3 Reasons Embedded Insurance is a Huge Opportunity for Businesses

White-Label Insurance Growing Your Business Embedded Insurance

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White-Label Insurance Growing Your Business Embedded Insurance

By Laura Knight on Oct 6, 2021

7 min read

Close-up of a tablet showing several different graphs. The tablet is being held above a desk by one person, while another person gestures at it with a pen. The desk itself is cluttered with a laptop, a leather portfolio, a coffee cup, and several different chart printouts.

When businesses that provide digital goods and services think about growth, they probably don’t think about insurance - but they should. “Insurance” might call to mind a complex, largely offline business, but the reality is that modern consumers’ behavior and expectations are driving rapid change in the industry, especially for the embedded insurance market. Over 60% of US consumers have said they prefer to buy insurance digitally, and just as many are happy to buy from non-traditional insurers1. In the US market alone, embedded insurance is opening up billions of dollars in opportunities for new entrants.

What is embedded insurance?

Most people are familiar with embedded finance, whether they realize it or not. If you’ve ever used a meal delivery or a ride-sharing service, you’ve used an embedded finance system. The meal delivery company likely didn’t develop its own payment processing system from scratch - it probably integrated with a fintech company that already had the technology. You were able to seamlessly make your payment for the service without ever leaving the app because the payment-processing tech was embedded in the app experience.

Embedded insurance follows the same premise: a business offers an insurance product, usually at the point of sale, and the consumer can buy it within the same experience as the rest of the company’s products. This creates opportunities for companies whose core product or service isn’t insurance, but that consumers would benefit from insuring. The point when the consumer buys the product or service is a natural (and convenient!) time to buy insurance as well.

Embedded insurance examples

An embedded insurance example might be a televet provider offering pet insurance on their app or website. A consumer could set up a virtual vet visit on their mobile device, and then be offered insurance to protect their furry friend’s health, right on the same page (and from a source they already trust when it comes to their pet). The consumer could then buy the policy in a few clicks, without ever leaving the televet’s brand experience. This is different from the more usual click-through partnerships with insurance, also called affinity partnerships. In the affinity scenario, the televet might have a button for getting insurance on the site, but clicking on it would only send the customer off to the insurance partner’s signup experience (with the televet essentially just acting as a lead gen channel for the insurer). The customer buys the insurance product from the insurance company directly, who then manages the relationship (for better or for worse).

With digital embedded insurance, the entire purchase experience takes place in the televet’s front-end environment, with the televet’s branding. The televet also continues to own the relationship and benefits from the consumer’s continued brand loyalty.

It sounds simple, but it can make a big difference for your top and bottom line, along with your customer satisfaction and retention.

Here are three key reasons why your company should be thinking about adding embedded insurance to help grow your business:

Reason #1: Embedded insurance offers significant potential revenue growth

The single biggest reason to consider offering digital embedded insurance? It’s a very significant financial opportunity.

Insurance creates new recurring revenue streams.

Your customers will make regular premium payments to keep their policies active, which translates into regular income for your business. And recurring revenue builds value for your company besides just the money itself - regular, repeating income streams are exactly what investors and shareholders like to see.

Selling more to your customers increases their engagement and your retention rates.

The more your customers buy from you, the more likely they’ll keep buying from you. Adding insurance products increase your stickiness as their brand of choice - both by strengthening your relationship with the customer, and increasing their switching costs. This has benefits beyond just increased ARPU; Bain & Co. famously posited that a 5% increase in customer retention can boost profits by as much as 95%.

The insurance market is huge.

In 2021, the US property & casualty (P&C) insurance market is projected to take in $700B in gross profits. That’s an enormous sum coming in just from insurance, and a considerable amount is open for new entrants to tap into. Despite its size, the insurance market is ripe for disruption, because...

Reason #2: Traditional insurance isn’t meeting modern consumer standards

For many consumers, the traditional insurance-buying experience just isn’t working any more. Why?

Traditional insurance is impersonal and frustrating.

The explosion of personalized services over the last decade has raised the bar on consumer expectations, and traditional insurers aren’t meeting it - as reflected in traditional insurers’ often-low NPS scores. A one-size-fits-all, take-it-or-leave-it approach isn’t compelling to the modern digital consumer.

