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Embedded insurance is coverage offered within a partner’s purchase or service journey—for example, when a retailer, telecom provider or equipment maker presents protection alongside its own product. The partner or an insurance intermediary may earn distribution commissions or service fees; the insurer that accepts the risk earns underwriting returns. Those are different revenue streams, and which party receives them depends on its role, contract and applicable regulation.
What embedded insurance means
Embedded insurance integrates an insurance offer into a business partner’s customer journey, often through a business-to-business-to-consumer (B2B2C) arrangement. Munich Re describes partnerships with businesses such as original equipment manufacturers, retailers and telecommunications companies. The customer encounters protection in context, while the partner’s product or service remains the primary purchase.
Embedding can make an offer convenient and available at a relevant moment. It does not guarantee that a customer is covered, that a policy is suitable, or that claims will be paid. The policy’s terms, eligibility rules, exclusions and purchase or activation requirements still matter.
Technology can connect the partner’s journey to quoting, enrollment and policy administration, but an embedded offer is not simply a checkout button. Munich Re notes that partner tenders, ongoing technology work, reliable scaling and compliance can all carry costs.
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How the money flows
The customer’s premium is the amount paid for insurance coverage. It is not the same as the commission or fee retained by a distributor, and neither amount is the same as profit. Premium supports the insurer’s obligations and expenses; the insurer’s underwriting result depends on the risks it accepts and the claims and costs that follow.
- The customer pays a premium. The payment may be collected by the insurer or another party under the arrangement.
- Distribution and service compensation is allocated. Depending on the contracts and functions performed, a partner, agent or managing general agent (MGA) may receive commissions or fees.
- The risk-bearing insurer accounts for the insurance risk. It receives premium in connection with assuming that risk and earns an underwriting return only if the economics of the business support one.
These are possible components, not automatic payments to every participant. For example, the European Insurance and Occupational Pensions Authority (EIOPA) discusses an EU arrangement in which a third party is paid by an intermediary based on policies sold and premiums. That illustrates one possible compensation method, not a universal commission rule.
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Who may earn revenue?
| Participant | Possible revenue | What it depends on |
|---|---|---|
| Business partner or platform | Distribution remuneration, such as a commission, or a negotiated fee | Its role in offering or distributing the policy and the contract with the insurer or intermediary |
| Agency or MGA | Commissions on business placed and fees for services; some agreements may include performance-linked adjustments or other charges | Its delegated or contracted responsibilities, the parties involved and the terms of the agreement |
| Risk-bearing insurer | Underwriting returns from accepting insurance risk | Premium, claims, operating costs, risk selection and the capital and risk-management requirements of the business |
| Insurer that also performs MGA functions | Potentially both distribution commissions and underwriting returns | Whether it performs those functions and accepts the associated operational, claims, compliance and risk responsibilities |
Fees can relate to services such as policy administration or claims processing. Company filings also describe ceding commissions and carrier fronting fees in particular arrangements. These terms are not interchangeable, and none should be assumed to apply to a given embedded-insurance product without checking the contracts and roles.
Performance-based compensation
Some agreements adjust commissions according to underwriting performance. Hippo’s 2021 SEC filing describes commission adjustments tied to underwriting performance, among other revenue items. Hagerty’s 2024 annual report, filed in 2025, describes a contingent underwriting commission under a specific Markel alliance agreement. These examples show that compensation can be contract-dependent; they do not establish a standard rate for the market.
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A company-specific illustration, not a market rate
Hagerty reported that its MGA subsidiaries earned a base commission of approximately 37% under the Markel alliance agreement in its 2024 annual report, filed in 2025. The report also described a contingent underwriting commission ranging from -5% to +5% of written premium. Separately, MGA commission and fee revenue represented 35% of Hagerty’s total revenue in 2024, compared with 37% in 2023 and 39% in 2022. These are figures for Hagerty and its disclosed business and agreement, not a typical embedded-insurance commission, consumer premium rate or sector-wide margin.
Operating models: outsourced MGA or insurer-led
The operating structure affects who controls the customer experience, who performs insurance functions, and who bears risk. Boston Consulting Group’s 2025 discussion contrasts an outsourced-MGA approach with a model in which the insurer also performs MGA functions.
| Question | Outsourced-MGA model | Insurer also performs MGA functions |
|---|---|---|
| Customer and platform relationship | The business partner and MGA can manage the customer-facing distribution relationship, subject to their agreement. | The insurer has greater potential control over distribution and the platform relationship, depending on how the arrangement is designed. |
| Underwriting and product work | The insurer focuses on underwriting and risk assessment; the MGA earns a commission on each sale in BCG’s example. | The insurer may perform MGA functions as well as underwriting, bringing distribution work in-house. |
| Potential insurer revenue | Underwriting returns from the risk the insurer accepts. | Potential underwriting returns plus commissions on product sales. |
| Responsibilities and exposure | Distribution, insurance operations and risk-bearing functions are divided among the parties according to the arrangement. | The insurer takes on more responsibility for risk management, claims and compliance alongside its expanded role. |
Combining roles may offer more control and revenue sources, but it also concentrates operational obligations and does not remove the need to manage insurance risk. The table describes operating options, not a guarantee that a particular participant will receive a particular payment.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Regulation depends on activities, not the digital channel alone
An insurance offer appearing in an app or at checkout does not by itself determine whether the platform is acting as an insurance distributor or what authorization it needs. In its Q&A 2260, submitted on 3 March 2021, EIOPA said: “The regulatory framework for insurance distribution activities does not ultimately depend on the business model used for conducting those activities (e.g. via websites, platforms, walk-in shops, mobile applications, online or face-to-face activities) as the IDD is technologically-neutral.” This statement concerns interpretation of the EU Insurance Distribution Directive, not a worldwide licensing rule.
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EIOPA says competent authorities should assess the facts case by case. Relevant factors include how the offer is branded and perceived by customers; whether the provider participates in demands-and-needs or disclosure steps; whether it collects or transfers premiums; whether it completes or administers contracts; and whether it receives a commission or other remuneration. EIOPA also flags possible consumer detriment, and national requirements may be stricter.
For a real arrangement, legal status must be assessed for the jurisdiction, insurance product and activities involved. A business should not infer permission to sell, advise on or distribute insurance merely from the fact that the offer is integrated into its technology.
What determines whether the model works commercially?
There is no universal embedded-insurance commission rate or profit margin established by the cited sources. A useful evaluation separates the economics and obligations rather than treating premium volume as revenue available to the platform.
- Contract terms: Identify who receives each commission or fee, which services it pays for, and whether compensation changes with performance.
- Risk allocation: Establish which insurer carries the risk and what underwriting, capital and risk-management capacity that requires.
- Operating responsibilities: Map ownership of the customer relationship, product management, underwriting, policy administration, claims and compliance.
- Integration and ongoing costs: Account for partner onboarding, technology maintenance, reliability, scaling and regulatory work.
- Customer protections: Check how eligibility, coverage limits, exclusions, disclosures and claims are presented in the customer journey.
Without those details, a premium figure or advertised commission alone cannot show what the partner earns or whether the arrangement is profitable.
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