Sizing Up Embedded Auto Insurance Programs

Embedded insurance is quickly emerging as the future of insurance distribution. Embedded insurance is a method of selling insurance within the transaction of another product or service. By abstracting insurance functionality into technology, third-party organizations can seamlessly integrate insurance products into their customers’ journey and enhance their value propositions. Embedded insurance programs facilitate brands and insurance carriers to work together and establish meaningful relationships to better meet their customers’ needs and deepen brand loyalty. The embedded insurance market continues to grow and is predicted to reach $3 trillion by 2023.

In this article, we’ll provide an overview of embedded insurance, explore how it benefits customers, companies, and insurers, and cover some embedded insurance FAQs.

What is Embedded Auto Insurance?

Embedded insurance brings relevant insurance policies right to the customer at the most opportune moment—when they’re thinking about finances and are most motivated to protect their purchase.

Embedded insurance is a digital model in which businesses embed an insurance application link or widget into a website, app, or platform at a point in their customers’ shopping experience. The embedded link enables customers to buy insurance policies to cover their purchases when it’s most relevant.

There are common examples of embedded insurance programs all around us. A highly visible example is the partnership between Costco and a national carrier that offers protection plans for electronics purchases at the point of sale. Target follows the same model as well. Some other familiar embedded insurance examples include travel aggregator websites (where customers can make airline, hotel, and rental car reservations on one site) offering travel insurance before checkout, cell phone retailers offering extended protection on new devices, appliance dealers offering insurance coverage for major appliances at the register or online checkout, and online vacation rental search engine companies offering host liability insurance when a landlord registers a home on their site.

The concept is the same for embedded auto insurance. Whether it’s an automaker presenting their customers with the opportunity to purchase a car insurance policy when buying their vehicle or a financial agency offering auto insurance discounts at their existing customer touchpoints, embedded auto insurance programs enable companies to enhance their offering, increase customer loyalty, and develop new revenue streams.

How Are Embedded Auto Insurance Programs Helpful?

The great thing about embedded auto insurance programs is that there are major advantages for all parties involved. Customers, companies, insurance providers—everybody wins. Let’s take a look at the unique benefits embedded insurance offers for each group.

How Embedded Insurance Helps Customers

It streamlines their insurance buying experience.

Embedded insurance makes purchasing insurance easy and convenient by allowing customers to buy their policy during checkout or within their payment portals—without having to talk to an insurance agent or involve another party. Enabling customers to buy an insurance policy as an added feature with their purchase takes the inconvenient process of shopping for insurance off their plate (saving them a ton of time and hassle).

It’s there when they need it most.

People are most motivated to protect something they own at the initial point of sale (when the product is new and right in front of them). Because car insurance is legally required in the vast majority of states, customers will need to purchase insurance for their new vehicle, and embedded insurance gives them the opportunity to buy a policy at the precise moment they need it.

It can help them save money.

While the specifics between companies and insurance carriers in an embedded insurance program will vary from one partnership to the next, embedded insurance can provide customers with an opportunity for financial savings. This can look like bundling discounts, access to better rates, exposure to more affordable options, and more.

It gives them peace of mind.

Including insurance in the sale of their vehicle gives customers peace of mind knowing that when their sale is complete, their purchase is already protected.

How Embedded Auto Insurance Helps Brands

It adds value to their offering.

By extending their offerings with embedded auto insurance, brands enhance the value of their core product and get to be the hero for their customers. The introduction of insurance deepens their core product’s desirability and differentiates it from competitors.

It enhances their customer experience and increases customer loyalty and lifetime value.

Today’s customers expect a strong value proposition and an enjoyable customer experience. Integrating embedded auto insurance into their offering helps companies streamline the insurance buying experience and increase convenience for their customers. By providing additional value, improving the customer experience, and maintaining active touchpoints, they can build a preference for their brand amongst their customers.

A Dimension Data report showed that 92% of the companies they surveyed signified that they had an increase in customer loyalty after improving the customer experience.

It increases their revenue.

Embedded auto insurance provides a way for companies to passively increase their revenue through insurance renewal commissions. Brands also often see increases in revenue as a result of improving their customer experience.

The Dimension Data report also showed that 84% of the companies experienced greater revenue after taking steps to improve the customer experience.

It provides more opportunities to engage with customers.

Embedded insurance provides an opportunity for companies to maintain customer relationships beyond the point of sale through ongoing touchpoints and communication. Common instances in a customer’s insurance journey—like claims or recurring payments—tie the customer back to the brand. Additionally, they can grow along with their customers as their needs change and evolve over time.

It keeps them ahead of the competition.

Offering embedded auto insurance helps companies stand out as innovative, authoritative brands and differentiate themselves from their competitors.

How Embedded Auto Insurance Helps Insurance Carriers

It boosts retention.

An embedded auto insurance partnership can increase conversion for carriers by providing them with preferred risks that may not have found them otherwise. Embedded auto insurance can give carriers access to customers they wouldn’t normally connect with or reach through their standard acquisition methods and channels.

