Best’s Commentary: Embedded Insurance Gradually Gaining a Foothold

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MEXICO CITY–()–With the use of embedded insurance gaining greater global traction, AM Best notes that the role of regulation in protecting policyholders is critical and serves to encourage further acceptance of this distribution concept.

Embedded insurance coverage is developed by a carrier, but is distributed through non-insurance channels. It also is available across multiple markets, although it lacks common characteristics in terms of transparency, regulation and overall success. It often complements another product or service offered and has a limited insured amount.

In a new Best’s Commentary, titled, “Embedded Insurance Gradually Gaining a Foothold,” AM Best notes that in the United States, embedded insurance is starting to gain interest across the whole distribution chain and companies are working on facilitating its implementation. E-commerce and insurtech have given rise to specialty insurers that use embedded insurance as their main distribution channel. Across Latin America, leading online retailers offer extended guarantees on a range of electronic devices. Using blockchain, companies—mostly in Europe—are developing insurance solutions that can be embedded in noninsurance products. Additionally, embedded insurance is similar to microinsurance in that it can foster financial inclusion and enhance insurance culture in less-educated or low-income segments of the population by normalizing and promoting insurance coverages in goods that most view as essential.

According to the commentary, regulation is essential to the overall success and sustainability of embedded insurance, although practices vary from country to country. Regulations can determine whether certain coverages are optional. In some cases, the insurance is already included free of charge; in other cases, the client decides to obtain it. In some jurisdictions, dealerships already incorporate auto insurance from a specific insurer into auto loans. However, regulators favor expanding the choice of insurers available to customers.

Embedded insurance remains an evolving concept. “To support fast purchasing decisions, coverage should be easily understandable, its price affordable and its enforcement clear,” said Eli Sanchez, associate director, AM Best. “For insurers, it should help diversify distribution channels profitably, while helping them develop specialization in standardized insurance products.”

Ultimately, a deeper understanding of the product, risks and applications on the part of regulators will guarantee that functioning of the insurance contract remains adequate and lead to greater acceptance of embedded insurance.

To access the full copy of this commentary, please visit

To view a video discussion with Sanchez about this report, please go to

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

Copyright © 2022 by A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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