Signing up is hard.

If a consumer does want to buy traditional insurance, providers don’t make it easy. The insurance industry is still largely dominated by old-school analog processes, requiring phone calls, printed and scanned forms, or even faxes (and nothing adds friction to a signup flow like needing to stop and google where to find a fax machine). Making things worse, the process itself tends to be a disjointed mix of multiple UIs, with the consumer required to submit the same information multiple times. This wastes consumers’ time - and increases the odds they’ll just abandon the transaction.

Most traditional insurance products are one-size-fits-all.

With traditional insurance, the policy they offer is the policy you get, regardless of what you actually need. Need pet insurance to help cover your dog’s allergy meds? A traditional policy will likely package that coverage along with coverage for things like cancer and hip dysplasia, even if your dog is unlikely to ever require those treatments. If a company like Equifax gets hacked and costs insurers tens of millions in losses, your neighborhood coffee shop gets hit with a rate increase as if they pose the same risk. This one-size-fits-all approach means that many customers get stuck paying for things they don’t need because it’s the only way to get insurance coverage for the things that they do.

All these problems with traditional insurance add up to a big embedded insurance market opportunity to grow your business, because as it turns out...

Reason #3: Modern insurance consumers prioritize trust and convenience

It may seem counterintuitive, but companies who aren’t traditionally known for selling insurance are uniquely positioned to win a significant share of the modern insurance market. The opportunity is greatest for digital businesses that provide other goods and services, where protecting those offerings with insurance is a natural fit. So why is your company in such a good place to help?

You know your customers.

You’ve already spent a lot of time and energy acquiring, learning about, and understanding your customers. You know their needs, which helps tailor the right insurance products to fit their life, and you know their preferences, which helps create the right experience. You specialize in serving your customer group, and you understand their needs in a way that a giant, generalized insurer can’t.

Your customer knowledge also allows you to reduce friction in the signup flow. Instead of requiring customers to fill out and send long, involved applications, you can use the information you already have about them to prepopulate the necessary forms and ensure you’re only asking them to provide information you actually need.

Customers want to buy more products from brands they already trust.

One of the insurance roadblocks for modern consumers is that they prefer convenient buying experiences with brands they already use and trust - which isn’t most insurance companies. This is particularly true for younger people. In a recent survey, 82% of millennial customers said they’d want to buy insurance from a “new entrant” (i.e., a company from outside the insurance industry).

Buying a traditional insurance policy often means tracking down and researching products from brands they aren’t familiar with - and as we’ve already seen, the industry doesn’t make this an easy task. For customers, it’s far simpler to obtain insurance from a trusted brand that they already have a relationship with (and also to keep track of the policy once they have it).

New insurance-as-a-service options lower traditional barriers to entry.

In the past, all these advantages still might not have been enough to make adding an insurance offering worth it. Insurance is a highly complex, highly regulated business, and new entrants could expect to take 24-48 months to bring a minimum viable insurance offering to market. For companies whose core focus isn’t insurance, the investment simply wouldn’t pencil out.

Things have changed, however, and so has the business equation. Advances in the insurance-as-a-service space mean that you can now partner with a company that’s already done the heavy lifting on the technology, operations, compliance, and capital required (like Boost!). With the right partner, you can go to market with a co-branded or white-labeled insurance offering in a matter of days or weeks, instead of years.

If you’re looking to increase your company’s revenue (and who isn’t?), offering embedded insurance should definitely be near the top of your consideration list. With the potential for significant recurring revenue from embedded insurance, increased customer engagement and satisfaction, and an easier go-to-market path than ever before, there’s never been a better time to start.

Ready to get started with embedded insurance? Contact us to speak to one of our Boost insurance product experts today.

