Embedded insurance has long been available for travel tickets and similar items. Today, the concept of including insurance with an insurable purchase is rapidly taking hold in the realm of consumer goods, including motor vehicles.

From here, insurers can take a natural next step into providing embedded coverage for specialty goods. Partnering with boat and motorcycle manufacturers, jewelers, auction houses and other businesses can help insurers meet customer needs at the right moment.

When Specialty Items Need Embedded Coverage

Specialty insurance is a catchall category that includes coverage for a variety of items and risks not addressed by conventional property and casualty insurance policies. Many items that demand specialty insurance are the domain of specialized manufacturers and retailers, including:

• Boats, motorcycles, and other specialty vehicles.
• Jewelry and other collectibles.
• Appliances and specialized electronic equipment.

Traditionally, insurance customers received information about specialty coverage from agents or carriers. The conversation began when a customer disclosed their ownership of a specialty item, prompting the agent or carrier to discuss specialty coverage.

Customers who sought specialty insurance on their own sometimes faced an uphill battle. Finding specialty insurance is a multi-step process for customers and comes with a steep learning curve. A customer who needed coverage outside their standard policy first had to become familiar with specialty coverage, then seek out insurers that provided specialty insurance, writes Max Freedman at business.com.

Today, embedded insurance provides another way for insurers to reach customers — one that does not depend on customers initiating the conversation.

By embedding coverage into the purchase of a specialty item, insurers connect automatically with customers who need that particular coverage. Carriers also build relationships with third-party manufacturers and retailers, who offer a rich source of data about customer needs, preferences and uses of insured specialty items.

Making Embedded Insurance Work for Specialty Items

A central challenge of specialty insurance distribution is lack of customer knowledge or awareness. For example, many customers are surprised to discover that their auto insurance policy doesn’t cover trips made on their motorcycle or that a standard homeowners insurance policy contains limits on coverage for jewelry and other collectibles.

Even when customers know they need specialty insurance for certain items, they may face challenges in obtaining the right coverage. Tasks like appraisal remain the customer’s responsibility, as a State Farm guide to insuring collectibles notes. If the work to insure specialty items seems too onerous, customers may forego coverage entirely — exposing themselves to risk and depriving insurers of the opportunity to build a lasting relationship.

Embedded insurance offers a solution for customers and insurers. When insurance is included or available at the point of sale:

• Insurers connect with customers who have precisely the need for coverage that the insurer addresses.
• Customers receive the information they need to be informed insureds, without the added burden of seeking out that knowledge themselves.
• Specialty retailers and manufacturers build stronger customer relationships and establish themselves as trustworthy sources of products, services and insurance support.

By lowering the burden of obtaining specialty coverage, embedded insurance boosts customer confidence in the purchase and the insurer. For the customer, insurance feels less like a costly chore and more like a natural extension of their decision to buy a boat, motorcycle or other specialty item. Customers already familiar with embedded insurance in contexts like travel are more likely to embrace embedded insurance for other products and services.

Embedded insurance is becoming part of everyday life for insurers, businesses and customers. “We’re not just seeing it from technology companies, but also from large retailers and many other different types of businesses,” notes Vikram Sidhu, a corporate insurance and regulatory partner at the law firm of Mayer Brown.

By embedding coverage with the purchase of specialty items, insurers meet customers at their point of need. Insurers, manufacturers and retailers also boost customer confidence in the product, its seller and their insurer.

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