The dark side of embedded insurance – and how to get it right
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In a nutshell
- Embedded insurance can be powerful, but when it’s poorly designed or hidden behind fine print, it loses value for users.
- Insurance that is bundled into a banking plan makes protection fairer and more inclusive by building coverage into the price of a product or service.
- These programs benefit customers through affordable, seamless protection and brands with increased loyalty and usage.
- When designed transparently and backed by technology, embedded programs can restore trust in insurance and ensure value truly flows back to users.
Quentin Colmant is the CEO of Qover, which he co-founded alongside Jean-Charles Velge in 2016. Prior to launching the company, he had a successful career in the insurance industry, holding a series of top management positions at Allianz Benelux in both general and life insurance.
Quentin has an MBA and two Master's degrees: a Master's in Engineering Science & Applied Mathematics and a Master's in Finance.
Embedded insurance, or bundled insurance in a banking plan or card, has become one of the most talked-about concepts in financial services. At its best, it protects people effortlessly by including insurance in a product or service that customers already use and trust.
In an earlier column, I wrote about the power of embedded insurance as a global safety net. But like any powerful model, it has its weak points too.
So as the industry grows, a darker side is emerging.
Some embedded insurance models risk losing sight of what truly matters: value flowing back to the end user. When coverage is poorly designed or hidden behind fine print, trust erodes and customers end up paying for protection that doesn’t really protect.
Bundled insurance – when done right by banks and fintechs – can help restore the balance.
How bundled insurance fits into paid banking plans & cards
Embedded insurance complements a product or service with meaningful protection, or coverage that makes sense for both the end customer and the distributor, and ultimately makes the customer feel better protected when using the brand’s product or service.
It adds value when it’s relevant and easy to use, not just when it’s conveniently placed next to the checkout button.
There are two main ways to embed insurance.
The first is a no-added-cost to the user (NAC) program, where the insurance is included in the price of the main product or service. Take a premium bank account: you might pay a fixed monthly fee and automatically get travel, cancellation or purchase protection insurance. The coverage is built into the plan – no add-on, no extra payment.
The second is transactional or opt-in embedded insurance, where the customer chooses to add insurance at the point of sale – for example, when booking a flight or buying a car. It’s optional and priced separately.
Both have their place, but the NAC model has unique potential to close the protection gap:
- Affordability: it scales efficiently, making insurance more affordable through pooled risk.
- Accessibility: by integrating into another product or service, it removes friction and makes insurance more convenient.
- Trust: some people have a negative view of insurance companies, while embedded insurance is delivered by brands people already believe in.
- Financial literacy: it even helps with financial literacy, since customers don’t need to navigate complex policies to make smart choices. Brands are accountable for making sure the right cover is already in place.
When done well, embedded insurance should protect more people, more fairly. But that doesn’t happen by default (more on that later).
Why embedded insurance is still better than transactional in financial services →
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Why bundled embedded insurance benefits both banks and customers
Let’s take the example of a bank or neobank offering an insurance program as part of a paid plan.
For the bank, the benefits are clear.
More premium customers: adding meaningful fringe benefits like insurance makes premium accounts more appealing and drives adoption.
More recurring transactions: coverage like purchase protection or cancellation insurance usually applies only when payments are made with the bank’s card, which means customers use it more often. That boosts indirect revenues through transaction fees.
And both of these lead to a less obvious long-term upside: becoming the main bank. The more a customer uses their card, the more likely they are to deposit their salary into that account. Over time, the bank becomes their primary financial hub.
For customers, the value is equally strong. For one, coverage is significantly cheaper. A standalone travel or gadget insurance can easily cost €100–200 per year. But as part of a premium bank account at €5–10 per month, those protections are bundled more efficiently – thanks to the power of volume and reduced anti-selection.
It’s seamless and convenient. No forms, no extensive underwriting questions, no need to remember to buy coverage; it’s already there when you need it.
And lastly, embedded insurance offers more value to the end user by eliminating distribution costs. Embedded programs cut out brokers and commissions. The brand pays the insurance provider directly, so more of the value flows back to users.
When designed properly, a NAC program acts as a kind of social safety net on steroids – a global safety net, if you will – so that people are automatically protected no matter what happens.
The pitfalls of bundled insurance – and how to fit them
Still, embedded insurance isn’t immune to pitfalls. Like any insurance product, it can be done poorly.
1. Fine print that hides weak coverage
In insurance, there’s no such thing as bad risk, only bad pricing. You can create the Rolls-Royce of insurance products, but you’ll be hard pressed to find someone who will pay for that.
Instead, customers will go for the cheaper option without reading the terms and conditions. And trust me, it’s easy to market premium protection, but harder to ensure the protection is real.
I’ve seen businesses offer an impressive-looking insurance benefit that collapses under the weight of exclusions in the fine print. So when you look closely, there’s no real value and substance to the coverage. Ultimately, the quality of an embedded program depends on the brand’s commitment to invest in solid coverage.
That’s why transparency and accountability matter. The right NAC setup – one that’s monitored, data-driven and user-first – ensures the benefits actually reach the end customer.
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2. The myth of overinsurance
Regulators and insurers sometimes worry that customers could be paying for duplicate coverage if they hold multiple bank accounts with bundled insurance. Say a customer has three different bank accounts with travel coverage, plus, a standalone travel policy on top of that.
But in reality, overinsurance is actually illegal in some countries. Overinsurance is rarely the issue, underinsurance is.
Combining coverage with different limits isn’t necessarily a bad thing, and can help customers extend their coverage if one policy caps out. That said, it’s important to take into account different regulations in each market.
In practice, banks continually monitor loss ratios and adjust coverage and pricing so customers don’t end up paying three times over. After all, if banks are the ones paying for a NAC program, it’s in their best interest to optimise that cost and make sure customers are using it. The economics self-correct.
3. One-size-fits-all coverage
Even the best embedded plan can’t meet every need. After all, it is one-size-fits-all coverage.
For example, frequent travellers or digital nomads may need higher limits or specialised protection than what bundled insurance provides. And unfortunately I see many people who wrongfully think they’re covered for everything.
But that’s not a flaw of no added cost protection itself, but rather insurance in general – another reason customers need a certain level of financial education if they have very unique requirements.
To me, this limitation is also a design opportunity.
The right partner can help tailor NAC programs that balance broad inclusion with flexible add-ons for specific needs.
This is where orchestration and technology come in – areas where Qover has made a difference. With real-time performance tracking, transparent reporting and modular design, banks can continue to evolve their program and better address the pain points of their specific audience.
Turn your embedded insurance from a cost centre into a growth driver →
Restoring trust and value through better embedded insurance design
The promise of embedded insurance is too important to lose to poor design.
No added cost insurance programs, when built transparently and fairly, can make protection more inclusive – but only if they’re done right.
For us at Qover, embedded insurance is more than just a buzzword, but a mechanism for trust. When cost efficiency meets clear, genuine coverage and real value flows back to users, insurance can finally work the way it was meant to: quietly protecting people in the background, everywhere they go.
Embedded insurance doesn’t have to have a dark side. We just need to shine a light on how it’s built.
