The Hidden Growth Lever Every Vertical SaaS Platform Should Be Pulling
How to Unlock the Potential of Embedded InsuranceTable of Contents
- The Historical Advantage of Vertical Software
- Reimagining Vertical Software’s Potential
- Defining Embedded Insurance
- How Embedded Insurance Helps Fix a Broken Industry
- The Business Case for Embedded Insurance
- Traditional Obstacles to Full-Stack Expansion with Insurance
- Choosing the Right Embedded Insurance Partner
Vertical software leaders face a strategic imperative: expand beyond core functionality or risk commoditization.
Unlike other growth strategies that require complex development, embedded insurance offers a relatively straightforward path to high-margin revenue. By integrating insurance at key decision points, vertical software platforms can transform their business models while solving longstanding pain points for their customers.
β Keep reading to discover how to identify profitable insurance opportunities and successfully embed them in your vertical platform.
The Historical Advantage of Vertical Software
β³TL;DR
π Vertical software addresses industry-specific frustrations by moving beyond generic, horizontal systems
π Companies focusing on vertical markets experience higher growth, with an 11% advantage over horizontal SaaS businesses
π The evolution of vertical software now includes full-stack platforms that integrate embedded services, eliminating friction for users
π Expanding beyond core functionality is becoming essential to stay competitive, with customer demand for integrated solutions rising
π Embedded financial services, like insurance, offer vertical platforms new opportunities for high-margin revenue beyond subscriptions
This frustration has created opportunities for vertical software that meets the needs of specific industries. The market continues to validate the merits of a vertical approach. Recent industry data demonstrates that SaaS companies focusing on vertical markets represented an 11% higher relative growth rate than horizontal SaaS businesses.
Recent data shows vertical SaaS companies grow than horizontal ones.
The Shift From Specialized Tools to Full-Stack Platforms
Today, the definition of “vertical software” is expanding. It’s no longer just about integrating with complementary software solutions. Vertical software can now take the next step by embedding services that look and feel like extensions of the core application.
This evolution addresses the traditional challenge of vertical software: a limited TAM and revenue constraints due to focusing on a small group of users with highly fine-tuned workflows. Technology changes, particularly the shift to a more API-driven cloud-based ecosystem, are making it possible to fully embed solutions like FinTech or InsureTech directly into vertical platforms.
As these platforms mature into complete operating systems for their industries, they eliminate friction by natively embedding financial services – including banking, lending and insurance – rather than forcing users to cobble together multiple solutions. Many vertical software companies are already beginning this transformation.
Single Function Tools
Focused workflows, limited integrations, industry-specific UI, narrow use cases
Integrated Workflows
Full-Stack Platforms
Core software plus embedded payments, financing options, and insurance products
Why Vertical Software Must Go Beyond Core Functionality
Vertical software platforms have always been designed to solve industry-specific problems that generic tools couldn’t. Vertical SaaS platforms create durable customer relationships by getting “the thousand tiny things right” for their specific markets, something horizontal platforms cannot achieve. This precision comes from:
Industry Language
Using industry-specific terminology and workflows rather than generic business concepts
Sector Compliance
Addressing unique compliance and regulatory requirements for particular sectors
Unique Workflows
Incorporating specialized calculations, forms, and processings that are difficult to build in horizontal platforms
Operational Flow
Reflecting the natural sequence of operations within a specific industry
Differentiation Pressure
Feature parity on core functions creates pressure to differentiate in new ways
Integrated Expectations
Customer expectations are shifting toward integrated solutions rather than disconnected tools
Vertical Disruption
Market leaders face threats from newer entrants targeting specific verticals with fully integrated approaches
FinTech Monetization
Embedded FinTech services create opportunities for higher-margin revenue beyond traditional subscription fees
Reimagining Vertical Software’s Potential
β³TL;DR
π Vertical software is evolving from specialized tools to comprehensive platforms that include embedded services
π The SaaS+ model represents a strategic opportunity to increase revenue, improve retention and enhance customer value
π Leading companies like Shopify, ServiceTitan and SportsEngine demonstrate the potential of this approach
π Embedded insurance represents one of the most promising areas for vertical software expansion
Reimagining Vertical Softwareβs Potential
Venture capital firms and industry analysts have begun referring to this evolution using various terms. “SaaS+” has become a popular way of describing this next step in vertical softwareβs evolution. This term was coined by Rally Ventures to describe SaaS platforms that extend beyond core capabilities. Other commonly used terms include “SaaS-enabled marketplaces,” “vertical SaaS 2.0” and “full-stack vertical SaaS.”
