Quick answer
Embedded insurance is cover offered as part of buying something else, such as gadget cover at an online checkout or protection added to a loan. EIOPA describes it as digital cross-selling of insurance with other products[1]. It is convenient, but regulators have found add-ons often give poor value[2].
Key points
- Embedded insurance is insurance offered inside another purchase or service, at the moment you buy that main product.
- Three parties are usually involved: the seller you deal with, a licensed insurer that carries the risk, and often a technology platform connecting them.
- EU insurers see banking, e-commerce and mobility as the most relevant areas for this kind of cross-selling.
- UK research found add-on buyers shop around less and that add-on GAP insurance paid out only about 10% of premiums as claims.
- Rules respond to these risks: the UK banned opt-out selling of add-ons, such as pre-ticked boxes, from 1 April 2016 and requires a pause of at least 2 clear days before selling add-on GAP cover in most cases.
On this page
#What is embedded insurance, in plain English?
You are buying a new phone online and, just before you pay, a box offers accidental damage cover for a few pounds a month. You are booking a flight and the airline offers travel insurance. You take out a loan and protection cover appears in the same form. In each case, insurance is embedded in a purchase you were already making. EIOPA, the EU's insurance supervisory authority, describes this as digitalisation enabling "the cross-selling of insurance products with other products to retail customers (sometimes referred to as 'embedded insurance')"[1].
Selling insurance next to another product is not new. Banks have long offered insurance with mortgages and loans, a model called bancassurance, and car dealers have sold cover with vehicles. What is new is the scale and the speed: an app or checkout page can show a tailored quote and sign you up in seconds. It is the insurance version of embedded finance, where loans and payments appear inside non-financial apps.
#Who is involved in an embedded insurance sale?
Who does what in a typical embedded insurance sale
- You — buy the main product
- Seller — shop, airline, lender
- Tech platform — quotes and policy admin
- Insurer — carries the risk
- Claim payout — paid by the insurer
The seller owns the customer moment and usually earns a commission. A technology platform may handle quotes, policy documents and payments through an API, a standard way for two systems to talk. The insurer writes the policy and pays claims. Knowing which company is the insurer matters, because that is who you claim from and complain to.
#Where is embedded insurance most common?
EIOPA's 2024 report, based on a survey of 209 EU insurers, found that this cross-selling "mostly relates to non-life insurance products" and that most insurers see bancassurance, customer products and e-commerce, and the mobility sector as the most relevant areas[1]. In everyday terms that means cover sold with loans and cards, with gadgets and online orders, and with cars, rentals and travel.
| Where you buy | Typical cover offered | Questions to ask |
|---|---|---|
| Online shop or phone retailer | Accidental damage, theft, extended warranty | Do I already have this through home insurance or a bank account? |
| Airline or travel site | Travel insurance, cancellation cover | Are my pre-existing plans and destinations covered? |
| Car dealer or car finance | GAP insurance, tyre and alloy cover | How much would the same cover cost elsewhere? |
| Bank or lender | Credit protection insurance with a loan or card | Is it optional, and what events does it really pay for? |
Examples are illustrative categories, not recommendations of any product.
#Why do regulators worry about value for money?
The convenience that makes embedded insurance attractive also weakens competition. In its 2014 study of add-on insurance, the UK Financial Conduct Authority (FCA) found that "Add-on providers have a clear point of sale advantage" and that "add-on buyers are less likely to shop around and are less price sensitive"[2]. It concluded that add-on insurance "often represents poor value for money", while noting poor value in some standalone products too[2].
One measure the FCA used is the claims ratio: the share of premiums paid back to customers as claims. For add-on GAP insurance (which covers the gap between a car's insured value and what you owe on it), the FCA reported a claims ratio of 10%, or 12% if insurance premium tax is excluded[2]. EU supervisors see similar patterns. EIOPA reports that national supervisors "continue to highlight cross-sold products as a significant consumer protection concern due to instances of high commissions and poor value for money", and that the insurance lines where cross-sold products most likely sit have commission rates of 28% and 16%, against 14% for non-life insurance overall[3].
Worked example
Worked example: what a claims ratio and a commission rate mean in money
Two simple calculations using the ratios above on hypothetical premiums. A claims ratio is an average across all customers, not what any one person gets back. Computed with code.