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Ready for Liftoff: BHMS Backs Boost

Jul 31, 2024

Friends of Boost, Today Boost is thrilled to announce that we have secured a significant equity investment from BHMS Investments, setting the stage for an incredibly exciting next phase for this company and the amazing team that has built it brick-by-brick over the past seven years. With a rock-solid foundation firmly in place, this partnership is going to supercharge our growth, fuel more innovation, and cement Boost’s position as the go-to infrastructure platform in insurance. We are on a mission to empower MGAs, insurtechs, independent brokers and agents, wholesalers, embedded insurance providers, and really any company that just wants to build, transact, and operate more efficiently in this technology-enabled world of ours. While capital is great, today is about hard-earned validation for our team doing that the right way since Day 1. BHMS is the perfect capital partner for Boost in terms of their insurance expertise and unquestionable track record in the space, but more importantly, they are fantastic people that share both our views on the industry and our principles of company building. The market is dangerously fixed for early and growth stage companies right now (and I say “fixed” intentionally). It’s incredibly easy to get picked off in an environment like that, so it takes a rare mix of both intellect and character to do the right thing when you’re on the capital side of that equation - and even more to be truly value-add to your portfolio companies. BHMS has that mix in spades and appreciated Boost for what it is, what it has accomplished, and what remains an incredibly high ceiling for this company vs. playing short-term charades with the herd. That’s our kind of investor. This investment isn’t just about the money—it's a resounding endorsement of Boost’s strength, credibility, and potential to make a truly meaningful impact on the insurance industry at scale. With BHMS now on board, alongside an incredible group of long-time strategic backers like Markel, RenaissanceRe, and Canopius, we’re ready to take our game to the next level. Our mission has always been to disrupt the insurance space with cutting-edge tech and unparalleled service, and this backing proves that disrupting responsibly is the only approach that works in our industry. Anyone can grow fast if they don’t care about quality or long-term credibility. At Boost, we underwrite profitably, we respect compliance, and we always - always - take a collaborative approach with our stakeholders across the entire value chain. As someone with literally zero patience, I can personally attest to that being incredibly difficult to do at times - but it scales. Even with the market’s ups and downs, Boost has been a powerhouse of innovation in the insurtech landscape with equal commitment to disruption and reliability. Doing things the right way does not mean you cannot innovate - or even disrupt - and leveraging best-in-class technology is not a right reserved for #insurtechs. Our platform has always been a one-stop shop for insurtechs and embedded insurance providers and MGAs, independent agents and brokers, and wholesalers alike - offering everything from product development to underwriting and program management to claims administration and reinsurance capacity. With our proprietary tech and a dream team of industry pros, we’re delivering smarter, more efficient solutions than ever before. Since our first program launched in 2019, we’ve underwritten over $200 billion in coverage, which is a somewhat staggering figure in hindsight. Today we’re proud to support programs for giants like Amwins along with trailblazers like Cowbell, Newfront, and Wagmo, and we’re grateful for all of the companies that chose to build with Boost even when Boost itself was just getting started. Our steady, disciplined approach has kept our portfolio profitable and we like to think that has kept our partners in front of us very happy as well. All of Boost’s success is thanks to what is hands down the best team in the industry. Hard stop. Their grit, dedication, and willingness to tackle tough challenges head-on has been crucial. Boost’s commitment to quality starts with our team and is reflected in them every single day. We keep things lean at Boost because that quality always outperforms quantity. Even if that approach always requires more from each individual and makes the stakes a bit higher, working with the right people makes the returns on each long hour invested that much more gratifying. Few people exemplify those principles or have demonstrated such an unwavering commitment to Boost more than Jeremy Deitch, so I am also thrilled to announce that Jeremy has been promoted to President at Boost and will join me on our Board of Directors. Jeremy’s leadership has been critical since the day he started at Boost almost 6 years ago, following probably the most grueling interview process in our company’s history - one he is always happy to dramatize even more if you ever ask him. ;) I couldn’t be more grateful to have a partner like him as Boost soars to new heights. With this new investment, we’re geared up to boost (pun intended) our growth and expand our tech offerings. We’re planning to scale our MGA programs, roll out new products, and snap up some strategic acquisitions. Our goal? To make building a business in insurance easier, faster, and more efficient for everyone so they can better serve their customers. We’re more fired up than ever about our mission to empower insurance providers with the tech and infrastructure they need to thrive. This partnership with BHMS is just the beginning. The future is bright, and we’re ready to lead the charge. Thank you to everyone who has been part of our journey thus far. Let's all keep pushing boundaries together - because the best is yet to come. Special thanks to the team at Howden Capital Markets & Advisory for helping Boost always say what it’ll do and do what it says. You can find our full press release here and, more importantly, can start joining our platform here. All my best, Alex Maffeo CEO & Founder Boost Insurance

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What is a Cell Captive?

