A new report by investment management firm Conning has suggested that embedded insurance could make significant inroads into both personal lines and small commercial insurance business, exceeding $70 billion in premium by 2030.
In its report, Conning suggests that the benefits of embedded insurance, through which insurance products are distributed by non-insurance brands, have sometimes been exaggerated, though it notes that the impact could still be significant.
Conning observes that multibillion-dollar investments in technology companies seeking to facilitate embedded insurance solutions have yet to result in a major shift of business towards embedded distribution.
However, the firm does note the major growth potential across the personal lines market and for standardised small business insurance coverage.
It writes, “The $179 billion personal auto insurance market could be ripe for disruption if manufacturers were to bring insurance in-house, as Tesla has been doing.”
The report outlines two main scenarios for the future growth of the embedded insurance market.
The first scenario, which Conning sees as most likely, is where insurers and their non-insurance partners would continue to focus on maximising the convenience of insurance purchases.
This first scenario is the one with the potential to support a $70 billion market by 2030. The firm writes that this would still be a noticeable slice of the total U.S. personal lines market, which was worth $362 billion in 2021.
The second scenario, which Conning views as less likely, is where one or more non-insurance brands would leverage the expense savings that are possible through embedded distribution to grow the insurance market through aggressive price competition.
Conning states that if this succeeded, the disruptive impact could be far greater, presenting major challenges for insurers employing more traditional distribution approaches.