- Premiums paid for add-on GAP cover
- £100
- Paid back as claims at a 10% claims ratio
- £10 on average
- Left for costs, commission, tax and profit
- £90
- Commission on a €200 premium at 28%
- €56
- Commission on a €200 premium at 14%
- €28
- Difference per €200 of premium
- €28
#What rules protect buyers of embedded insurance?
The UK responded with two specific remedies. For add-on GAP insurance, rules in force from 1 September 2015 require firms to give prescribed information and "introduce a deferral period, which means GAP insurance cannot be introduced and sold on the same day"[4]. The FCA Handbook sets the pause at at least 2 clear days after the prescribed information is given, or the day after if the customer starts the purchase and agrees to the shorter wait[5]. More broadly, the FCA banned opt-out selling of add-ons; those rules came into force on 1 April 2016[6]. Under the current Handbook rule, a customer must actively choose an optional extra, and leaving a pre-ticked box unchanged does not count as choosing it[5]. The FCA said in June 2026 that it was not proposing changes to the existing GAP rules[7].
UK action on add-on insurance
In the EU, EIOPA's 2022 thematic review of bancassurance raised consumer detriment concerns about credit protection insurance sold by insurers and banks alongside mortgages, consumer credit and credit cards[3]. Rules differ by country, so the practical habit is the same everywhere: treat the add-on as a separate purchase.
Common beginner mistakes with embedded insurance
Saying yes in the rush of checkout
The add-on is shown when your attention is on the main purchase. Pause and decide separately.
Not knowing who the insurer is
The seller's logo is on the screen, but claims go to the insurer named in the policy documents.
Skipping the exclusions
Cheap gadget cover may exclude loss, require a police report for theft or charge a high excess per claim.
Forgetting to cancel
Monthly add-ons can keep running after you sell the phone or repay the loan. Check how and when to cancel.
#How does embedded insurance relate to other fintech trends?
Embedded insurance is one part of insurtech, the wider use of technology in insurance. It follows the same logic as buy now, pay later at checkout: the financial product appears exactly when you are already spending. That timing is powerful for sellers, which is why regulators focus on whether customers are really choosing, and whether the price reflects good value.
The bottom line
Embedded insurance places cover inside another purchase, which makes it easy to buy and easy to buy without thinking. Regulators in the UK and EU have repeatedly found weak competition, high commissions and poor value in some add-on products, and have responded with rules such as the UK's ban on pre-ticked boxes. Treat the offer as a separate decision, check who the insurer is and compare it with cover you may already have.
Frequently asked questions
Is embedded insurance the same as an extended warranty?
Not exactly. Both can be offered at checkout, but insurance is a regulated contract with an insurer that carries the risk, while a warranty is usually a promise from the seller or manufacturer. The documents will say which one you are buying.
Can I buy the same cover somewhere else?
Often yes. The UK regulator found that add-on buyers are less likely to shop around[2], so comparing with a standalone policy is worthwhile.
Can a shop add insurance to my basket automatically?
Why is embedded insurance growing?
Digital checkouts and platforms make cross-selling easy; EU insurers point to banking, e-commerce and mobility as the key areas[1].
Sources
- Report on the digitalisation of the European insurance sector (EIOPA-BoS-24/139) — European Insurance and Occupational Pensions Authority, 2024 Primary
- General insurance add-ons: Final report – confirmed findings of the market study (MS14/1) — Financial Conduct Authority, 2014 Primary
- Consumer Trends Report 2024 (EIOPA(2025)0107262) — European Insurance and Occupational Pensions Authority, 2024 Primary
- PS15/13: Guaranteed Asset Protection insurance: competition remedy — Financial Conduct Authority, 2015 Primary
- ICOBS 6A: Product specific rules (6A.1 GAP contracts; 6A.2 Selling optional additional products) — Financial Conduct Authority (FCA Handbook), 2026 Primary
- PS15/22: General insurance add-ons market study – remedies: banning opt-out selling across financial services — Financial Conduct Authority, 2015 Primary
- CP26/22: Simplifying the insurance rules — Financial Conduct Authority, 2026 Primary
