Customer Interest First in Embedded Insurance

REPORT ANALYSIS Customer Interest First in Embedded Insurance

In brief Embedded insurance – the sale of insurance integrated into the purchase process of a product or service – is growing rapidly due to digitalization. Insurance is therefore increasingly being sold via platforms outside the financial sector. With this publication, the AFM aims to create space for the opportunities of embedded insurance by providing clarity on what we consider important for safeguarding customer interest in embedded insurance. These legal requirements and points of attention are also of added value for parties without a license in safeguarding customer interest. Parties must comply with the legal requirements and points of attention regarding licensing, product development, information provision, and further service provision for insurance. We will continue to research the opportunities and risks of embedded insurance.

NOVEMBER | 2025

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Summary Embedded insurance offers opportunities but requires clear safeguards for customer interest. By integrating insurance into the purchase process of products and services, convenience is created for customers and space for innovative insurance propositions. This development can help prevent uninsured damage and offer customers better-fitting products. At the same time, embedded insurance brings potential disadvantages, such as customers possibly making less well-considered choices and risking being over- or under-insured. In this publication, the AFM outlines the legal obligations that apply to providers and platforms, and provides practical recommendations for shaping embedded insurance for the benefit of the customer. Central to this are the topics of licensing, product development, information provision, and activities in the administration phase. The above topics are discussed along the customer journey and provide direction for safeguarding customer interest. With these tools, the AFM aims to create space for the opportunities of embedded insurance without losing sight of the risks. Thus, this publication provides providers and platforms with guidance to design embedded insurance sustainably and in the interest of customers.

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Table of Contents

1. Introduction 4 1.1 Background of this publication 4 1.2 Objective of publication: clarification and recommendations 5
2. Opportunities and risks of embedded insurance 6 2.1 Opportunities 6 2.2 Risks 6 2.3 Counteracting the risks 7
3. Licensing requirement 8 3.1 An AFM license 8 3.2 Mediating in insurance without an AFM license 8
4. Customer journey 11 4.1 Phase 1: Product development 11 4.2 Phase 2: Orientation 12 4.3 Phase 3: Closing 13 4.4 Phase 4: Administration 15

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1. Introduction 1.1 Background of this publication Embedded insurance means that the sale of an insurance is integrated into the purchase process (both physical and digital) of a product or service. Embedded insurance comes in many forms. A well-known example is the purchase of insurance when buying a new bicycle in a bike shop. This form of insuring has existed for some time, but has taken off due to developments in the field of digitalization. As a result, these insurances are increasingly being integrated into the websites of platforms, allowing customers to take out these insurances online - during the purchase of a product or service. This trend follows the broader trend that customers are increasingly making online purchases.1 Embedded insurance can be integrated into a product or into a platform. An example of an integrated insurance is a purchase insurance for purchases made with a credit card. An example of an integrated insurance in a platform is a cancellation insurance when buying a plane ticket or concert ticket. Besides these private examples, one can think within the small business market of an accident insurance for self-employed individuals who accept assignments via a freelance platform. The variety in types of platforms is very large, ranging from small (web)shops to large (neo)banks that integrate insurance into their paid subscription services. Within the European insurance sector, there are expectations that embedded insurance will experience strong growth, due to further digitalization and the possibilities to interact online with customers. In various reports, forecasts have been made about the impact and size of the growth that embedded insurance can experience, with the share of embedded insurance potentially reaching up to 30% of all insurance transactions.2 Although these estimates are uncertain, they suggest that there is commercial interest in bringing embedded insurance to the attention of potential customers. In her annual consumer research, the AFM sees that 1 in 8 consumers takes out an insurance via embedded insurance per year, of which slightly more than half of this group had taken out the insurance online.3 The characteristics of embedded insurance and the growth forecasts are for the AFM an occasion to examine the opportunities and risks of this development together, and to provide clarification of relevant regulations for both providers and platforms. Previously, both the AFM and De Nederlandsche Bank (DNB) had already drawn attention to this. In April 2023, the AFM stated in the publication "Technology towards 2033" that insurances offered via embedded insurance differ from traditional insurances, both in terms of coverage and duration.4 In June 2024, DNB published an in-depth analysis on embedded finance, with specific attention for embedded insurance.5 DNB notes among other things that the development of embedded insurance leads to the value chain becoming more complex and less transparent. And also that service provision is increasingly taking place across national borders. 1 CBS: almost 8 out of 10 people made online purchases in 2023 2 Embedded insurance | Deloitte Insights, IFT_1.2.indb & EY: How insurers and new entrants can take advantage of embedded insurance 3 AFM Consumer Monitor - Spring 2025 4 Occasional paper AFM: Technology towards 2033 5 Embedded finance: finding the balance between convenience and risk in the digital economy | De Nederlandsche Bank

