7 Aug 2026
Should your business offer embedded insurance?
By discovermarket | Updated 7 August 2026 | 9-minute read
Should Your Business Offer Embedded Insurance?
Summary
Embedded insurance may suit your business when it addresses a clear customer risk within a relevant journey. The decision begins with why you want to offer it and how success will be measured.
A large customer base does not automatically make your business suitable for embedded insurance. The stronger indication is that customers face a recognizable financial risk while buying or using your main product, and that useful protection can be offered when the need is easy to understand.
The decision therefore starts before product design, insurer selection or technical integration. You need to establish why you want to offer insurance, which customer problem the product should address and what success would look like; otherwise, you may have a distribution channel without a sound proposition.
Where might embedded insurance be relevant?
The following examples show where a relevant risk may arise, although they do not mean that every business in the industry should offer embedded insurance.
| Industry or activity | Potential customer risk | What your business should test |
|---|---|---|
| Travel and booking | Cancellation or disruption | Whether the cover matches the booking and financial commitment |
| Consumer electronics | Damage, theft or breakdown | Whether the replacement cost is meaningful and customers already have protection |
| Ticketing and events | Inability to attend or event cancellation | Whether the covered circumstances and exclusions are clear |
| Mobility and vehicle rental | Damage, excess costs or trip-related incidents | Whether the coverage fits the rental or usage period |
| Marketplaces and delivery | Loss or damage during a transaction | Which participant faces the loss and needs protection |
| Financial services and credit | Income interruption affecting loan repayments | Whether the cover addresses a defined repayment risk and is suitable for the borrower |
The useful question is not whether your industry appears in a list, but whether a particular customer, risk and moment come together in your own journey.
Start with why you want to offer insurance
You may consider embedded insurance to protect customers from a financial consequence associated with your main product, make that product more useful, strengthen retention or develop an additional source of revenue. A program may support several aims, but one should normally take priority because it will influence the product, customer journey and measures used to judge performance.
| Primary objective | What you would need to understand |
|---|---|
| Protect customers from a relevant financial loss | Whether the coverage responds to a meaningful risk and whether eligible claims produce useful outcomes |
| Improve the main product or service | Whether customers understand and value the added protection in the context of the core offering |
| Strengthen retention or engagement | Whether the program contributes to continued use or renewal without avoidable service problems |
| Develop an additional source of revenue | Whether policy volume and remuneration support a sustainable business case after implementation and operating costs |
Is there a clear customer risk and a useful product?
Your first test is whether customers face a specific risk with a financial consequence. You should be able to explain what could happen, who would be affected and how the insurance would respond. Even a technically insurable event may be a poor proposition if the likely loss is too small or the policy excludes the situations that concern customers most.
Existing protection also matters because customers may already have coverage through another policy, payment card, manufacturer warranty or statutory right. The Dutch Authority for the Financial Markets has identified both overinsurance and underinsurance as potential risks when customers make a less considered insurance decision while concentrating on another purchase. AFM: Embedded insurance, key points for safeguarding customer interests
Convenient placement cannot compensate for poorly matched coverage or a price that is difficult to justify against the benefit. Before estimating sales, consider the covered events, principal exclusions, excess or deductible, policy duration and likely claims experience.
These are product-design and governance questions rather than marketing preferences. Under the EU Insurance Distribution Directive, product approval processes must identify a target market, assess relevant risks and use a distribution strategy consistent with that market, followed by reviews of whether the product remains aligned with customer needs. Requirements vary, but the underlying question applies widely: does the product offer a reasonable exchange of price, coverage and service? EIOPA: Product oversight and governance requirements
Does the insurance belong in the customer journey?
Placement should help the customer consider the product rather than encourage an automatic response. The customer may be focused on completing the main transaction, particularly during a time-sensitive booking or a long checkout. The UK Financial Conduct Authority notes that, when insurance is sold alongside another good or service, the distribution channel should account for the risk that the customer’s attention remains on the core product. FCA Handbook: Product governance for insurance products
A suitable moment combines relevance with enough information for a considered choice. Your journey should explain the price, main benefits, important exclusions, duration and claims route, while allowing the customer to decline without unnecessary friction.
Is the opportunity commercially viable?
Once customer relevance has been established, you can assess potential scale. A practical starting point is the number of eligible customers or transactions, multiplied by the proportion that will receive an offer, expected take-up and average premium. The resulting estimate should be tested under conservative, expected and higher-demand scenarios.
