Embedded Insurance
Customized products to enhance your client relationship
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What is Embedded Insurance?
1. Market dynamics
The opportunity for insurers is big: in property and casualty, Embedded Insurance is expected to grow at CAGR 25% until 2030 and could account for over US$ 500 billion in gross written premiums globally by 2030, or 20% of the total market worldwide.
This sharp increase is in part driven by the shift from physical point of sale (POS) to embedded insurance.
2. What advantages does Embedded Insurance entail?
Behind the steep growth, there are key value-add factors that are beneficial to the insurer, the policyholder and the seller.
Embedded Insurance – The upcoming revenue stream Download PDF
What's in it for you?
- What is Embedded Insurance?
- Trends and market dynamics
- Opportunities and challenges for insurers and businesses
- Munich Re use cases and solutions
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Sectors where profound changes are happening
The concept of Embedded Insurance for OEMs is that the car comes equipped with a built-in insurance policy that covers the vehicle, driver and passengers for the duration of their ownership or lease of the car.
Additionally, car manufacturers have access to a wealth of data about their vehicles and their drivers and can thus offer insurance policies that are tailored to the specific needs and behaviours of each individual driver. For example, if a car manufacturer detects that a driver never engages in risky driving behaviours, such as speeding or sudden braking, they may offer a lower insurance premium to that driver, and vice versa. An example of a targeted offering is to propose travel insurance through the OEM app when the car is parked at the airport.
Embedded Insurance is the norm in the mobility sector, where customers get insurance coverage as part of the mobility service they are buying, cutting the need to buy a separate policy. This not only saves customers time and effort but also ensures that they are fully covered in case of an accident or other unforeseen events.
For most mobility business models, such as ride-hailing or car-sharing, the users usually do not notice what insurance premium they are paying, often only seeing a rate per minute, per km, or per trip.
In the property sector, Embedded Insurance is a game-changing solution. This can include everything from property damage and liability insurance to home warranty and appliance repair coverage.
One example is when landlords purchase insurance policies that cover the cost of damage caused by tenants, or other risks associated with renting out a property. The insurance policy is integrated with the rental agreement and is paid for by the landlord, supplying a convenient and seamless solution for both parties.
Utility providers are also exploring the use of Embedded Insurance to add value to their existing services and build deeper relationships with their customers.
One example is that some electricity providers offer their customers appliance repair and replacement insurance. Under this model, customers pay a monthly fee for coverage that will repair or replace their appliances in case of breakdowns or damage caused by power surges or other electrical issues.
Some utility providers are going further and are offering cyber insurance to their business customers covering the cost of data recovery, system restoration, and other cyberattack-related expenses.
By offering Embedded Insurance, retailers can provide coverage against damage, theft or other risks associated with their products. This instils confidence in buyers, encouraging them to make purchases with peace of mind. Once the customer selects the insurance option, the premium cost is added to their total purchase amount. The insurance coverage details are then provided to the customer, along with any terms and conditions.
In case of an incident or claim, customers can directly reach out to the insurance provider through the platform to initiate the claims process.
Challenges ahead
GCU offering
As the Global Consulting Unit of Munich Re, we support you to navigate the challenges ahead. Our Embedded Insurance solution team is fit to help businesses of all sizes integrate insurance into their products and services seamlessly. With our ability, businesses can improve customer experience, increase revenue, and mitigate risks.
- Global Consulting provides support as a strategic adviser with its technical experts and domain expertise, and as an implementer by exploring opportunities and assisting to set up the operating model.
- We enable clients through our technical product excellence across the insurance value chain from product development, underwriting, pricing and claims.
- We support the entire orchestration, providing a blueprint for implementation and working hands-on to bring a product to market.
- As our partners scale, we are actively monitoring and steering the portfolio. Our machine learning and artificial intelligence experts can further support our partners to enrich and understand the entire data landscape, as well as strengthen the decision-making process.
- Through its Munich Re network, Global Consulting also offers access to Managing General Agents (MGAs), Third-Party Claims Administrators (TPAs) or proven insurance infrastructure providers to seamlessly integrate embedded insurance throughout the value chain.