© AFM 2025 | Customer Interest First in Embedded Insurance 5 In this publication, there is frequent mention of providers and platforms; here, two different groups are meant by this. License holders who primarily deal with embedded insurance in the chain can be insurers, authorized agents, or intermediaries. When this publication speaks of providers, this applies to all these categories. When speaking of platforms, these are the places in the chain where the customer comes into contact with the insurance products. These can be parties with or without an AFM license.

1.2 Objective of publication: clarification and recommendations With this publication, the AFM clarifies a number of relevant provisions from regulations on embedded insurance and makes recommendations, so that providers and platforms who are (want to be) involved with embedded insurance can permanently safeguard customer interest in their business model. Providers and platforms must ensure that they organize their business operations in such a way that they comply with the relevant standards, whereby the AFM looks particularly at the licensing requirement, the product development standards, and legal requirements regarding information provision in embedded insurance. In the following passages, we first elaborate on the opportunities and risks we have identified (Chapter 2), after which we discuss what requirements apply regarding the licensing requirement (Chapter 3). Finally, the AFM addresses the safeguarding of customer interest during the different phases of the customer journey (Chapter 4).6 Here, a distinction is made between a number of statutory minimum obligations and additional recommendations. These recommendations can help insurers and platforms to further safeguard customer interest. 6 The AFM describes a number of relevant legal requirements in this publication, but this is not an exhaustive list of requirements.

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2. Opportunities and risks of embedded insurance 2.1 Opportunities Prevention of uninsured damage The AFM sees that embedded insurance offers opportunities to prevent uninsured damage. Embedded insurance brings insurance to the attention of customers at a time when these customers may have a real need for a certain insurance. For example, when booking a vacation or before starting a freelance assignment. Consumers can thus insure risks that they might otherwise not have been aware of. Better-fitting products Embedded insurance offers opportunities to develop new and better-fitting products. Because platforms bring together customers with similar insurance needs, providers can tailor products to that specific group of customers. Niche insurances can benefit the offer for customers. This can lead to better-fitting products and product terms.

2.2 Risks Less well-considered choices The ease with which customers can take out embedded insurance in a digital environment can lead to an increased risk of a non-fitting insurance. Customers are focused on buying a product or taking out a certain service. As a result, they may have less attention and time for the purchase of the insurance than when their primary goal is to take out an insurance. Furthermore, the taking out of embedded insurance is made as easy as possible by providers and platforms, to prevent customers from abandoning the purchase process prematurely. The sale of embedded insurance can therefore lead to less well-considered choices and a possibly too hasty decision by the customer. This can, as explained below, contribute to risks of over- and under-insurance. Over-insurance An important risk with embedded insurance is over-insurance; customers take out an insurance that (partially) covers the same risk as an insurance they already had. An example is an embedded damage insurance when buying a smartphone, while the customer was already insured against comparable damages via a household contents and travel insurance. Because embedded insurances are often presented as an 'extra service', customers are not always aware that they may already be sufficiently insured. This risk exists especially when insurances are sold in a too non-transparent manner during the purchase of a product or service. Over-insurance can therefore lead to unnecessary premium expenditures, without the consumer receiving extra protection. From the perspective of financial resilience, this is undesirable: customers bear burdens that are not in proportion to the added value of the insurance. Additionally, overlapping insurances can lead to complications in damage handling, when it is not immediately clear which insurer should pay out primarily.

