August 8, 2025
Unpack the top five myths holding back embedded insurance adoption and learn how customer-focused, truly integrated solutions can drive growth in a rapidly expanding market.
The embedded insurance market is experiencing significant growth. Research from Mordor Intelligence suggests gross written premiums could rise from $210.9 billion in 2025 to $950.59 billion by 2030, with projections indicating a potential CAGR of 35.14%.
Despite this projected expansion, misconceptions persist that could impact business opportunities and implementation strategies.
Most companies may misunderstand what embedded insurance actually is and how it works, potentially leading to strategic missteps and resource allocation challenges.
Many companies believe they're offering embedded insurance when they place a button on their website that redirects customers to a third-party insurance site. However, this approach differs significantly from integrated embedded insurance solutions.
True embedded insurance can create an integrated experience where bindable insurance quotes are offered to customers within the existing buying experience.
When a mortgage company has customer information needed for a homeowners insurance quote, embedded insurance solutions may pull this data programmatically and allow customers to complete purchases within the platform where supported by partner integration.
Companies like Matic demonstrate embedded insurance by integrating homeowners coverage into the mortgage servicing journey.
In reported case studies, some partners have experienced up to 2-3x increases in customer retention when borrowers can address insurance needs without external redirects, though results may vary by implementation.
What Embedded Insurance May Include:
Note: Some transactions may require redirect to comply with regulatory requirements.
The assumption that offering customers multiple insurance options improves conversion rates may be flawed. Research from Northwestern's Kellogg School demonstrates that customers often feel overwhelmed when faced with numerous options, a phenomenon known as "choice overload."
Studies in consumer psychology show that when customers encounter too many choices, they may pause their purchase to research coverage elsewhere. By the time they're ready to buy, they might purchase directly from carriers rather than through the aggregator platform.
Home builders using embedded insurance often see better results by pre-selecting appropriate coverage options based on property type and location, rather than presenting buyers with extensive choices during complex home purchases.
Consumer behavior research indicates that buyers often prefer guidance over extensive comparison shopping during purchase decisions. Additional research shows that 64% of consumers report feeling overwhelmed by choice, with 46% abandoning purchases due to overwhelming options.
Not every insurance product is suitable for embedding. The life and health industry includes complex, high-value products that may be challenging to embed effectively. While travel insurance or device protection can work at checkout, complex business liability policies typically require consultation.
The embedded insurance model often works best for straightforward insurance types with terms that are relatively easy to understand. Consumers might confidently purchase auto insurance when buying a vehicle, but business owners typically need detailed discussions about commercial policies.
For this reason, many embedded insurance products are offered on a guaranteed acceptance basis, subject to certain exclusions as disclosed in the policy terms and with minimal waiting periods.
Companies often believe that having appropriate APIs and integration tools guarantees embedded insurance success. While technology is important, partner buy-in is essential since insurance products are effectively sold by leveraging established brand trust and relationships.
The most sophisticated technology platform may not succeed without proper partner alignment.
Success often requires understanding why partners want to offer embedded insurance: additional revenue streams, improved customer retention, or enhanced customer experience.
Mortgage servicers can help customers navigate financial challenges by using embedded home insurance to potentially reduce costs when escrow changes occur. Technology enables the solution, but the value proposition drives adoption.
Critical Non-Technical Success Factors:
Perhaps the most significant misconception is viewing embedded insurance solely as a new revenue stream. While financial benefits may exist, approaches that focus primarily on short-term revenue may miss opportunities to address customer needs effectively.
This transactional mindset can lead to products that feel opportunistic rather than helpful. Successful embedded insurance typically addresses genuine customer needs at relevant moments.
By offering insurance when borrowers need it most (such as when insurance premiums or escrow payments increase), companies can provide solutions while maintaining customer relationships. This customer-centric approach often builds loyalty rather than focusing solely on immediate revenue.
Value-First Principles:
Industry projections suggest embedded insurance could grow from $13 billion to over $70 billion in gross written premiums by 2030. Companies that understand these misconceptions and build authentic, customer-focused embedded insurance offerings may be positioned to capture market opportunities.
The mortgage industry demonstrates how embedded insurance can work effectively. Some Matic partners have reported significant reductions in turn time from application to closing, potentially reducing the need to extend rate locks due to delays. This approach can create value for lenders, borrowers, and insurers simultaneously.
Ernst & Young forecasts that embedded insurance transactions could account for 30% of the total by 2028. Success may belong to companies that prioritize customer needs, invest in true integration, and understand that technology enables relationships rather than replacing them.
The embedded insurance market presents significant opportunities, but success typically requires proper understanding and implementation.
Insurance products offered through licensed insurance producers. Not available in all states. Product availability, terms, and conditions vary by carrier and state. Results may vary by implementation and market conditions.
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*Savings claim based upon averaging actual anonymized savings data for dwelling-only insurance rates paid (from July 2023 - June 2024) by customers of two of Covered’s largest mortgage industry partners across twenty-seven (27) US states. Bundles and non-dwelling insurance coverages were excluded.
† Net Promoter Score (“NPS”)® calculation averages post-purchase customer satisfaction surveys from 9/24/2024 - 2/28/2025. NPS® is a market research metric measuring customer satisfaction with a scoring calculation that incorporates both detractor and promoter customer feedback.
Quotes are presented solely for your convenience. Savings may vary. Rates are subject to change based upon the specific coverage you select and other factors that apply to your situation. CA License #0M81402, doing business as Cubbard Insurance Solutions in California.
