Embedded insurance and how insurers can benefit with Pia Schlüter

As more noninsurers recognize insurance as a valuable profit pool and differentiator for their customers, embedded insurance has emerged as a strategic priority for insurance companies. McKinsey spoke with Pia Schlüter, a partner in the Düsseldorf office, to understand more about the latest trends in embedded insurance and how insurers can be successful.

McKinsey: How has embedded insurance evolved, and why has it become a priority for noninsurers?

Pia Schlüter: The concept of selling insurance at the point of sale of another purchase has been around for quite a while, but the way it is presented nowadays feels more integrated. The insurance offer is seamlessly embedded into [typically digital] customer journeys and is sometimes fully included in the price. Often this integration is done in such a smart way that the customer will consider the insurance offer a value add rather than an upsell or additional purchase.

For noninsurers, taking advantage of embedded insurance not only means enhancing their own offerings and customer value propositions, but it also opens new revenue streams. For a Spanish department store, for example, insurance accounted for 12 percent1 of the group’s EBITDA. As a result, more and more noninsurers, from OEMs to telcos to online travel agencies, are enhancing their own offerings with insurance to reap the same benefits.

McKinsey: How are noninsurers approaching embedded insurance offerings? What are the selling points or differentiating factors they benefit from compared to insurers?

Pia Schlüter: Noninsurers are selling insurance in various ways and models. There’s the traditional “affinity” approach, where the noninsurer acts as distribution partner to an insurer; the “managing general agent [MGA]” approach, where the noninsurer acts as an MGA and takes over part of the insurance value chain; and the full “risk carrier” approach, which assumes the entire responsibility of the insurer.

The latter two models [MGA or full risk carrier] provide noninsurers a number of advantages that give them an edge over insurers, such as unique customer access, often superior data, and the opportunity to fully and seamlessly embed insurance into their offerings and sales journeys.

McKinsey: What does this mean for insurers? How should they think about embedded insurance?

Pia Schlüter: For insurers, embedded insurance represents both a threat and an opportunity. On one hand, embedded insurance is becoming a significant sales channel, which gives insurers access to a high number of customers with high conversion rates. On the other hand, insurers risk becoming a mere capacity provider to noninsurers and turning insurance into an even more commoditized business.

Insurers therefore need to carefully assess whether and how to engage in the embedded insurance business. This requires making a number of conscious design choices and investments. For example, they should consider which industries, sectors, or types of noninsurance players to focus on, such as automotive, banking, and retail; which products to offer and how to differentiate with value-added services based on that industry or sector; and whether to insist on their own brand or accept “white labeling.” Then they should consider how to deliver on operations and claims and how to technically integrate into the noninsurers’ sales processes.

To get started, insurers can assess the market opportunity and develop a rough idea of how they can break into the market. Then they can design a more detailed, end-to-end picture before building and scaling an embedded insurance business.


Pia Schlüter is a partner in McKinsey’s Düsseldorf office.

For more on digital business building in insurance, see:

1 In 2021, the insurance subsidiary generated an EBITDA that represents about 12% of the group’s EBITDA. Source: McKinsey