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2.2.1 Under-insurance Embedded insurance also brings the risk of under-insurance. Here, customers think they are sufficiently insured, while the insurance only offers a limited or superficial level of coverage. A customer, for example, books a trip online and is automatically offered a travel insurance, which however only covers baggage loss and not medical costs or cancellation. The customer departs with the idea of being fully insured, but in reality faces considerable risks. Especially in the case of medical costs abroad, where the Dutch health insurance only reimburses what the treatment costs in the Netherlands, costs can run into many thousands of euros. It is only in situations where one feels vulnerable - such as during illness, damage, or theft - that it becomes clear that the coverage was insufficient. Besides individual damage, this harms trust in the financial sector. Although customers receive information, for example via the Insurance Product Information Document (IPID), some customers will not take the time to read this carefully or will not understand this information well. This risk always exists, but is (still) greater with embedded insurance. After all, customers are not primarily concerned with purchasing an insurance, but with another product to which the insurance belongs.

2.3 Counteracting the risks The application (and knowledge) of laws and regulations by involved providers and platforms is an important safeguard to counteract the mentioned risks. Thus, the laws and regulations regarding product development can be an important safeguard for fitting products and counteracting over- or under-insurance. Therefore, in the following chapters, we go deeper into a number of important provisions from the laws and regulations. First, the licensing requirement is outlined, because the distribution chain of embedded insurance is often a collaboration between providers with a license (such as insurers or authorized agents) and enterprises without a license (such as platforms).

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3. Licensing requirement Platforms that want to provide insurance to customers via embedded insurance can either operate under their own license, or choose to mediate in insurance without an AFM license under certain conditions. In this chapter, we describe the possibilities and obligations per scenario.

3.1 An AFM license Enterprises that mediate in financial products in the Netherlands generally require a license from the AFM for this. Under Article 2:80, first paragraph, of the Financial Supervision Act (Wft), it is indeed prohibited to mediate in financial products without an AFM license. Maintaining this licensing requirement and acting against illegal mediators is an important task of the AFM and a condition for safeguarding trust in the financial sector in a broad sense. Also, platforms that have included embedded insurance in their offer to customers can be qualified as mediators. This does not mean, however, that they always need a license from the AFM, because there are also exceptions to the licensing requirement under the Wft. These are explained further below.

3.2 Mediating in insurance without an AFM license Besides applying for their own license, there are three options to mediate in insurance without an own AFM license.7 First, platforms can, under certain conditions, make use of the exemption from the licensing requirement. Second, platforms can register as an affiliated intermediary of the provider and thus make use of the provider's license. Third, platforms can act as the policyholder in group insurances, where they are exempt from a licensing requirement in certain cases. When an exception to (or exemption from) the licensing requirement is used, the provider and the platform must be aware of under which conditions this is possible. This prevents situations where the platform inadvertently operates illegally without a license and thereby violates Article 2:80, first paragraph, Wft. From Article 4:94, Wft, it also follows that it is prohibited for providers to cooperate with platforms that operate illegally. This means that it is important for both parties that the platform operates under the correct conditions. Of course, independently applying for an AFM license remains a possibility. Since October 1, 2025, there have been tightening measures for the licensing requirement regarding group insurances; this is taken into account in this publication. This tightening of the licensing requirement for group insurances is important because platforms may now perform activities subject to a licensing requirement. In general, the AFM sees that platforms make use of the exceptions to the licensing requirement provided by the legislator pursuant to Article 2:80, first paragraph, Wft. The AFM understands that platforms make use of these possibilities, but points out that conditions are sometimes attached to this and that not all exception constructions fit all embedded insurance propositions.

Legal Requirement 1 Providers and platforms must ensure that the chosen insurance proposition and the platform comply with the conditions of the licensing requirement, exemption, or exception.