May 23, 2024

A captive is an insurance entity that a business creates, rents, or owns in order to self-insure risks. A cell captive, sometimes also called a protected cell captive or segregated cell captive, is a specific insurance captive structure that allows an entity to segment or separate business in one cell from that in another cell, so that a particular cell’s assets and liabilities are insulated from anything that happens in another cell (even if both cells are part of the same overall captive facility). Using captives to self-insure risk offers businesses a number of benefits: they can participate in some or all of their program’s underwriting profitability, maintain end-to-end control over risk (including pricing and claims handling), and avoid paying significant overhead fees to a “middleman” insurer. Companies have several options for structuring and utilizing an insurance captive. They might build a single-parent captive, pool risk in a group captive, or make use of a cell captive. In this blog, we’ll take a look at each. In a single-parent captive, a company will often partner with a fronting carrier to reinsure at least part of their own risk. These are most commonly used by very large companies with exposure to multiple lines of business, which they can insure through the same captive entity. Example: A national food-delivery business wants to provide insurance to its restaurant partners, to protect against the risk of lawsuits related to food safety for meals delivered through the service. It discusses partnerships with several major insurance carriers, but none are willing to provide the level of coverage that the business is looking for at a reasonable price. To get what it needs, the food-delivery business sets up a captive to reinsure a fronting carrier partner, enabling the business to insure its own risk and provide the coverage it needs to its restaurant partners. Setting up a single-parent captive is a considerable undertaking with high capital requirements and a complex setup, with significant ongoing operational requirements going forward. In order to make sense financially, it usually requires a high volume of premium. For that reason, this option is usually only viable for very large businesses. For businesses that can’t afford (either in time or in money) to set up their own captive, a second option is to partner with other businesses in a related industry to set up a group captive. In this scenario, a single captive maintains portfolio capacity that can be shared by a group of entities. The entities can then pool risk together in the single captive. Example: Several real estate companies form a partnership to share a group captive to pool their similar risks. Each company contributes a certain amount of capital to fund the captive, and the capacity is shared among the partners. The participating real estate firms are then able to leverage the captive’s capacity to exercise greater control over their risk, and avoid paying high fees to middlemen. This can allow the partner businesses to share risk (and benefits) between them, and works well for trade associations and other groups of companies in related industries, that share similar risks. However, since the fund is shared between partners as well, one partner’s negative returns can impact the other partners involved. In a cell captive, the business first sets up an entity called a core, which is a similar process to setting up a single-parent captive. Once the core entity is complete, however, the business can much more easily spin up additional cells within the captive structure. The financials for those individual cells are separate from each other, rather than the combined funding of a single-parent or group captive. For many companies, however, using a cell captive doesn’t mean building one themselves. While there are use cases for single-parent cell captives, most businesses that create them then rent out cells to other businesses. Using a cell in another company’s captive entity (also called captive-as-a-service) allows a business to reap the benefits of an insurance captive at a much lower cost. We’ll look at some examples in the next section. The first step in creating a cell captive is to create the “Core” entity. This process is similar to building a single-parent captive: Once the core captive entity has been created and adequately funded, the owner can spin up individual cells within the captive’s structure to support different lines of business, segments, or partners. The Department of Insurance will still need to approve all new cells, but the process is much more streamlined than in prior cases. New cells can often be set up in weeks instead of the months or years typically needed for entirely new captive entities. Captive cells’ assets and liabilities are then statutorily protected from each other (which is where the ‘protected cell captive’ name comes from). This means that if one cell has a difficult year and experiences significant underwriting loss, the assets of the neighboring cells can’t be used to fund that loss. There are multiple ways that cell captives are used, including offering captive-as-a-service (also called rent-a-captive) to other partners or businesses, and separating different parts of the parent company’s business for performance tracking. In a captive-as-a-service or rent-a-captive scenario, the company that owns the captive core would allow other businesses to use cells in its captive. For a fee, the owner can set up a new cell specifically for the partner business, and manage it on their behalf. This lets the partner business leverage the owner’s infrastructure to achieve many of the same benefits of a single-parent captive, without the cost and complexity of creating one. Example: An insurtech specializing in commercial insurance has built a very strong customer base, and wants to further grow its business by participating in some of its own risk. However, building a full captive is too resource-intensive for the insurtech to take on. Instead, the insurtech partners with a CaaS provider and rents a captive cell. The insurtech then uses the cell to self-insure some of its risks, enabling it to participate in the underwriting returns and further scale towards a full-stack insurance business. While the most common reason for building a cell captive is to rent out cells to other businesses, there are a few reasons a company might build one for its own use. Because the cells’ financials are statutorily separated from each other, a cell captive allows a large enterprise to delineate between different lines of business or geographic regions, and monitor their performance separately. Example: A nationwide property management company offers several insurance products to its customers to help protect their personal property and finances. For planning and budgeting purposes, each line is supported by an individual cell in the management company’s cell captive. Over the course of the fiscal year, several lines perform over their targets, while one line significantly underperforms. The other LOBs’ budgets are unaffected by the low-performing LOB’s losses, and the company has clear visibility into which of its products are doing well and which may need a course correction. Cell captives provide a number of benefits to both their owners and the end users: Cell captives are popular for a reason: they offer significant value to both the companies with the resources to build them, and the companies that would rather rent a cell than build a single-parent entity from scratch. To learn more about Captive-as-a-Service with Boost, contact us.

