Embedded Insurance Simplifies Protection With One-Click Coverage

Embedded insurance refers to the seamless integration of relevant insurance products within a product or service's purchase or usage journey. It means that instead of buying insurance separately, consumers get coverage built in as a part of the product feature as an add-on at the point of sale, which they can opt into or opt out of.

"Embedded insurance is typically a single-click feature. It usually includes key features; however, customers do not buy it without realizing it. They usually get an option to include this or opt out of it," says Amarnath Saxena, Chief Technical Officer- commercial, Bajaj Allianz General Insurance.

How It Works 

For example, when you are about to book a flight, you get the option of buying travel insurance along with it, or you get to buy an extended warranty along with the mobile phone. Embedded insurance is real-time and contextual. It's easier and makes more sense because the provider has the required information, and it is easier to get yourself covered by the relevant insurance products.

"As per the example above, if someone is booking flights, it has all your details, such as how many days you are travelling, where you are travelling, etc. So, it becomes easier to offer and bundle travel insurance with it for both parties' convenience. The good part is that embedded insurance is completely digital and is API driven," says Saxena.

The Benefits Of Embedded Insurance

"Embedded insurance can be very beneficial when executed correctly—it provides almost instant protection at the right moment, frequently almost at no cost. But it can only be good when it is relevant, understandable, and easy to claim. Embedded insurance mustn't be perceived as just an upsell," says Kunal Varma, CEO and co-founder of Freo. 

When a good product-market fit is present, embedded insurance provides advantageous outcomes for both the customers and the insurers. Phone damage protection plans provide great examples of this. 

This mitigates anti-selection and creates a large volume of consumers, making the insurance cheaper, potentially sustainable, and affordable than a stand-alone product. "For example, trying to source content ownership insurance for a Rs 20K phone after the purchase may be difficult. On an e-commerce platform, you usually buy the same coverage at the time of purchase," says  Pankaj Nawani, CEO, CarePal Secure. 

Millions of consumers purchase protection plans every year as they enter into the insurance ecosystem. "The customer has the opportunity to protect a prized possession at a price they are willing to pay. For insurers, the same consumer creates new accounts and product lines, which are perfect for cross-selling opportunities to sell other products. We think embedded insurance is a win-win for everyone," says Nawani.