This SaaS+ approach has several advantages:
For Customers:
- Deeper integration into critical workflows
- Reduced need for multiple point solutions or multiple vendor relationships
- More complete coverage of industry-specific needs
- Streamlined user experience across related functions
For Software Vendors:
- Revenue diversification beyond subscription fees
- Enhanced competitive differentiation
- Improved customer retention through broader value delivery
The SaaS+ Expansion Path
1. Payment processing: a common first step
Many vertical platforms begin expanding by integrating payment processing directly into their workflows, delivering a streamlined user experience, greater visibility into transaction patterns, and new revenue streams.
Example: Originally built as an e-commerce platform for creating online stores, Shopify expanded into Shopify Payments, Shopify Shipping and Shopify Capital. These integrated financial services allow merchants to process payments, manage shipping and access financing without leaving the platform. By embedding these services, Shopify has transformed from a website builder into a comprehensive e-commerce business solution.
2. Expanded financial services
Once payment processing is established, platforms can add more sophisticated financial capabilities including financial management, funds distribution and treasury services.
Example: Toast, a restaurant management platform, expanded beyond payment processing to offer payroll services, helping restaurant operators manage staff compensation directly through the same system they use for point-of-sale and operations.
3. Capital and lending solutions
With established payment flows and financial data, platforms can facilitate access to capital through business financing, equipment loans and consumer financing options.
Example: ServiceTitan, a platform for home service contractors that started by digitizing scheduling, dispatching and CRM functions, now offers embedded financing options that allow contractors to offer payment plans to homeowners directly through the platform. This capability helps contractors close larger jobs while giving homeowners flexibility for expensive repairs or upgrades.
4. Embedded insurance and protection
Embedded insurance represents another valuable expansion opportunity that can be implemented without taking on underwriting risk. Options include transaction protection, liability coverage and specialized vertical-specific protection.
Example: SportsEngine integrated payment processing, funds distribution, insurance, embedded e-commerce, background screening and more into its platform. This included refund protection insurance for cases of injury or family relocation, as well as supplemental accident insurance that helps pay down health insurance deductibles for sports-related injuries. As a result, SportsEngine increased average revenue per user by 34%.
Payment Processing
Examples: Shopify expands into payments, shipping, and capital.
Expanded Financial Services
Example: Toast adds payroll services.
Capital & Lending Solutions
Example: ServiceTitan offers embedded financial options.
Embedded Insurance & Protection
Example: SportsEngine embeds refund protection insurance.
Reimagining Industry Workflows With Embedded Protection
Embedded insurance works best in workflows that already involve risk and meet at least one of these characteristics:
- The insurance would typically require a separate purchase process
- The risk is small enough that purchasing separate coverage is inconvenient
- The protection product doesn’t currently exist in the traditional market
- Success comes from weaving these protection options directly into decision points where customers are already considering risk, rather than treating insurance as a separate product.
The following examples demonstrate how embedded protection creates value when integrated at the most relevant points in the customer journey.
Problem: Potential attendees hesitate to purchase tickets for events scheduled weeks or months in advance, fearing unexpected circumstances might prevent attendance. Event organizers face lower conversion rates and increased last-minute cancellations, while attendees risk losing their investment if they can’t attend.
Solution: Embedded refund protection is available during the ticket checkout process. If the customer canβt attend due to covered reasons (e.g., illness, transportation issues, family emergencies), attendees submit claims directly through the platform they already know, uploading basic documentation through a streamlined interface.
Result: Ticket purchase conversion rates increase as buyer hesitation decreases. Attendees gain peace of mind, while event organizers maintain predictable attendance numbers without managing refunds themselves. The platform generates incremental revenue through insurance commissions, creating a win-win-win scenario that enhances the value proposition for all participants.
Problem: Event organizers invest significant resources in venues, vendors, marketing and other expenses long before the event date. If unforeseen circumstances force cancellation, organizers face substantial financial losses that could threaten their business.
