Embedded insurance is insurance offered as a tick-box inside something else you are buying. The insurance is priced and issued in about a second, at the moment you buy.
Imagine you book an overnight bus from Chennai to Madurai on an online travel agency. Before you pay, a box offers trip insurance for ₹49. It covers a cancelled trip, lost baggage and medical costs on the journey. You tick the box. The ₹49 is added to your ticket price, and you pay both in one payment gateway checkout. A few seconds later, the policy arrives in your email.
You never went looking for insurance. It was offered to you at the moment you needed it. The same thing happens when you buy a phone online and add screen protection, or when you rent a storage unit. These are explained in extended warranty and protection plans.
Here is what happens behind the tick-box. The travel website calls the insurer's system through an API, with the trip details: the date, the route and the number of passengers. The insurer's underwriting rules decide the price. Underwriting means deciding whether to insure someone and how much to charge. The insurer's insurance core system then creates the policy and returns the policy number. All of this happens while the page is loading.
Embedded insurance is not only for shoppers. Some companies build business insurance into the HR and payroll software that small businesses already use. When a business adds an employee, the insurance can cover them automatically.
In India, a website that sells insurance needs permission from IRDAI, the insurance regulator. It usually registers as a corporate agent of the insurer. Some digital insurers grew mainly by selling this way, inside other companies' apps.
Selling a financial product inside a non-financial product is called embedded finance. Embedded insurance raises one open question. Which company does the customer think of as their insurer: the website that sold the policy, or the insurer that pays the claim?