It improves their customer experience.

Embedded auto insurance allows carriers to spend less time and resources on acquisition so they can focus more on their existing customers and improving their experience.

Forming an Embedded Insurance Strategy

From a simple widget to an end-to-end, white-labeled insurance experience—embedded insurance solutions can be scaled up or down to meet a brand’s unique needs. Brands that have been open to partnerships and collaborations in the past may be more apt to enter into an embedded auto insurance partnership. Additionally, brands with an established core offering may have an easier time viewing embedded auto insurance as an enhancement to their existing offering, while some early-stage brands may find the idea disruptive until they feel that their offering is more stable and solidified.

Fortunately, implementing an embedded insurance program can be fairly quick and easy. Developers can seamlessly integrate insurance products into the customers’ buying journey. Some solutions can even be integrated by embedding a single line of code.

Embedded Auto Insurance: Partner Provider FAQs

Now, let’s cover some common questions that may come up when considering what offering embedded insurance could look like for your company.

Is embedded insurance a totally new thing?

Nope—companies have been selling insurance near point of sale for many years. What’s new when it comes to embedded insurance is that with more and more (and more) experiences moving online, there is a unique opportunity for embedded insurance to create personalized experiences at point of sale and beyond.

What kind of companies should consider embedded auto insurance partnership opportunities?

All sorts—there are many types of companies that can benefit from embedded auto insurance partnerships and should consider an embedded auto insurance program. If a company creates any instance in a customer journey when auto insurance is highly relevant, they can provide their customers with added value in that moment by giving them the opportunity to shop for and purchase insurance. Let’s take a look at some examples:

Financial institutions that customers trust to assist them with their finances

Customers trust their banks and financial platforms to help them manage all financial aspects of their lives, and car insurance—a top monthly expense—is a natural extension of those services.
As a licensed agency providing financial services, embedded insurance enables these types of financial institutions to increase convenience for their customers, enhance their shopping experience, and offer them auto insurance discounts at their existing touchpoints (initial purchase, recurring payments, ongoing service, etc.)—all under their brand.

Auto Dealers

When customers purchase a new car and are going to need to add a new car and/or driver to their policy, their car insurance rate(s) will likely change, creating a great opportunity to introduce auto insurance and provide their customers with the ability to explore their options.

Original Equipment Manufacturers (OEMs)

Aside from introducing insurance commissions as a recurring revenue stream (without the financial risks or operational complexity of building an insurance program), implementing an embedded auto insurance program provides OEMs additional customer touchpoints where they can intervene and/or connect with their customers.

Life changes

Companies that assist their customers before, during, or after life changes have a unique opportunity to add value to their customers’ experience through embedded auto insurance. Significant life changes naturally encourage customers to reevaluate their current needs, including their auto insurance policy. Some examples include purchasing a home, moving, starting a new job, receiving a promotion, retiring, having a child, etc.

Do you need an insurance license to offer auto insurance to your customers?

No, you don't—but it certainly helps! There are many ways that you can introduce insurance to your customers. When you are licensed, you are eligible for better economics and able to receive recurring revenue streams.

Can a business that is not a car insurance company offer auto insurance?

Yes—and we encourage it! Insurance is highly relevant, recession-proof, and there are many "moments that matter" and life events that warrant shopping for auto insurance.

Can a company be paid for insurance referrals without an insurance license?

Yes you can, but you are limited to being paid for referrals further up the funnel. If you have an insurance license, you are eligible for commissions at the point of sale and for every policy renewal.

Has embedded auto insurance proven to be a successful partnership strategy?

It has! There are countless highly-visible examples of successful embedded insurance partnerships, such as Asurion and Verizon (Verizon Mobile protect is administered by Asurion), Extend and Peloton (Peloton implemented a product protection program from Extend), INZMO and Uber (Uber delivery partners can choose INZMO's instant damage and theft protection for mobiles and bikes), and Cover Genius and eBay (eBay partnered with Cover Genius to provide product insurance during checkout).

How does embedded insurance differ from affinity programs?

While embedded insurance programs and affinity programs have many similarities, embedded insurance offers a better experience for customers. With affinity programs, customers are typically passed from one brand to the next, resulting in a suboptimal user experience and significant drop-off. Embedded insurance programs keep the customer within the original experience and present recurring touchpoints. As a result, embedded experiences have higher conversions.

Embrace Embedded Auto Insurance

Embedded insurance enhances a brand’s customer experience and establishes trust by adding value and convenience when it’s most relevant to their customers. Clearcover Embedded Insurance Solutions—Clearcover’s home and auto embedded insurance program—simplifies distribution into one partnership and can handle the entire insurance experience on a brand’s behalf. Learn more about how brands can improve transaction rates, increase revenue, and solve multiple customer needs by cross-selling insurance within their own ecosystems at clearcover.com/embedded.