What is embedded insurance? Definition & Examples!

The term embedded insurance is coming up more and more. But what is it exactly? And is it a new thing? We’ll give you answers to these and many more questions in the coming paragraphs.

So, what does embedded insurance mean? Embedded insurance is any relevant and product-specific insurance that is offered to customers right when they need it most (i.e., when they’re buying the product they want to protect).

One example of a retailer offering embedded insurance would be a car dealership giving customers the option to buy car insurance as they’re signing the papers to purchase their new car. Embedded insurance isn’t limited to offline retail though. It’s becoming more and more common in e-commerce too.

In the coming paragraphs, we will go into more detail on this topic, and show you how you can benefit from it as an online retailer.

Why embedded insurance?

Consumer behavior has changed dramatically when it comes to insurance:

Insurance is a “low involvement” product that has traditionally been offered and sold separately from the product it should protect. Because of that, it is perceived as complicated and hard to understand. At the same time though, the “need for protection” is greater than ever, not just for one’s own self, but also for one’s belongings.

There’s a disconnect between what customers want and what insurance companies can offer them. Insurance policies that would provide direct value to customers (and make them more likely to buy a product) are rarely taken out because they require extra effort and research on the customer’s part to actually track them down and sign up.

Embedded insurance saves customers from the time-consuming search for the right insurance, allowing them to get it right at the point of purchase with no extra effort or registration.

There are numerous areas of application involving both property insurance and personal insurance. Frequent callers can insure their new smartphone against theft and accidental damage as they buy it, and travelers can insure their trip as they book it… the opportunities are endless.

Embedded insurance is a win-win situation for everyone involved:

  • Insurance companies gain access to new target groups and markets that are otherwise hard to reach
  • Retailers can enrich their products and/or services with insurance solutions and in some cases, even earn commission revenue doing it
  • Consumers get the best protection for the products and services they’re buying with no extra effort

What do I get out of embedded insurance as an online retailer?

As an online retailer, you’re likely always on a mission to make the best possible buying experience for your customers, while making as much revenue as possible. Embedded insurance can help you on both counts!

Embedded insuranceNon-embedded insurance
Suitable insurance offered at the point of saleX
Higher attachment ratesX
Better buying experienceX
Better understanding of customer needs through online dataX

Better buying experience through embedded insurance

Through embedded insurance, you can offer your customers a better buying experience. When they add insurance to their purchase, they know that if they have an issue with their product, they’ll be able to get a replacement or their money back. This boosts their confidence in you and your products and takes the risk out of the purchase.

More revenue through embedded insurance

Since embedded insurance increases trust in your business, it will have a positive effect on your conversion rate, and a higher conversion rate means that you’ll get more out of your marketing efforts.

In addition to that, some embedded insurance providers also offer a commission program where you earn money on every insurance sold. So you’ll be able to sell more and make even more money while doing it.

How can I start?

With Hakuna, you can easily offer the right insurance to your customers for every product they add to the cart so they can buy it in the same transaction, with just one additional click. There’s no registration or additional signup necessary. Your customers get peace of mind and you’ll earn on every insurance policy you sell.

To give you a better idea of what embedded insurance could mean for your business, here are a few numbers: On average, online retailers using Hakuna see a 3x increase in their conversion rate and a 9% increase in the average order value.