Is Selling Embedded Insurance Right For Your Business?

With more and more companies taking advantage of the growth opportunity of embedded insurance, you may be wondering if it’s a good option for your business. 

Many types of businesses stand to benefit from offering embedded insurance, particularly those from outside the traditional insurance industry. Like any opportunity, however, some businesses will be a better fit than others. In this article, we’ll take a look at what kinds of businesses are good candidates for offering embedded insurance, and which might be better off exploring other options.

Why Businesses Should Consider Embedded Insurance

First, let’s take a step back and cover why embedded insurance is such a promising opportunity in the first place:

It’s a potentially large new stream of recurring revenue.

The insurance market is big and getting bigger, with the US property & casualty insurance market projecting $700B in 2021 gross written premiums¹. With traditional insurance providers frequently falling short of modern consumer expectations, the door is open for new entrants to grab a piece of the pie.

Offering embedded insurance allows businesses to tap into that large market as a new revenue stream. Since insurance customers will pay regular premiums on their policies, this translates into a steady flow of recurring income for the business.

It’s a great way to increase customer retention.

The more customers buy from you, the more they’re likely to keep buying from you. Insurance is also a sticky industry, with an average customer retention rate of 84%. Embedded insurance thus gives businesses a loyalty-building cross-sell product for their existing customers, both deepening the relationship with the customer and increasing the cost to switch.

It’s a valuable differentiator.

Helping your customers protect the things that are important to them is a way to set yourself apart from your competitors, particularly if you’re the first in your segment to offer it. Businesses that get started with embedded insurance early will have an easier time gaining new customers versus later competitors, who will have to convince people to switch.

Which Businesses Should Sell Embedded Insurance?

Embedded insurance is a great opportunity, but is it a great opportunity for your company? Embedded insurance is probably right for your business if…

You sell products or services that complement insurance

You’re already providing your customers with value. Providing them with the means to protect that value is a natural next step. With embedded insurance, you can meet your customers where they already are (at your point of sale!), and offer insurance at the time when they’re most likely to buy it.

For example, a company that sells pet products or services might also sell pet insurance that provides care for its customers' animals. At the moment they’re making a related transaction on the company's website, the customer could click a button and seamlessly be offered a policy tailored to their needs, increasing the probability that they’ll opt to buy. If the customer needs to later research insurance providers and call around for their options, they’re more likely to just not buy insurance at all.

This is true for services as well as physical goods. Neobanks, for example, are already selling financial health to their customers. Insurance is a natural complement to a lineup of products designed to protect and grow consumers’ finances, and offering it alongside the rest of the suite means reaching customers when they’re already thinking about their financial health.

Your business also has an advantage in that your customers already trust you, and thus are more likely to buy. In fact, 60% of US customers have indicated they’d prefer to buy insurance from non-insurance companies². Insurance is a relatively easy way to deepen that trust relationship with your customers, while also increasing your business revenue.

Your business has strong digital distribution

If your business already has robust online distribution channels selling to a large customer base, embedded insurance is a great opportunity to increase your average revenue per user (ARPU) or customer lifetime value (LTV). Selling embedded insurance adds a valuable new product to your mix, and creates a cross-sell opportunity that may not have existed otherwise.

Since you’re selling to your existing customers, embedded insurance allows you to grow your revenue faster without additional acquisition costs. For many companies, it provides a faster, less costly path to growth than expanding into new customer groups. And since customers tend to be loyal to the brands they buy the most from, embedded insurance also helps increase the likelihood that your existing customers will turn into repeat buyers.

You’re skilled at launching new products

If your company has a strong record of successful product launches, it’s a sign you know how to handle new business opportunities. That agility will help you get up and running quickly with a new embedded insurance offering, and position it to succeed.

Insurance is a product like anything else - it needs organizational support to thrive and reach its full potential. Companies that regularly launch new initiatives and have strong internal processes to drive successful new products are particularly well-suited to adding ancillary revenue streams from products like insurance.

Which Businesses Should NOT Sell Embedded Insurance?

As we’ve seen, selling fully-embedded insurance is a great opportunity for many businesses - but it’s not for everyone. For some companies, other paths to growth will likely be a better fit for their markets and objectives. Embedded insurance probably isn’t right for you if…

Your business is not willing to meet compliance requirements 

Like many financial sectors, the insurance space is heavily regulated. This provides important protection to both consumers and businesses, but it does mean the insurance market is less open-access to new entrants. With software, you can simply set up a website and start selling the product. With insurance, there are rules that need to be followed first.

With a supportive insurance partner to help you navigate the landscape, staying compliant doesn’t have to be complex or difficult. A good partner will help you determine what you need to do to get started (for example, you may want to get an insurance license for someone at your company), and will help you stay compliant once you’re in the market.

While your partner can help simplify compliance processes, ultimately your company will still need to take the necessary steps to meet them. If your company is unable (or unwilling) to follow the rules of the road, insurance won’t be a good fit for your business.

You plan to treat embedded insurance like a plug-in 

While embedded insurance can deliver a lucrative income stream, you can’t simply add a link on your website and wait for the revenue to start piling up. As we’ve seen, adding digital insurance is often a faster, easier path to growth than new customer acquisition. However, it still requires work on your part in order to be successful.

While the launch window is obviously very important, the resourcing need doesn’t end there. Like any product, your embedded insurance offering will need to be appropriately supported by marketing, product management, and other go-to-market resources, as long as you offer it. If your company isn’t able to provide that ongoing support, you’re unlikely to get significant results.

Your business is mostly non-digital

One of the biggest drivers of embedded insurance adoption is how seamless it is for the customer. Your company offers the insurance products in your own digital experience, when the customer is buying other goods and services from you, and the customer can then buy a policy with little-to-no friction. The ability to meet the customer with the right insurance product at the right time is a major reason why the customer is likely to buy in the first place.

If digital sales aren’t a big part of your business, then you lose a lot of that potential. If you can’t incorporate your insurance offering into a digital experience, it’s much harder to achieve the right time/right place factor that plays a big role in embedded insurance success. Without the point-of-sale convenience, your customers are stuck in the same routine as with traditional insurance: having to research and pursue an insurance opportunity after the fact.

If you believe embedded insurance could be a good fit for your business, explore what to look for in an embedded insurance partner or get started with Boost today. Still not sure? Here at Boost we’re always happy to consult. You can drop us a note any time.

¹ Triple-I/Milliman: Property/Casualty Underwriting Profits to Continue in 2021
² Bain/Research Now Insurance NPS Survey, 2018