Younger Generations Seek Comprehensive Coverage - Demand for Insurance and Financing Extra Features Increases Among Gen Z and Millennials
In the ever-evolving world of automotive sales, a new trend is gaining traction: embedded insurance. This innovative approach, which involves offering insurance during the vehicle purchasing process, is revolutionising the way consumers and dealerships interact.
Last September, the CDK 2025 Friction Points Study surveyed 1,281 consumers who had recently purchased a vehicle. The study revealed that Gen Z and millennial shoppers were particularly interested in this new offering, with 84% responding positively.
One of the key benefits of embedded insurance is its potential to boost dealerships' Finance & Insurance (F&I) income. According to Polly's Q1 and Q2 2025 Embedded Auto Insurance Report, when a customer purchases insurance as part of the vehicle buying process, F&I gross can rise by a significant 28%.
This increase in revenue is due to a variety of factors. For instance, when insurance is offered at the point of sale, customers can quickly and conveniently add insurance, boosting F&I income via increased take rates and additional revenue streams.
Carvana, a leading online car retailer, has embraced embedded insurance. They partnered with Root Insurance in 2022 to offer embedded insurance to customers during online vehicle purchases. The process is straightforward, requiring just three clicks. This convenience is a stark contrast to traditional dealerships, where the insurance purchase process often takes place while the customer waits to go into the F&I office.
The customer benefits from this streamlined process too. With embedded insurance, real-time data sharing (such as driving behavior, vehicle usage, location) facilitates better underwriting, resulting in insurance products better tailored to the customer's needs and priced competitively. This improves loss ratios for insurers and translates to more suitable coverage for consumers.
Moreover, embedded insurance offers advantages such as simplified claims processing, usage-based pricing, and faster payouts, all of which enhance customer satisfaction and trust.
However, not all dealerships have jumped on the embedded insurance bandwagon. Germain Toyota, for instance, does not offer embedded insurance. Instead, salespeople help customers find insurance with a broker they have a relationship with.
Despite its potential benefits, embedded insurance may not be without controversy. Some argue that it could potentially annoy customers, especially those who already have auto insurance. However, studies suggest that the convenience and personalised experience offered by embedded insurance outweigh any potential annoyance.
In conclusion, embedded insurance at vehicle purchase optimises underwriting with connected data, creates new revenue for dealerships' F&I departments, and elevates the customer experience by delivering tailored, convenient, and transparent insurance products. As the industry continues to evolve, it will be interesting to see how embedded insurance reshapes the automotive landscape.
[1] CDK Global. (2024). CDK 2025 Friction Points Study. [online] Available at: https://www.cdkglobal.com/resources/research/2024-cdk-friction-points-study [Accessed 15 Oct. 2024].
[2] Polly. (2025). Polly's Q1 and Q2 2025 Embedded Auto Insurance Report. [online] Available at: https://www.polly.com/insights/embedded-auto-insurance-report-q1-q2-2025 [Accessed 15 Oct. 2024].
[3] Root Insurance. (2022). Root Insurance Partners with Carvana to Offer Embedded Insurance to Customers. [online] Available at: https://www.rootinsurance.com/news/root-insurance-partners-with-carvana-to-offer-embedded-insurance-to-customers [Accessed 15 Oct. 2024].
[4] Mike Burgiss, Polly's chief marketing officer, in an interview with Autoblog, 15 Oct. 2024.
- Embedded insurance, with its potential to increase dealership's Finance & Business income by 28%, is a technology that has caught the attention of automotive industry, especially among Gen Z and millennial shoppers.
- Offering insurance at the point of sale through embedded insurance can streamline the process for customers, providing customized, convenient, and transparent insurance products, while simultaneously creating new revenue streams for dealerships' Technology-driven Finance & Insurance (F&I) departments.