Solution: Cancellation insurance integrated into the event planning workflow protects organizers against losses stemming from circumstances beyond their control, such as extreme weather, venue issues, or public health emergencies.
Result: Organizers gain confidence to commit to larger venues and more ambitious events, knowing their financial investment is protected. This increases platform transaction volume while reducing financial anxiety for organizers, ultimately leading to more frequent and larger events being planned through the platform.
Problem: Travelers often hesitate to book full trips (including lodging, lift tickets, tours and spa packages) due to fears of unexpected disruptions like injury, illness or extreme weather. When cancellations arise, property owners and vacation platforms face abandoned bookings and higher customer support volumes.
Solution: Protection for a customerβs entire itinerary with bundled travel insurance tailored to their trip, including refunds and medical coverage can be seamlessly integrated into booking, agency and property management software platforms. This provides a native experience that drives new revenue while delivering protection to travelers.
Result: Customers gain confidence to book earlier and spend more, knowing their investment is protected. Platforms benefit from higher booking conversion, reduced refund management and incremental revenue through commissions.
Problem: Pet parents often delay or avoid veterinary care due to the high and unpredictable costs of treatment, especially for emergencies or chronic conditions. Veterinary practices lose revenue from skipped appointments and must navigate inconsistent visit volumes.
Solution: Embedded pet insurance fundamentally changes how customers access pet insurance. Platforms can easily offer value-added insurance and wellness products natively in the pet portal, scheduling and payment workflows, making it easier for veterinarians to bring peace of mind to pet parents.
Result: Pet owners seek care more confidently, improving pet health outcomes and customer loyalty. Insurance options reduce financial barriers to treatment and decrease economic-driven euthanasia cases. Veterinary clinics enjoy steadier revenue and better compliance with care recommendations, while platforms gain new revenue through insurance partnerships.
Defining Embedded Insurance
β³TL;DR
π Embedded insurance incorporates protection directly into software workflows at the moment of relevance
π True embedded insurance requires vertical-specific products, go-to-market support and superior claims handling
π A user-first mindset is essential for creating insurance products that feel native to the platform
π Real-world applications show how embedded insurance creates value for users, platforms and industry participants
Embedded insurance represents a fundamental reimagining of how protection products become native elements within vertical software platforms, creating value at precisely the moment users need it most.
What Embedded Insurance Is (And Isn’t)
Embedded insurance isn’t simply adding an insurance marketplace or offering generic referrals to third-party providers. It’s the seamless inclusion of protection products directly into the natural workflows of a vertical software platform. True embedded insurance is presented at the moment of relevance, when customers are already making related decisions about risk.
Traditional Insurance Approach
Insurance Marketplace
Separate section for browsing multiple insurance options.
Referral Partnerships
Technology Only Solutions
Embedded Insurance Approach
Moment of Relevance
Insurance appears exactly when users are considering risk.
Native User Experience
Vertical Specific Products
The Four Components of Successful Embedded Insurance
A true embedded insurance provider offers:
Vertical-Specific Insurance Products
Coverage tailored to industry needs, such as sports registration insurance for athletic platforms or adventure tourism liability for travel management software.
Go-to-Market Enablement
Seamless Experience
Claims Experience Transformation
How Embedded Insurance Helps Fix a Broken Industry
β³TL;DR
π Traditional insurance frustrates customers with confusing buying experiences and adversarial claims processes
π Insurance fulfills the essential need for risk transfer, but its implementation has failed to evolve
π Embedded insurance transforms the experience by appearing within trusted platforms at moments of relevance
π This approach creates seamless buying, builds trust, simplifies claims and expands protection to underserved markets
The Negative Reputation of Insurance
The traditional insurance experience has earned its poor reputation through consistently disappointing customer interactions:
The buying experience is terrible.
Insurance purchasing remains stubbornly offline, manual and confusing. Shopping for insurance is a chore for most people. Customers face lengthy forms filled with questions they don’t understand and often can’t explain the coverage they’re ultimately purchasing.
Claims are even worse.
If customers find the buying experience frustrating, the claims process can be genuinely adversarial. Traditional claims handling makes customers feel like insurers actively want to deny their claims. Complex requirements, slow processing times and opaque decision-making leave customers fighting to receive benefits from policies they’ve already paid for.
