Neither embedded insurance nor traditional distribution is universally better. Choose the route that fits the customer’s needs, the cover’s complexity, your ability to operate and oversee the arrangement, and its full economics. Embedded offers can meet customers at a relevant moment; agents, brokers, direct insurer sales, and bank channels can provide other ways to explain and deliver cover. Many businesses will need a mix rather than a single channel.
What embedded and traditional insurance distribution mean
Embedded insurance
Embedded insurance places an insurance offer within or alongside another product or service journey—for example, travel cover offered by an airline or damage cover offered by an appliance seller. The European Commission defines insurance distribution broadly to include selling, proposing to sell, advising on, or preparing the conclusion of insurance contracts. An embedded placement is still insurance distribution; the host business’s role and applicable obligations depend on what it does and where it operates. The European Commission’s overview of insurance distribution also says customers buying insurance packaged with another product or service must retain the choice to buy the principal product without the insurance.
Traditional distribution
“Traditional” is an umbrella term, not one channel. It can mean an agent or broker, an insurer’s own direct sales, or bancassurance through a bank. In most EU Member States, agents and brokers remain the main route; bancassurance dominates in a few, while ancillary intermediation is significant in only a small number, according to EIOPA’s 2026 summary of its 2025 survey and third IDD application report.
How the models differ for a business
| Decision area | Embedded offer | Traditional or multichannel approach |
|---|---|---|
| Customer access | Can present relevant cover during a related purchase or service interaction. | Can reach customers through an adviser, broker, insurer-owned direct channel, or bank relationship. |
| Explanation and complexity | Works best when eligibility, key terms, and purchase can be made clear in the host journey. There is no established universal complexity threshold. | Agent or broker involvement can support consultation and risk-specific advice. Direct sales can suit appropriately targeted, simpler offers. |
| Economics | Assess conversion, compensation, integration, underwriting, servicing, and any effect on existing channels. No cited evidence establishes a universal cost advantage. | Direct sales need a viable economic model and investment; agent and broker channels have their own remuneration and service arrangements. |
| Choice and understanding | Convenience may help, but an add-on can make comparison harder or create pressure if poorly designed. | Advice may help with complex cover, but every channel still needs suitable products, clear terms, and fair conduct. |
| Operations and accountability | Responsibilities among insurer, distributor, platform, and service partners need to be explicit for data, complaints, policy servicing, and claims. | Controls must cover the insurer, intermediary, any delegated authority, and service arrangements. |
| Regulatory obligations | Placement beside another product does not remove distribution obligations. Applicable permissions depend on activity and jurisdiction. | Insurer direct sellers and intermediaries are also subject to distribution rules, which vary by country and product line. |
This comparison synthesizes material from the European Commission, EIOPA, the UK Financial Conduct Authority (FCA), PwC, and Deloitte; it is not a claim that every firm using a given channel has the same costs or customer outcomes. PwC’s discussion of insurance distribution describes possible partner arrangements such as traditional commission, an upfront referral fee, or revenue or profit sharing. Those are examples of structures, not quoted rates or a guarantee that a particular arrangement is available.
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A practical framework for choosing a channel
- Start with the customer’s risk. Identify what the policy protects and when that need arises. A related purchase may be a useful moment to offer cover, but convenience alone does not establish suitability.
- Match the channel to the support required. Work out how much explanation, advice, underwriting information, and ongoing help customers need. PwC notes that some simple life and small-commercial offers may be easier to distribute directly through technology, while a broader strategy can route customers with more complex needs to agents.
- Model total economics, not just sales conversion. Include customer acquisition, technology integration, partner compensation, underwriting, servicing and claims, retention, and potential channel conflict. Do not assume an embedded arrangement is cheaper simply because it appears at checkout.
- Assign responsibilities before launch. Document who designs and approves the product, explains cover and exclusions, handles policy changes, responds to complaints, and supports claims. The FCA’s review of UK general-insurance distribution chains described potential harms including excessive prices, unsuitable sales, and inadequate claims or complaints service, linking risks to weak customer focus and poor governance or oversight.
- Check local permissions and disclosures. Confirm the actual role each party will perform, the relevant product line, and the applicable jurisdiction’s requirements before offering cover. The EU framework does not answer licensing questions for every country or business model.