Because policy volume or premium is not your revenue, the commercial case should distinguish the premium paid by the policyholder from any commission or other remuneration your business receives, then account for implementation, integration, support, payment handling, cancellations and refunds.
Take-up requires careful interpretation because a high rate may show that customers recognize value, but it can also reflect forceful placement or uncertainty about whether the product is optional. Commercial performance therefore needs to be read alongside cancellations, claims, complaints and other evidence of customer outcomes.
Can your business support the complete insurance journey?
The offer may appear during a brief part of the purchase, although the relationship continues after the sale. Customers may need to find policy documents, correct information, cancel the cover, request a refund, renew or make a claim, and they are likely to associate any difficulty with the brand through which the insurance was obtained.
You should know which organization will underwrite and distribute the policy, provide the technology, collect money, answer questions, administer changes and handle claims. The arrangement should also establish how service requests move between participants, how problems are escalated and what customers are told about each party’s role.
Operational readiness does not require your brand to perform every function, but it does require assigned responsibilities and continued oversight. If you want point-of-sale revenue without an owner for cancellations, complaints or claims-related service, the program is not ready.
Define success before selecting the solution
You should define success across customer, commercial, operational and strategic outcomes. Customer measures may include understanding, cancellations, complaints and claims outcomes. Commercial measures may include eligible transactions, offer rate, take-up, premium, remuneration and program cost, while operational measures could cover issuance failures, payment exceptions, support contacts and reporting accuracy.
Strategic measures depend on your original reason for offering insurance. If the objective is retention, you might examine renewal or continued use among comparable groups, while a program addressing travel disruption could study how insured customers recover from covered events. These relationships require careful interpretation because insurance may not be the only factor affecting the result.
Measures should be agreed with the insurer, intermediary and technology provider before launch, including who supplies the data and how often performance is reviewed. Claims outcomes and complaints deserve particular attention because they show aspects of the proposition that sales data cannot; current FCA guidance also identifies these as relevant information when reviewing product value and customer outcomes.
When embedded insurance may not be the right choice
Embedded insurance may not be appropriate when you cannot identify a specific customer risk, the cover has only a weak relationship with your main product, customers are likely to have adequate protection already or important exclusions remove much of the expected benefit. A commercial case that depends on implausibly high take-up is another warning sign.
In other cases, the idea may be suitable but your business may not be ready because ownership, data, customer support or appropriate partners are missing. The right decision may be to resolve those gaps and test the proposition, while choosing not to proceed remains valid when a useful and workable proposition does not exist.
How can you test the proposition?
A limited pilot can test assumptions before a wider program, provided the product, distribution arrangement and customer protections have been properly approved for the market. It should cover a defined customer segment and journey, with agreed criteria for continuing, changing or stopping.
The test should examine whether customers understand the offer, whether policies are issued correctly and how support, cancellations and early claims are handled. Its final review should return to the original objective and ask whether the product addressed the customer risk and whether performance supports the commercial case after operating costs.
Frequently asked questions
Does your business need a large customer base?
A smaller business with a defined audience and a highly relevant risk may have a stronger proposition than a large platform offering unrelated cover, because customer volume affects commercial scale without establishing suitability.
Should revenue be the main reason to offer embedded insurance?
Revenue can be a legitimate objective, although it should not be considered separately from customer value and operating cost. A program that generates sales but produces poor claims outcomes, frequent cancellations or complaints is not successful.
Does the brand need to become an insurer?
A licensed insurer normally underwrites the policy and carries the insurance risk, while authorized intermediaries and other providers may perform distribution, technology or administrative functions. The brand’s responsibilities depend on the arrangement and jurisdiction.
The decision for the business
Your business is a credible candidate when a recognizable customer risk, a relevant moment and a useful insurance product come together within an operating model that your partners can support. Commercial scale matters, but only after customer fit has been established.
The most useful first question is not “Which insurance product can we add?” It is “Why do we want to offer insurance, what customer problem will it address and what evidence would show that it is working?” The answer provides the basis for product design, partner selection and an informed decision about whether to proceed.
About discovermarket
discovermarket provides technology infrastructure that connects businesses, insurers and other insurance participants. Its platform supports product configuration, distribution through APIs, SDKs, widgets and branded microsites, policy administration, claims workflows and performance reporting.
discovermarket is a technology provider and does not underwrite or sell insurance. Insurance products are underwritten and distributed by the insurers and authorized intermediaries responsible for each program.