Exemption from licensing requirement If the platform only mediates in certain damage insurances that serve as a supplement to a good or service, it can make use of the exemption from the licensing requirement.8 This exemption is an elaboration of rules from the Insurance Distribution Directive (IDD) whereby ancillary insurance intermediaries are exempt from a licensing requirement under certain conditions.9 The exemption from the licensing requirement means that the platform does not have to comply with the vast majority of the standards in the Wft. However, there are a number of standards that the platform is obliged to adhere to and for which the provider takes responsibility for ensuring compliance.10 On its website, the AFM has compiled and published all relevant information about the exemption and licensing requirement.11

Affiliated intermediary The Wft also offers the possibility to register enterprises, for example platforms, as an affiliated intermediary and thus attach themselves to the provider's license.12 The designation of the affiliated intermediary is an implementation of a provision in the IDD.13 The affiliated intermediary makes use of the provider's license for the products in which they mediate. The platform may, in this case, not collect premiums and may mediate for only one provider per product. Furthermore, the provider is responsible for ensuring that the platform complies with the relevant provisions in the Wft.14 It must also register the platform as an affiliated intermediary with the AFM. This scope is therefore broader than for the aforementioned exemption from the licensing requirement. On its website, the AFM has compiled and published all relevant information about affiliated intermediaries.15

Policyholder in group insurances If the offered insurance product is specifically a group insurance where the platform acts as the policyholder, a licensing requirement for the platform may apply since October 1, 2025. This is because the activities performed can be regarded as mediation.16 Whether there is mediation is determined based on two criteria: does the customer have a choice regarding taking out an insurance, and does the platform receive compensation? If yes, then there is in principle a licensing requirement. There is no licensing requirement if customers have no choice or if the platform does not receive compensation. In the case that customers do have a choice and the platform receives compensation, the platform may still qualify for the exemption from the licensing requirement if it qualifies as an exempted intermediary. Thereby, the policyholder must comply with the conditions of the exemption from the licensing requirement as described earlier. On our website, we have published an interpretation regarding the licensing requirement for group insurances.17

An overview of the possibilities for an exemption The table below gives a summary of the differences between the possibilities for exemption from the licensing requirement when mediating in insurances. The conditions under which the exemption or exception applies can differ greatly from each other.

AFM supervision of the licensing requirement The AFM actively supervises compliance with the licensing requirement and takes action if it establishes that enterprises are mediating illegally. To prevent illegality, it is important for providers and platforms that they evaluate the insurance proposition - including underlying agreements - in the context of the licensing requirement and conditions of the exceptions thereto. Finally, we note that an exemption from the licensing requirement does not automatically mean an exemption from the entire Wft, and that the AFM continues to supervise compliance with non-exempted standards.

17 Group insurances

Exemption or Exception	Products	Premium	Compliance with Wft provisions by platform	Licensing Requirement
Licensing Requirement	No restriction on number of providers. Platform may not mediate in all insurance products.	Collection by the platform. Maximum premiums established.	Selection of Wft articles as laid down in Article 47, fourth and fifth paragraph, exemption regulation Wft.	At the provider. Platform not registered with AFM.
Exemption from licensing requirement	Per product but one provider. Platform may mediate in all insurance products.	Collection by the provider.	Entire Wft.	At the provider. Platform registered with AFM.
Affiliated intermediary	No restriction on number of providers. Possibly an obligation for customers to take out the insurance.	Collection by the provider.	At an obligation for customers and/or no compensation for the platform, the platform falls outside the Wft.	At the provider. Platform not registered with AFM.
Policyholder group insurances without licensing requirement

Table 1: Overview of exemption possibilities

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4. Customer journey For insurance products, the customer journey can roughly be divided into four phases: product development, orientation, closing, and administration. In this chapter, the AFM outlines the most important legal obligations and recommendations for developing and distributing insurance products via embedded insurance per phase.

4.1 Phase 1: Product development Given the mentioned risk of over- and under-insurance with embedded insurance, providers have a responsibility to ensure that the pro