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There’s no debate about the importance of insurance in our daily lives. Insurance companies evaluate the risks people face every day, and as it turns out, almost anything and everything can be and is insured. From athletes insuring specific body parts to Lloyd’s providing insurance against alien abductions, the world of insurance is one of the longest-enduring financial industries.
It stands to reason that in 2025, customer preferences are changing not only what is insured, but also the process of accessing coverage. In our fast-paced, tech-driven world, consumers don’t want to spend hours on the phone and wait days for a quotation.
Embedded insurance satisfies that need. Within minutes, consumers can purchase a product and have it insured in one seamless transaction. This fast-growing solution is gaining traction and is projected to grow from $210.90 billion (2025) to $950.59 billion by 2030.
Here’s a quick look at embedded insurance and the opportunities and challenges it presents to insurers and consumers:
What is embedded insurance, and why do consumers demand it?
Embedded insurance, refers to the integration of sales transactions into the underwriting process. This happens simultaneously and enables a seamless, automated process that is customer-centric. A good example of this is insuring a car at the same time as purchasing it or buying travel insurance while purchasing flight tickets.
This Insurtech innovation has been at the helm of responding to customer preferences and has been a game-changer in the insurance field. Prior to its development and subsequent widespread use, clients would have to conduct two separate actions in order to make a purchase and then cover it.
This process has a lot of friction and as such causes frustration. Sticking with the auto insurance example, a driver would, for instance, need to have multiple details on hand to conclude a transaction successfully.
With embedded insurance, coverage is just a few questions and clicks away. This tech-driven approach is essential to responding to changing customer preferences.
Technology’s role in the embedded insurance evolution
Artificial intelligence, machine learning, the Internet of Things, and cloud technology are what enable embedded insurance. These tools allow insurers to extract relevant data from third parties, automate the quote process, and embed coverage into a product’s purchase.
This has revolutionized the insurance industry which previously relied on customers to furnish details relating to risk and coverage. Simply providing a quote was a lengthy process as underwriters would have to gather responses from customers and evaluate risks over a period of days before they could confirm a premium.
Homeowners coverage was particularly challenging, relying on homeowners to furnish details about construction and property attributes. From there, an agent would provide a suitable insurance product and calculate a premium. The underwriter would then evaluate the suggested policy and conduct the final checks and balances to issue the cover.
Today, insurers have real-time access to third-party data which they input into algorithms developed to churn out accurate underwriting and premium calculations. This allows insurance companies to issue quotes instantly and provide real-time coverage. Embedded insurance reduces the burden on customers and improves the accuracy of risk coverage all in a matter of minutes.
Challenges of using embedded insurance
While this sector of the insurance industry is steadily gaining traction, the benefits must be weighed against the challenges. Here are a few considerations:
Technological Integration
Embedded insurance is highly tech-driven and requires an overhaul of systems. Companies must invest in developing APIs that can integrate into different systems to seamlessly access third-party data. Converting existing insurance into an embedded offering is a resource-intensive task.
Regulatory Compliance
Navigating the regulatory landscape in the insurance industry is difficult at the best of times, with the variations that exist from state to state. Compliance with local regulations can add another challenge when considering the embedded insurance approach. Global e-hailing giant Uber and insurance giant Aon teamed up to offer drivers on-demand insurance nationwide, and despite their considerable joint resources, found it difficult to traverse the varied regulatory landscape across the United States. Compliance issues impede implementation and, over time, increase costs.
Data Privacy and Security
A central feature of embedded insurance is the sharing of customer data via third-party apps. This raises valid concerns about the privacy and security of consumer data, which insurance companies will need to endeavor to protect to maintain customer trust. Additionally, insurers need to maintain compliance with data regulatory policies like the General Data Protection Regulation in Europe and the California Consumer Privacy Act in the US.
Preparing for embedded insurance
Over the last few years, embedded insurance has gained traction in the industry for its convenience, ease of use, and improved accuracy in risk assessment and policy management. Many insurance companies have raced to keep pace with competitors, and in so doing, have taken shortcuts instead of making the necessary investment in technology upgrades.
One way that some companies have attempted to offer embedded insurance is by simply updating the front end of an insurance website, typically by adding pre-fill applications. While this may add a level of convenience for the customer, only the sales process is impacted.
To truly integrate embedded insurance, substantial changes must be made to the back end of insurance systems. A true embedded insurance process allows for immediate underwriting of the risk and calculations of the premium, as well as communication with third-party data sources.
Overhauling an insurance system to allow for actions like calculating the coverage limits for household contents, or deciding whether contents will be insured for replacement or current cash value is complex. Insurers are cautioned against taking shortcuts for the sake of trends and must invest time and money into developing competent, AI-driven systems.
Conclusion
The insurance industry, in meeting the needs of shifting consumer demands, has developed a customer-centric solution in the form of embedded insurance. Departing from out-dated, time-consuming processes that placed the burden on consumers to provide detailed information, embedded insurance is a quick and seamless process.
Embedded insurance is fast gaining traction in the industry. Customers can now purchase a product and its coverage at the same time. This solution has removed the friction of consumers needing to source vital information about an insured product and has reduced a days-long process to a matter of minutes.
While the benefits of embedded insurance are clear, there are a number of challenges that insurers must overcome to offer this service. The technology integration is complex and resource-intensive, the regulatory landscape is tricky to navigate, and data privacy and security are heavily scrutinized.
Insurance companies are cautioned against taking shortcuts when trying to offer embedded insurance solutions. Still, the investment is worthwhile as embedded insurance is changing the face of insurance technology.
