Solving for ‘X’: The Why of Embedded Insurance in Vertical Industries

  • First published on on November 14, 2023
  • by Paul Prendergast, CEO and Co-Founder, Kayna

Embedded insurance is one of the fastest-growing digital distribution methods in property and casualty insurance and is forecast to reach more than USD$722 billion in gross written premium worldwide by 2030. There is a fundamental reason for this tremendous growth. The embedded channel is an innovative way to reach a segment that has been notoriously challenging to serve through traditional distribution.

Small and medium-size businesses (SMBs) have long been considered a high-growth market for the insurance industry, not only for the sheer number of such enterprises but also because of the diversity of industries and risk profiles that SMBs represent. Why has profitable growth in this segment been elusive? A big part of the challenge is structural. The insurance industry simply is not built to distribute products that meet both the needs of SMBs and the objectives of underwriters. Servicing SMB accounts consumes substantial amounts of time for agents and brokers, while the data that underwriters require to make informed pricing decisions on such accounts is lacking.

A “one size fits all” approach for SMBs inevitably results in greater risk and missed opportunities for the insurance industry: 40% of SMBs in the United States go without insurance, and 75% are materially underinsured. That means many businesses are exposed to loss and financial hardship they otherwise can mitigate, with the proper protection.

Vertical industry environment

A major step in the digital transformation of business operations is the emergence of vertical software-as-a-service (SaaS) platforms. These cloud solutions are industry-specific and designed to meet the service needs of an industry type. With tens of thousands of vertical SaaS platforms, SMBs form a large portion of their user base.

Examples of successful vertical SaaS platforms are: Toast, a point-of-sale and workflow platform designed for restaurants and the food and beverage industry; Procore, a construction management software; and Service Titan, a business platform for commercial service professionals such as plumbers and electricians. In addition, a wide variety of new vertical SaaS platforms is developing, serving industries from architecture to travel, to scrapyards and waste management, according to Bain Capital Ventures.

These platforms serving vertical industries provide an environment that supports the distribution of multiple kinds of embedded services, from digital payments to finance, and naturally, insurance. The nature of vertical SaaS platforms makes integrating third-party products and services an attractive way to enhance the platform’s customer experience – without having to become expert in providing those products and services. As a result, vertical SaaS platforms working with the right embedded partners do not need to develop their own insurance infrastructure to offer compelling coverage to their customers.

Advantages of embedded insurance

Embedded insurance is a data-led, seamless integration of insurance products. This solution has numerous advantages, including:

  • Enhanced customer service. By embedding insurance in a vertical platform, users gain the convenience of accessing coverage options and can buy policies within the application or platform.
  • Expanded revenue streams. Vertical SaaS platform providers can establish new revenue streams through fees on insurance policies sold through their platforms.
  • Risk mitigation. Insurance coverage helps platform users manage risks and protect their businesses.
  • Differentiation and competitive advantage. SaaS platforms can stand out from competitors by offering comprehensive insurance solutions that combine data and behavioral intelligence with financial protection.
  • Platform innovation. Offering embedded insurance is a way to encourage innovation in the vertical ecosystem. By identifying industry-specific risks and offering customized coverage, vertical SaaS platform providers can help customers address emerging risk needs.

The critical element in embedded insurance is the technology and data orchestration layer, which gives the vertical SaaS platform access to insurance companies and brokers for product distribution. Data supporting embedded insurance can come from multiple sources, not just the providers of the insurance products. The SaaS platform provider also can leverage its own data on customers to provide relevant, right-sized insurance products. This makes the insurance purchase much faster and easier, resulting in a direct benefit to customers that also enhances the platform experience. When SaaS platform providers and embedded insurance partners work together to meet SMBs’ needs, all parties win.


Paul Prendergast is the chief executive officer and co-founder of Kayna, an insurance infrastructure platform that enables embedded insurance. Kayna provides the technology and data orchestration layer between carriers, brokers and any vertical SaaS platform to distribute products that are directly relevant to policyholders. Founded in 2021, Kayna operates across platforms that serve millions of people and businesses worldwide, ranging from field services, fintech and retail, to personal care and wellness.

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