Neither embedded insurance nor traditional distribution is automatically better. Embedded offers can put relevant cover alongside a related purchase; agents, brokers, insurer-direct sales and bank channels can provide other ways to reach and advise customers. Choose based on customer need, product complexity, total operating economics, service ownership and the rules in each market. Many businesses will need a mix of channels rather than an either-or decision.
What embedded and traditional insurance distribution mean
Embedded insurance
Embedded insurance places an insurance offer in or alongside another product or service journey—for example, travel cover offered with a flight or damage cover offered with an appliance. The European Commission treats selling, proposing, advising on or preparing an insurance contract as insurance distribution, including when an ancillary seller makes the offer. A customer must retain the choice to buy the main product without the insurance. European Commission: Insurance distribution.
Traditional distribution is a group of channels
Traditional does not mean one specific sales method. It can include agents, brokers, direct sales by an insurer, and bancassurance through a bank. In most EU Member States, agents and brokers remain the main distribution 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. EIOPA, 2026.
How the models compare
| Decision factor | Embedded offer | Traditional or multichannel approach |
|---|---|---|
| Customer moment | Can appear during a related purchase or service interaction, when the risk may be salient. | Can reach customers through an adviser, broker, insurer-owned channel or bank relationship. |
| Complexity and advice | More plausible when eligibility, cover and purchase can be explained clearly in the host journey. There is no universal complexity threshold established by the sources. | Agents or brokers can support consultation and risk-specific advice. Direct sales can suit appropriately targeted, simpler offers. |
| Economics | Assess conversion alongside integration, partner compensation, underwriting, servicing, claims and effects on existing channels. No universal cost advantage is established. | Direct sales require a viable economic model and investment. Agents and brokers have their own remuneration and service arrangements. |
| Choice and understanding | Convenience can help, but a poorly designed add-on may make comparison harder or create pressure at the point of sale. | Advice may help explain 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 must be clear for data, complaints, policy servicing and claims. | Oversight is still needed across the insurer, intermediary, delegated authority and service arrangements. |
| Regulation | Embedding an offer does not remove distribution obligations. Applicable permissions depend on the activity and jurisdiction. | Insurer-direct sellers and intermediaries are also subject to distribution rules, which vary by country and product. |
This is a practical synthesis, not a claim that all businesses in a given channel have the same costs or customer outcomes. European Commission; EIOPA; FCA; PwC; Deloitte.
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A decision framework for your business
- Start with the customer’s risk. Identify what the policy covers and whether that risk naturally arises during your product or service journey. A relevant purchase moment can make an embedded offer convenient; it does not, by itself, establish that the cover is suitable. European Commission; Deloitte.
- Match the channel to the explanation and support needed. Work out what customers need to understand, what advice or underwriting information is required, and how they will get help. PwC notes that technology may make some simple life and small-commercial offers easier to distribute directly, while a broader strategy can refer more complex needs to agents. PwC.
- Model the full economics, not just sales conversion. Include acquisition, technology integration, partner compensation, underwriting, servicing, claims, retention and potential channel conflict. Possible partner arrangements include traditional commission, an upfront referral fee, or revenue or profit sharing; these are examples of structures, not guaranteed terms or stated rates. PwC.
- Assign customer-facing responsibilities before launch. Specify who approves the product, explains cover and exclusions, handles policy changes and complaints, and supports claims. The FCA’s review identified potential harm where customers paid excessive prices, bought unsuitable products or lacked needed claims or complaint service; it linked risks to weak customer focus and poor governance or oversight. The review describes risks, not a finding that every add-on offer causes harm. FCA.
- Verify permissions and disclosures locally. The EU Insurance Distribution Directive (IDD) sets conduct and transparency requirements, and Member States may add provisions. Outside the EU—or under a country’s own implementation—requirements can differ. Check the actual activity, product and jurisdiction with qualified local advice before launch. EIOPA: IDD.
- Consider a channel mix. Digital direct, embedded offers, agents and brokers can complement one another when customer needs, technology and economics support the arrangement; channel choice need not be binary. PwC.
What EU market data does—and does not—show
- EIOPA reported a 7.5% decrease in registered insurance intermediaries from 2020 to 2024. It cites stricter professional requirements, increased supervision, consolidation, demographics and changes in distribution models among contributing factors.
- 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 increased 10% from 2022 to 2024. 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 registration definitions and data collection differ between states, so comparisons require care.
These figures describe the EU distribution market; they do not show that embedded insurance is growing faster than conventional channels or is the right fit for an individual business. Source: EIOPA, 2026.
Regulation, customer choice and potential harms
The IDD applies to insurance distribution, including sales through ancillary intermediaries. It sets requirements for information, conduct, transparency, supervision and sanctions, while allowing Member States to add provisions. EIOPA describes the non-life Insurance Product Information Document (IPID) as a comparison aid. Its listed information includes cover, insured risks, exclusions, premium payment, customer obligations, claims obligations, duration and cancellation. EIOPA: IDD.
Choice should be practical, not merely theoretical: for a product packaged with insurance, the customer must be able to buy the principal product without the cover. Separately, an FCA-hosted 2014 behavioral-research summary says an experiment found that the “add-on mechanism” weakened consumers’ ability to shop around and compare effectively. The FCA notes 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. FCA, 2014.
Technology and partnership risks to plan for
EIOPA describes more automated distribution through APIs, including insurance embedded alongside financial and non-financial services. Digital tools can improve efficiency, reduce operational costs and make new products viable, but they can also increase ICT security risks and dependence on large service providers. Digitalisation also changes conduct and prudential risks. EIOPA: Digitalisation market monitoring report.
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Partner coordination affects the customer experience as well as compliance. Deloitte highlights licensing, pricing transparency, pressure at the point of sale, claims dissatisfaction that may reflect on the host brand, and the possibility that the insurer’s direct customer relationship weakens. Its US discussion notes that auto dealers offering insurance may need state agent licensing; this is a prompt to verify local requirements, not a complete licensing analysis. Deloitte.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why market forecasts do not settle the choice
Deloitte’s 2023 article cited forecasts for 2030 embedded property and casualty insurance sales ranging from US$70 billion in the United States to US$700 billion globally. It also described a conditional scenario in which, 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 distribution. These are forecasts and a scenario, not realized sales or measured profitability. Deloitte, 2023.
No like-for-like measured comparison in the cited sources establishes total costs, customer outcomes or profitability across the two models. A large projected market is not evidence that embedded distribution will earn more for your business. Build the decision around your own customer proposition, operating capabilities, responsibilities and local rules.
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