Why Embedded Insurance Is Taking Off in Malaysia’s Digital Economy

Introduction – Insurance That Fits Seamlessly into Daily Life

Have you ever noticed that you can easily protect your purchases online or your car rides like Grab lately?

If you haven’t noticed, many online services these days have included an option for you to insure your purchases so that you can save yourself from any unforeseen circumstances.

The protection that you add on to your purchases or your car rides is what embedded insurance is. Embedded insurance is a new form of insurance that is changing the way Malaysians purchase their goods with added protection.

With many Malaysians adopting the digital lifestyle, many are no stranger to embedded insurance. They have, in different ways, added embedded insurance to their purchase so that their purchase is protected. The reality is, embedded insurance is also convenient and often added on with a click.

These features make embedded insurance pretty popular among Malaysians. In this article, we explore further what embedded insurance is, how it differs from traditional insurance and what we can expect in future when it comes to embedded insurance.

What Is Embedded Insurance?

According to Chubb, embedded insurance, “is an innovative way for businesses to integrate relevant risk protection into their customers’ purchase journeys, allowing them to include or add on coverage when buying their products or services.” (Chubb, 2022)

To make it simpler, embedded insurance is insurance that is already integrated with your products when you buy them. Most of the time, as consumers, you can add on this insurance coverage during the checkout process when shopping online.

Some in-app purchases are also known to bundle this coverage with your purchase whereby a separate process is not necessary, should you want to further protect your purchase.

Ultimately, embedded insurance negates the necessity of any paperwork for consumers as well as businesses as it offers targeted insurance that often complements the products.

Embedded Insurance vs Traditional Insurance

Let’s take a look at some of the differences between embedded insurance and traditional insurance:

Why It’s Taking Off in Malaysia

The Push for Digital Convenience

In Malaysia, almost all of our transactions are somewhat digitalized. According to Mckinsey, ‘95 percent of Asian consumers are digitally inclined’ showing a strong preference to purchase goods and services online. (Mckinsey, 2023)

This behaviour also reflects the consumer’s preference for goods and services to be instant, seamless and integrated.

Since embedded insurance is digitalized and conveniently offered at different points of sales, consumers are willing and open to the idea of making sure that their online purchases are ‘more protected’ or ‘more trustworthy’ by adding on embedded insurance.

Growing Trust in Digital Platforms

Fintech apps, e-commerce, and super-apps that are used day in, day out have certainly increased the adoption of embedded insurance.

Apps like Grab or Touch N Go are so recognizable that their product offerings are highly trusted by most Malaysians. The bottom line is that, any embedded insurance products which are offered by these super apps are indeed trusted by many so much so that users are no longer turning to traditional insurance providers.

Supportive Market Environment

The supportive market environment in Malaysia is another reason why embedded insurance is gaining popularity.

Bank Negara Malaysia for example, recently released a regulatory framework; Licensing and Regulatory Framework for Digital Insurers and Takaful Operators that aligns with their 2022-2026 blueprint.

In the blueprint, one of BNM’s key objectives is to close protection gaps by advancing and enhancing the digitalisation of the financial sector as well as the dynamism of the insurance and takaful sector. (DFDL, 2024)

Malaysia’s insurtech ecosystem and regulatory openness like observed from BNM shows that a supportive ecosystem is indeed in place that has allowed for embedded insurance players to continue growing.

Benefits of Embedded Insurance for Malaysians

For Consumers

• Micro insurance options are now available for specific needs which are also far more affordable
• Fast payment processing since everything is digitalised
• Convenient and hassle free experience with no additional paper work necessary

For Businesses

• Integrated insurance sales adds a new revenue stream
• Value added service that offers peace of mind increases customer’s loyalty towards business

Real-Life Examples of Embedded Insurance in Malaysia

• Ride hailing services have become a common service for many Malaysians. Whether you are a rider or a driver, embedded insurance is actually offered to both so that your ride is insured. For example, Grab offers their drivers the option to purchase embedded insurance on a daily basis, whenever they are online.

This insurance is meant to provide coverage for them while on their job for accidents as well as any other liable situations that might arise with their riders.

• E-commerce platforms are also offering embedded insurance in Malaysia for almost any products that you purchase. While items like television and electronics are commonly purchased online with a warranty period from the seller, platforms like Shopee and Lazada are also offering embedded insurance in the form of extended warranty.

It is also now becoming increasingly common for other items to be insured through embedded insurance, where protection is provided for goods from spills, cracks or any other accidental situations. Consumers can easily add a ‘product protection plan’ that will insure their goods in these situations all with a click.

• Popular fintech apps like TnG Wallet are good examples of embedded insurance providers. They have created embedded insurance products like WalletSafe which insures your e-wallet balance from unauthorised transactions or any device theft.

   

They also offer daily embedded insurance plans for domestic and international travel which can be purchased directly from their app, without needing to go through any additional paperwork.

Challenges Holding Back Wider Adoption

Regulatory Complexity

Currently, newer companies do face some regulatory complexity as they need to adhere to the rules set by Bank Negara. These rules which apply to new digital products may be more complex, increasing the barrier for entry for newer players.

While regulatory bodies are creating a supportive ecosystem, they also stress on compliance and other rules which can mean a slower approach in the creation of new embedded insurance providers in Malaysia.

Data Privacy and Security

Safeguarding user’s data, their financial information and other personal information is extremely crucial. But this becomes one of the biggest challenges for any provider who offers embedded insurance in Malaysia.

With increasing data breaches, scams that involve personal data thefts, many are becoming more and more aware and tend to distrust any form of online product. This definitely hinders the wider adoption of embedded insurance products.

Consumer Awareness

Another common challenge that holds back wider adoption of embedded insurance is the lack of awareness amongst consumers about what embedded insurance is and how it can help them.

Many are more used to long-term traditional insurance offerings by insurance agents that may not easily adapt to embedded insurance policies. Buying insurance products online which does not involve any face-to-face interaction might feel unsafe for some.

What the Future Looks Like for 2025 and Beyond

Embedded insurance in Malaysia is definitely set to grow beyond applications like e-hailing rides or even e-commerce purchases.

With the booming growth of the healthcare sector, we may find embedded insurance being built directly into telemedicine apps. For example, when booking a doctor’s consultation, you may be able to automatically add protection for follow up appointments.

Gig economy protection might also become more common where freelancers, delivery riders are all automatically insured in the case of any accidents or income loss.

With the rise of AI and machine learning, we foresee embedded insurance in Malaysia becoming more and more personalized that will match a person’s habits and lifestyle choices.

It might also result in Malaysia becoming one of the top regional leaders in embedded insurance since we are growing steadily when it comes to the fintech ecosystem plus a population that is comfortable with online services.

Read also: Cyber Insurance for SMEs in Malaysia: What It Covers and Why It Matters

Conclusion – A Seamless Future for Digital Protection

Protection does not need to be complex anymore. With embedded insurance, you can get affordable protection easily, since it has been integrated seamlessly.

For consumers, embedded insurance means getting peace of mind all within one click when shopping online especially.

Embedded insurance for businesses on the other hand means that they have a good opportunity to deliver extra value to their consumer aside from generating additional revenue.

By 2025, it could be a standard feature of Malaysia’s digital economy, just like how online banking is for us today.