The Rise Of the Embedded Insurance Market In India Embedded insurance is a substantial tool for insurers and third parties to further the penetration of the insurance sector in the unexploited Indian market, especially in rural and underserved areas

By Rohan Kumar

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COVID-19 pandemic accelerated the digitization of every sector and insurance is no different. The entire insurance value chain has undergone some degree of digitization or automation or both. Automation and digitization, especially in product underwriting and distribution, have enabled a quick rise in embedded insurance. This has the potential to reduce the under-penetration of insurance in India significantly. In simple words, embedded insurance refers to bundling insurance along with a product or service at any point of sale. The insurance could be complementary like a warranty or customers may be asked to pay a nominal premium over and above the transaction cost.

This was already done while booking flights online. But now, due to a dramatic increase in online transactions across categories like payments, pharmacy, medical consultations, gadgets, and vehicles, there is a large push on creating sachet or micro-insurance products that could be embedded across these multiple categories.

Insurance coverages that could be added alongside cab rides, cycles, cleaning services, mosquito illnesses, COVID, pets, etc., have suddenly become commonplace. And most of these did not even exist two years ago in India. Even more traditional products such as life insurance can be had on payment apps with as low as INR 100 a year.

Embedded insurance not only contextualized the product constructs but also made insurance affordable and easy, through a simple issuance process. In turn, it increased the penetration of insurance in the country, where it had remained stagnant for more than two decades.

According to's latest report, India's embedded finance industry is expected to grow by 46 per cent annually to reach INR 36,694.5 crore in 2022 to INR 1,61,442 crore by 2029.

The convenience and personalization of these products work very well for millennials. Thus making them a perfect first step into the world of insurance, increasing their chances towards buying into more comprehensive insurances such as life and health at a much earlier age.

Embedded insurances seek to close the protection gap

Currently, there is at least a 70 per cent protection gap in India, which is the difference between the amount of insurance needed versus the amount of insurance that is actually purchased. Insurance companies are proactively identifying these protection gaps and are attempting to exploit this market by embedding smaller products into broader ecosystems. Hence benefiting the customer, insurers and the point of sale channels or merchants. It becomes win-win for everyone.

Point-of-sale channels can seamlessly embed insurance in their customer's journeys in most cases. It not only adds to their revenue stream but also wins them additional loyalty from the customer, as they come back for repair or replacement. Additionally, more people are preferring embedded insurance because of their convenience. The number of hands holding smart phones is continuously increasing in this country. Hence, an easy availability of insurance on digital platforms accessible through phones is already helping in reducing the under-penetration of insurance substantially in India.

Insurers are also in a profitable position as embedded insurance allows them to reach a larger number of potential customers with minimal effort. They add to their customer base with innovative tailor-made products designed specifically to suit their customer's needs. Embedded insurance products also have significantly lower cost of distribution and improved underwriting risks due to a wider adoption of the product.

Customers in the end benefit the most as it reduces their financial risk at an early age. Thereby, encouraging better savings and financial prudence going forward. With a positive attitude towards insurance, it gets them to think about other insurance products sooner than later.

What's next?

Property, health and casualty are some of the categories that could be easily embedded across a variety of categories. If the protection gap is efficiently exploited, embedded insurance has the potential to create thousands of crores of value over the next three years in India alone. Insurance companies can invest in training their employees in design thinking to focus on minimizing customer effort and maximizing their product value.

Likewise, there are also significant benefits to customers' ease of use and convenience. A recent study by PYMNTS states that 60 per cent of typical buyers of life and health insurance policies that got insured through traditional providers would be "extremely' interested in corresponding bank-embedded offers. Additionally, 49 per cent of consumers questioned during the study stated that they'd be more interested in bank-embedded offers because of their convenience and the trust offered by renowned entities.

It will be critical for businesses to strike the right balance between speed/efficiency of business operations, protection of customer interests, and compliance with data protection and regulatory norms for the success of this model.

Most importantly, embedded insurance is a substantial tool for insurers and third parties to further the penetration of the insurance sector in the unexploited Indian market, especially in rural and underserved areas.

Rohan Kumar

CEO & Co-Founder at Toffee

An entrepreneur, product marketer and senior executive, Mr. Rohan comes with 16 years of hands on market-entry & commercial strategy experience. He’s held leadership positions, spanning a range of growth-stage and fortune 500 companies, having secured commercial partnerships across 5 continents and managed a cross-cultural international team.

Launched Toffee, a bite size, micro-event & contextual insurtech startup in 2017 which aims to de-jargonize the insurance buying experience and letting individuals focus on what matters to them the most. He believes that this product can humanize insurance products towards a growing, yet neglected, young demographic.

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