How does it compare to standalone insurance?
What is Embedded Insurance?
Embedded insurance is coverage seamlessly integrated into everyday purchases or services, offering protection exactly when and where you need it. Think of it as insurance that’s bundled into your daily life – be it booking a taxi, a train, a flight, or even ordering a cooking gas cylinder.
Examples of embedded insurance
You may already have encountered embedded insurance without realising it:
- Ride booking apps like Ola & Uber: Ride insurance automatically offered through their apps for a small fee.
- Indian Railways: Optional travel insurance offered while booking tickets on IRCTC, usually at just ₹0.35.
- Airlines: Travel insurance bundled with flight bookings, covering accidental death or injury, baggage loss or flight cancellations.
- Cooking Gas: Accidental insurance coverage included with your LPG cylinder connection.
- E-commerce Platforms: Flipkart and Amazon offering insurance for electronic items and appliances. Apollo pharmacy and Tata 1mg offering health insurance through their apps.
Do people really opt-in?
The effectiveness of embedded insurance largely depends on how easy it is to opt in or opt out. While rail travel insurance on IRCTC is quite popular due to its minimal cost and simple selection process, not everyone chooses the optional ride insurance in ride-booking apps, often to save a small amount per ride. Many passengers decline airline insurance, assuming they’ll never need it.
How does it compare to standalone insurance?
Embedded insurance is not a replacement for conventional standalone insurance, but rather an additional layer of protection that supplements it. Here’s why:
Specific and Situational Coverage
Embedded insurance is usually tailored to a specific situation or product (e.g., travel insurance for a single trip or cab ride insurance).
Conventional insurance typically offers broader and longer-term protection.
- Short vs. Long-term
Embedded insurance usually covers short-term risks (such as accidents during travel).
Standalone insurance policies often cover long-term risks, like health, life, or property damage.
- Affordable and convenient
Embedded insurance is easy, inexpensive, and convenient, making it an accessible extra layer.
Standalone insurance requires more planning, is usually comprehensive, and is designed for continuous coverage.
- Coverage Amount
Embedded insurance policies usually offer relatively low coverage limits and are focused on specific events.
Regular standalone insurance provides significantly higher and broader coverage limits.
- A ‘trial’ of sorts for first time insurance buyers
Embedded insurance often serves as an introduction to insurance for people unfamiliar with regular insurance products, helping increase overall insurance awareness.
Conventional insurance requires a deliberate decision and higher financial commitment.
Awareness is key!
Despite the benefits, embedded insurance uptake remains relatively low due to limited awareness. Many people are unaware of the substantial benefits offered by spending just a few extra rupees. Better awareness campaigns highlighting success stories and explaining the small cost versus potential significant protection could improve adoption rates significantly.
Embedded insurance bridges the protection gap by filling in gaps left by standalone insurance – like coverage for a missed flight or lost luggage – situations typically not covered by standard life or health insurance or which you don’t require cover for all the time. Both types of insurance should coexist, complementing each other.
Next time you book a ride or flight, pause before declining insurance—those few rupees might protect you against unexpected setbacks.
Insurance isn’t just a product; it’s protection.
Stay insured, stay safe!
This blog post is brought to you by the minds at insurancepe!
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