Here's What Embedded Insurance Is and How It Can Save You Money on Car Insurance

With the rise of digital technologies like mobile apps and smartphones, many companies are offering innovative new financial products for digital banking, online payments, and managing money. Complex financial products can be offered anywhere, via mobile device.

The insurance industry is also being transformed by digital technology that harnesses the power of data. One of these new types of insurance is called "embedded insurance." With embedded insurance, companies -- and not just insurance companies -- are beginning to offer specialized insurance coverage in a variety of ways.

Let's look at what embedded insurance means, and how it could help you save money on car insurance.

Embedded insurance: What it means and how it works

Accenture defines embedded insurance as "any insurance that can be purchased within the commercial transaction of another product or service." Examples of embedded insurance might include buying car insurance for a rental car, getting an extended warranty on a new washing machine, or buying travel insurance as part of the process of booking a flight.

Digital technology is making it easier to sell embedded insurance to a wider range of customers, for various situations. Spot Insurance (getspot.com) is an insurtech startup that offers specialized embedded insurance for purchases like travel, concert tickets, and ski passes. With Spot's injury insurance, skiers and snowboarders can purchase emergency insurance coverage along with their ski passes.

With embedded insurance, companies can offer you the right coverage at the right time -- right at the exact moment when you might be worried about "what if I fall on the mountain while snowboarding" or "what if my family has a last-minute illness before our big international vacation?" Embedded insurance can offer people a higher level of convenience and peace of mind. And it's also opening up new ways to save money on car insurance.

Another form of embedded insurance is also underway in the auto insurance world. But instead of buying insurance from a separate company, you can now buy auto insurance directly from your car company.

Embedded insurance: A new style of car insurance

Several major automakers have recently started to offer their own auto insurance policies. This is another form of embedded insurance, where you can buy car insurance straight from the same company that manufactured your vehicle.

Here are a few major car companies that are now offering embedded auto insurance.

Ford: Ford Insure

Ford Insure is a special type of car insurance for Ford vehicles of model year 2020 or newer. It uses connected car data to help you save money on car insurance by rewarding safe driving. After four to six months with Ford Insure, you might be able to save up to 40% on car insurance.

Ford Insure also offers a pay-per-mile car insurance plan, and there are discounts available if you bundle your car insurance with homeowners insurance. Ford also offers pet insurance through its underwriting partner, Nationwide.

GM: OnStar Insurance

General Motors (GM) is also offering embedded insurance, called OnStar Insurance. This insurance uses in-vehicle telematics technology to track driving data and reward safer driving. Like Ford Insure, it's limited to newer model vehicles.

If you have a Buick, Cadillac, Chevrolet, or GMC vehicle from model year 2016 or newer, OnStar Insurance will work with your car's connected vehicle technology. No app or telematics plug-in device is required!

OnStar Insurance is not just for new GM vehicles. Even if you have an older model vehicle, or drive a non-GM car, you can still get OnStar Insurance -- but it will be a traditional car insurance plan, not the telematics version that rewards safer driving behavior.

Tesla Insurance

Tesla drivers can choose Tesla Insurance to insure their Tesla vehicles, which uses real-time driving data to determine your Safety Score. Each month, your Tesla Insurance premium is calculated based on your previous month's driving data and Safety Score.

Unlike other telematics car insurance programs that might take several months to help you get a discount, Tesla Insurance works based on real-time data and delivers results fast. As of Jan. 6, 2024, Tesla Insurance is only available in the following 11 states:

• Arizona
• Colorado
• Illinois
• Maryland
• Minnesota
• Nevada
• Ohio
• Oregon
• Texas
• Utah
• Virginia

Bottom line: Embedded insurance is coming to the auto insurance industry. More auto insurance companies are looking for innovative ways to use driving data to help you save money. If you're looking to save money on car insurance, your next big discount might come from inside the car!