Embedded Insurance and AI: The Future of Insurance Distribution

As the insurance industry navigates the digital landscape, a significant shift is occurring in the way insurers distribute their products. The latest research from GlobalData highlights that insurers are increasingly turning towards embedded distribution channels and integrating artificial intelligence (AI) into their operations. This shift is driven by changing consumer behaviors and a growing preference for digital purchasing patterns. During the first quarter of 2025, GlobalData conducted a comprehensive industry poll through Verdict Media platforms, gathering insights from over 170 respondents. The findings reveal a notable trend toward embedded insurance as a promising distribution model poised to drive future growth in personal insurance lines.

The preference for embedded insurance is evident, with 31.6% of survey participants identifying it as their top choice for future distribution, surpassing direct-to-consumer models (18.4%) and traditional broker-mediated sales (17.2%). Embedded insurance involves integrating coverage options at the point of purchase for various products or services. For instance, consumers can opt for travel insurance when booking flights, auto insurance during vehicle purchases, or electronic device protection alongside new gadgets. This model aligns with consumers’ buying habits, providing a seamless, contextually relevant experience that increases the likelihood of purchase. Beatriz Benito, a leading insurance analyst at GlobalData, underscores the competitive edge of this approach. It not only meets customers at the point of need but also paves the way for non-insurance entities to partake in distribution, thus expanding reach and customer engagement.

Embedded insurance is not a novel concept; however, its relevance is amplified by a surge in e-commerce activities and a consumer demand for streamlined, digital-first experiences. As consumers shift away from traditional brick-and-mortar retail environments, digital platforms play an increasingly pivotal role in this model. This transition is further supported by technological advancements that facilitate frictionless transactions and interactions. According to Benito, the importance of digital platforms in the embedded insurance model cannot be overstated as consumers continue to expect effortless experiences across all industries. Such platforms allow insurers to capture a segment of the market that may have otherwise remained untapped in a conventional setting.

Simultaneously, insurers are also exploring how AI can redefine their operational efficiencies and customer interactions. GlobalData's 2024 Emerging Trends Insurance Consumer Survey, which encompassed 5,500 respondents across 11 countries, sheds light on consumer perceptions of AI in insurance. A significant majority—73.8%—believe that AI can enhance access to customer service, while 71.5% expect it to boost operational efficiency. Moreover, 71.2% acknowledged AI’s superiority in pattern recognition. Among those who have engaged with AI-driven tools like chatbots, a favorable experience was reported by 74.5% of participants. Despite these advancements, challenges remain, primarily centering around consumer trust. Concerns related to decision-making processes, especially in claims processing, and data privacy are cited as major hurdles. Benito emphasizes that enhancing transparency regarding AI’s role in decision-making and its impact on claims and pricing is crucial for earning consumer trust and fostering broader AI adoption in the industry.