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Partnerships and Focus: Big Trends at Money20/20

Nov 3, 2021

It was a busy October for the team at Boost Insurance, wrapping up with one of our favorite industry events: Money20/20. The conference was a super interesting contrast to ITC which was laser-focused on insurance, while Money 20/20 was more about fintech in general and much, much bigger! With fintech about ten years ahead of insurtech in terms of maturity, it’s interesting to see the level of innovation and diversity of companies in our big brother industry. Here are some of the big trends we noticed. One of the really interesting trends that kept being repeated at Money20/20 was a shift in mindset among both fintechs and banks. In the past, they have tended to see each other as competition for consumers’ business and attention but now everyone is moving towards viewing each other as complementary vs. competitive. We saw multiple collaborative efforts between the upstarts and the established, working together to create a better customer experience. This works because they each have a specialization (fintechs excel at meeting modern consumer expectations and banks are experts in profitably navigating a very regulated, very complex business), and partnership lets them bring both those strengths to the table. This was extra interesting to us at Boost because it reflects what we see in insurance, with insurtechs and carriers working together and bringing their own strengths together to meet modern consumer needs and expectations. For example - Boost has built a modern tech platform making various insurance products available via API but partners with established reinsurance companies to facilitate risk transfer. There will still be winners and losers between the incumbents and the upstarts, but as collaboration and competition continue consumers will be the clear winners. A trend I’ve written about before, and one that we continue to see play out, is tech companies’ focus on affinity groups. Fintechs are springing up all over with explicit goals of serving a relatively narrow group of people and serving them well. Companies like Paceline for people focused on health and wellness, Daylight for the LGBTQ+ community, and First Boulevard for African-Americans are just some of the fintechs concentrating on being the best option for a specific set of consumers. This is pretty much the opposite of traditional one-size-fits-all programs - instead of creating something broad that can be good enough for the biggest slice of people, creating something very targeted that can be great for a specific niche. This trend is great news for consumers who traditionally have not been served well by financial services in general. At Boost we’re starting to work with more affinity-focused companies because our modular, customizable product structure allows partners to tailor insurance for their customer needs. It’s exciting to be part of making insurance more accessible to all groups of people! Finally, it was really exciting and validating to see so much interest in new approaches to traditional industries. Finance and insurance have historically had a reputation for being very slow to change, sometimes for good reason (highly regulated, handling people’s money is a big responsibility, etc). This year though there’s a ton of interest in potential innovations, look no further than the enormous presence of blockchain and crypto-focused companies at Money20/20! Boost met with a TON of different companies during the show, and we cannot talk about anything yet but be on the lookout for some very interesting things coming in the near future! Money2020 was a heck of a conference and while my conference year is wrapped, the Boost team will be out and about at shows the rest of the year. We are looking forward to more opportunities to meet people in 2022, so if you did not get a chance to connect with us at Money2020, just drop us a line.