalization in the insurance industry, embedded insurance has enabled new partnerships between insurers and non-insurance customer platforms. Online marketplaces and apps have enabled insurers to reach consumers where they engage and make online purchases. 

The next generation of consumers appears primed to engage with embedded insurance products. A 2023 report by Bindable found that 64% of millennials and Gen Z who had been offered the chance to buy insurance during a relevant purchase said it made them more likely to purchase insurance they wouldn’t otherwise seek out. Of those who purchased an insurance product, an incredible 94% said they did so because it was offered through a trusted third-party brand; the insurance provider didn’t matter to them.  

In response to these opportunities and evolving consumer attitudes, insurers have created an array of different types of embedded insurance, each with different levels of customer choice attached:  

  • Invisible (or truly embedded), where insurance coverage is rolled into the purchase of the product. For example, in the United States rideshare companies like Uber and Lyft are usually mandated by state law to provide coverage for their drivers and hence partner with insurers to provide such coverage. 

  • Affinity sales or platform sales, where insurance is offered on the website or online platform of a consumer brand. For example, digital banking leader Nubank partnered with Chubb to integrate insurance products within its online banking services. Insurance offers are customized based on the customer’s purchase history and spending power, allowing Nubank to seamlessly offer insurance to their warm customer base. 

    In-app or in-product, where an insurance offer is made via a non-insurance consumer app, either with an opt-in or opt-out option, providing the customer with a choice whether to accept the cover. Alipay, China’s leading mobile payment platform, has partnered with over 90 insurers to offer a its 500 million customers a variety of risk products within its app.  

Given the customer choice required on the latter two approaches, some may argue those options are not truly embedded in the strictest sense of the term, and are rather an example of affinity group insurance which is a well established sales approach for the industry .  An important component for these embedded insurance business models – where data plays a pivotal role – is to identify critical moments when a consumer has the highest propensity to click "YES" to an insurance offer, and to ensure the right offering is available. 

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Why is embedded insurance an attractive prospect for third-party partners? A recent RGA study found significant uplift for a mobile network operator (MNO) that tied a hospital cash offer to its own product offering.

Life insurance Industry perspectives and considerations 

Where are insurers in the evolution of embedded insurance options, and what does the future look like? In 2022, Celent took the temperature of eight leading executives in digital insurance, both property and casualty (P&C) and life carriers. Opinion on the market potential was varied with P&C executives being quite bullish on the potential, estimating it to make up more than 10% of the total insurance market, with life insurance executives being far more bearish than this.  

The panel’s life insurance executives pointed to regulatory hurdles as common barriers to embedded initiatives. Gathering enough data on applicants to facilitate underwriting of embedded products is also a challenge, they reported.  

Indeed, some P&C embedded offerings input data from easily accessible rating factors, such as driving data or miles driven collected by a tracking device. Helpful ratings factors for life insurance – such as age, gender, or medical history – are not as readily available when a customer opts in for an insurance product while buying a consumer product or service. Simple life insurance products can be priced without these factors, but such simplification can lead to higher prices for some subgroups relative to others. Another option to simplify the embedded insurance offering would be to consider accidental coverage only. 

Given the simplicity required for the products, the size of coverage for embedded policies is typically small. For that reason, viable, successful embedded offerings need the ability to scale. Without scalability, the low premiums of embedded products will not sufficiently offset the costs incurred by insurers and their partners to launch the offering.  

Another challenge connected to simple insurance products is that customers may misinterpret or misunderstand the limited scope of their coverage. This can lead to more submitted claims and more disputes about unsettled claims.  

Despite these challenges, embedded insurance is and will continue to be an important and developing distribution model, especially in the many corners of the market currently underserved by insurance. Embedded insurance can serve as a much-needed step toward life insurance protection. 

For example, in my home country of South Africa, the Association for Savings and Investments (ASISA) in partnership with True South Actuaries & Consultants estimated in their “2022 Life and Disability Insurance Gap Study” that the average South African income earner had a life insurance shortfall of at least R1 million and a disability cover gap of around R1,4 million. It’s worthwhile to note this is relative to an average salary amongst income earners of around R300,000 per annum. 

In response, one of the country’s largest retailers partnered with an insurer to offer a simple funeral insurance offering bundled into the purchase of groceries for customers who use a loyalty card and exceed an annual spending threshold. The insurance is funded by the retailer as a loyalty reward for its customers. At the same time, the insurer gains visibility and credibility among customers, a population it can later approach with data-driven upsell offers for more tailored coverage. 

As embedded insurance continues to evolve, our industry needs to be mindful of its key considerations and proactive about mitigating its risks. Embedded insurance is certainly worth further investment and investigation as a distribution strategy. By getting insurance into the hands of more consumers, our industry can help extend financial protection to underserved populations around the world.  

At RGA, we are eager to engage with clients to better understand and tackle the industry’s most pressing challenges together. Contact us to discuss and to learn more about RGA's capabilities, resources, and solutions. 

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Meet the Authors & Experts

Jaqui Wassenaar
Jaqui Wassenaar
Vice President, Head of Digital Distribution, Ventures and Partnerships (former)