The Top 5 embedded insurance trends in 2025

Embedded finance is becoming a central pillar in the architecture of financial services, projected to be worth $230 billion by the end of 2025.Of that global value, embedded insurance is expected to contribute $116.49 billion, which is over 50% of the total market. Insurance is a major part of the financial services revolution and we’ve looked at what we believe will be the five most significant embedded insurance trends on the way to that 2025 year-end milestone.

The history of AI is a long one, but its capabilities are now advancing at a remarkable rate. Functions with which it struggled only a few years ago can now be performed with extraordinary speed and precision. Artificial intelligence in insurance has already made significant changes in the traditional industry and its incorporation into embedded insurance platforms is advancing the simplification of the underwriting process, the personalisation of the customer experience and the streamlining of claims management. Not only does it allow the distributors of embedded insurance to provide genuinely tailored solutions it is making risk assessment more accurate, which in turn reduces costs for both provider and customer.

Embedded insurance has been with us for many years, ever since it was used in transactions that were ancillary to consumer transactions, like travel insurance purchased with plane tickets, life insurance bought at airports and extended warranties sold with household appliances. In those early days the technical and legal complexity of dealing with traditional insurance companies meant that it was only major retailers who could afford to offer complementary insurance, and even then only on big-ticket items. 

Embedded insurance has evolved to such an extent that those costs and complexities are rapidly reducing. This means there are fresh opportunities for any smaller company to become a digital insurance platform and compete on something that resembles a level playing field in the valuable insurance ballpark. Consumers’ closest relationships are with the brands they trust and use every day, so if those brands can demystify and improve access to essential financial protections, they can gain a significant advantage over the monolithic legacy insurance companies. It also enhances their performance in customer acquisition and retention.

It's positive news for consumers too. The protection gap is a familiar term to describe the low adoption rates of certain types of insurance, with life insurance and income protection ranking significantly below home insurance. Trust is often the cause of consumer resistance, so small and medium-sized enterprises that have already built are in a strong position to help improve the financial resilience of their customers.

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Embedded insurance could be exactly what you need

The history of embedded insurance so far has been the integration of complementary products at the point of sale for consumer goods and services. That’s set to change in 2025.

If you buy a television, washing machine, laptop or smartphone in a shop, the salesperson will usually recommend buying an extended warranty. A car dealer might try to convince you to buy a week’s worth of drive-away insurance.

Online retail uses the same model, without the in-person hard-sell but with similarly persuasive tactics. There’s a lot of money to be made from this practice: for example, up to 15% of consumers buy extended warranties on household and electrical goods.

These are simple products, but the growth of embedded insurance means that it’s only a matter of time and technology before more complex forms of insurance are available as part of online purchase journeys. Products like income protection and life insurance involve complex underwriting that is absent from these simpler types of cover. To offer them, service and product providers need to work much more closely with embedded insurance companies, not only to avoid misselling but to create personalised solutions that consumers can activate in a matter of minutes. That’s a challenge and an opportunity for both the insurance market and any business that is looking for new sources of revenue. Eleos is currently the only UK company offering embedded income protection and life insurance, but we expect our innovation to become a trend.

We’ve seen open banking and we’ll soon be familiar with open insurance. Following the open banking model, it’s a framework to enable the secure sharing of insurance data between insurers, distributors and customers, using Application Programming Interfaces (APIs). This is precisely the technology that Eleos already uses to collaborate with its partners in providing embedded insurance.

Data-sharing is essential for providing personalised insurance products and increasing transparency, while ensuring customer security and privacy within the data protection regulations. It also makes it easier to develop innovative insurance products designed to meet quantifiable consumer need, thereby broadening the insurance ecosystem. It encourages competition, reduces prices, and improves functions like underwriting and claims processing. In the embedded insurance sector it is a game-changer.

Something of a buzzword, embedded insurance 2.0 represents what could be considered the second wave in the digital transformation of insurance. It’s a phrase we expect to hear a lot during 2025.

 In many ways it’s the embodiment of what Eleos was founded for – the integration of insurance products into non-insurance platforms through close partnerships that offer genuinely personalised solutions to consumers’ insurance needs. Some of its key features are:

• The use of data from multiple sources, including devices connected to the Internet of Things.
• Collaboration between insurers and an increasingly diverse range of consumer service and product providers
• The ability to provide value-added services that draw insurance further into the mainstream of daily life.

Predictions for the future of embedded insurance are just that: predictions. But the past projections of leading analysts have often been met and sometimes exceeded. The embedded insurance sector is expected to grow at a CAGR of 25% until at least 2030, which means the global value of premiums could reach $500 billion. There’s virtually no limit to the types of consumer businesses that could enter the insurance market through the embedded route as the sector develops and matures.