- Test whether a channel mix serves customers better. Digital direct, embedded offers, agents, and brokers can complement one another if the technology, customer needs, and economics support the handoffs.
What EU market evidence says—and does not say
EIOPA’s 2026 summary of its 2025 survey and third IDD application report describes a changing EU distribution market, but the figures do not show that embedded insurance is outgrowing traditional channels or that it will suit a particular business.
- Registered insurance intermediaries decreased by 7.5% between 2020 and 2024. EIOPA cites several possible factors, including stricter professional requirements, increased supervision, consolidation, demographics, and changes in distribution models.
- Commission remuneration was prevalent in 24 Member States in 2024; fees were prevalent in one, and a combination of commission and fees in three. These are counts of Member States, not commission rates or shares of premiums.
- The number of intermediaries holding cross-border passports rose 10% from 2022 to 2024, even as the overall number of intermediaries declined. Most passported intermediaries operated under freedom to provide services.
- Online sales remained low in most Member States in 2024 but were increasing year on year, particularly for non-life cover. EIOPA cautions that national registration definitions and data collection differ, limiting direct comparisons.
Deloitte’s 2023 report cited forecasts for 2030 embedded property and casualty sales ranging from US$70 billion in the United States to US$700 billion globally. It also presented a conditional scenario: if as much as 20% of the US personal-auto market became embedded by 2030, at least US$50 billion in premiums could be diverted from traditional channels. These are forecasts and scenarios, not realized sales or proof of superior profitability. Deloitte’s analysis of embedded insurance does not provide a like-for-like measured comparison of total costs, customer outcomes, or profitability across the two models.
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Customer protection and regulation
In the EU, the Insurance Distribution Directive (IDD) applies to insurance sales, including sales by ancillary intermediaries. It sets information, conduct, transparency, supervision, and sanctioning requirements, while allowing Member States to add provisions. EIOPA’s IDD overview describes the directive’s aim as ensuring distributors take responsibility for consumer outcomes and that products meet consumers’ needs.
For non-life insurance in the EU, the Insurance Product Information Document is intended to help consumers compare policies and make informed decisions. Its listed content includes cover, insured risks, exclusions, premiums and payment, customer obligations, claims obligations, duration, and cancellation. It is a useful reminder that a short point-of-sale flow should not obscure the information customers need to assess a policy.
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Choice and comparison deserve particular attention in add-on journeys. A 2014 FCA summary of behavioral research says the experiment found that the add-on mechanism weakened consumers’ ability to shop around and compare products effectively. The FCA page notes that the paper’s views are those of its authors; this is evidence of a comparison risk, not proof that every embedded interface produces poor outcomes. The FCA’s summary of the experiment is relevant when designing prompts, defaults, and opportunities to decline cover.
Technology and partnership risks to plan for
APIs and other automated distribution tools can make it easier to offer insurance alongside financial and non-financial services. EIOPA says digital tools can improve efficiency, reduce operational costs, and make new products viable, while also increasing ICT security risks and possible dependence on large service providers. Digitalization can change conduct and prudential risks as well. EIOPA’s digitalisation market-monitoring report sets out these broader implications.
Deloitte also flags licensing, pricing transparency, point-of-sale pressure, partner coordination, claims dissatisfaction that can damage the host brand, and a potentially weaker direct relationship between insurer and customer. Its US discussion notes that auto dealers offering insurance may need state agent licensing. That example is a prompt to verify local law, not a complete licensing analysis. Before launch, agree how data moves between parties, who can resolve a failed handoff, and which organization owns customer communications at each stage.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.When each model is a stronger fit
Consider an embedded offer when
- The insured risk is closely connected to the host product or service and is salient during that journey.
- Customers can understand the cover, exclusions, price, and choice without being rushed or obscuring the option to proceed without insurance.
- The partners can support underwriting, policy servicing, complaints, and claims with clear ownership.
- The economics remain viable after integration, compensation, servicing, and oversight costs are included.
Consider an agent, broker, or other established route when
- Customers need risk-specific advice or consultation to select suitable cover.
- The business lacks the expertise or infrastructure to explain, underwrite, service, or oversee an embedded journey responsibly.
- An intermediary or insurer channel offers a clearer path to ongoing advice and service for the customer’s needs.
These are decision signals, not rules that assign every product to one channel. A business can offer a simple digital route for straightforward needs and refer customers to an adviser when their circumstances call for more support.
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