Why people still buy insurance:
Despite these problems, insurance fulfills an essential need – transferring risk from individuals and businesses to entities better equipped to manage it. When executed properly, insurance can be life-changing during crises like accidents, natural disasters or health emergencies.
If people truly understood insurance’s core purpose, they would want it to be easier, faster and more integrated into their lives. The problem isn’t with the concept of insurance, but with its implementation.
How Embedded Insurance Can Transform the Customer Experience
By addressing the industry’s fundamental challenges, embedded insurance creates tangible improvements:
Seamless buying experience
By appearing within trusted software platforms at relevant moments, insurance becomes a natural part of existing workflows. Itβs offered as a seamless option, with no need for lengthy forms or separate transactions.
Trust through transparency
When insurance comes from platforms that customers already rely on, the trust relationship transfers to the insurance offering. Clear, simplified coverage options help customers understand exactly what they’re getting without insurance jargon.
Frictionless claims
Streamlined, software-driven claims processes feel more like modern digital experiences than traditional insurance. When claims are handled through familiar interfaces, the experience becomes faster, more transparent and less adversarial.
Accessibility for underserved markets
Embedded insurance creates protection opportunities for people and businesses who previously wouldn’t have purchased standalone insurance. By reducing friction and improving the experience, more people gain access to financial protection.
Traditional Insurance:
Complicated Buying:
Lengthy forms, confusion
Embedded Insurance:
Seamless Buying:
No separate payment, one-click at checkout
Traditional Insurance:
Trust Deficit:
Years of skepticism
Embedded Insurance:
Trust Transfer:
Platforms users already trust
Traditional Insurance:
Fighting for payment
Embedded Insurance:
Fast, digital process
Traditional Insurance:
Many left underprotected
Embedded Insurance:
New markets served
The Business Case for Embedded Insurance
β³TL;DR
π Embedded insurance creates high-margin, recurring revenue with minimal operational lift
π Protection increases conversion rates and transaction values while reducing churn
π Early movers gain durable competitive advantages in maturing software categories
π Revenue sharing extends benefits to platform customers, creating mutual value
New Revenue Streams With Minimal Overhead
Embedded insurance creates high-margin revenue without requiring software companies to take on underwriting risk. With insurance partners handling product development, compliance and claims management, platforms generate significant income with minimal investment.
Boosting Core Product Metrics
Offering protection at the moment of transaction reduces perceived risk, addressing objections that might otherwise prevent completion. When customers feel protected, they’re more likely to complete purchases and commit to larger transactions.
For platforms serving contractors, tourism, event management or other high-value services, embedded insurance meaningfully increases conversion rates and average transaction values. When customers experience losses but are protected by embedded insurance, they’re more likely to return to the platform, reducing churn and strengthening relationships.
Market Differentiation and Competitive Advantage
In markets where core functionality is becoming standardized, embedded insurance creates meaningful product differentiation. Early movers gain advantages that are difficult to replicate, creating durable competitive positioning against both established rivals and new entrants.
Revenue Sharing With Clients
Many vertical software companies extend embedded insurance benefits to their customers through revenue sharing. Platforms serving businesses like event venues, sports leagues or membership organizations can share insurance revenue with these clients.
This approach transforms insurance from a cost center to a profit center for both the platform and its customers while simultaneously improving the end-user experience.
Scalable Revenue, Zero Overhead
Unlock high-margin, recurring income without added risk, maintenance, or operational burden.
Stronger Conversions, Happier Customers
Reduce friction at checkout to boost conversions, increase transaction sizes, and drive repeat businessβall while building trust.
Differentiate With Confidence
Stand out in saturated markets with embedded insurance thatβs hard to replicate and easy to love.
Shared Revenue, Shared Value
Drive revenue for both your platform and your clients through seamless insurance revenue sharing that enhances the end-user experience.
Traditional Obstacles to Full-Stack Expansion with Insurance
β³TL;DR
π Vertical software companies face four primary barriers when expanding into insurance: regulatory complexity, technology gaps, business model challenges and customer experience
π Legacy insurance systems aren’t designed for integration with modern software platforms
π Most SaaS teams lack the expertise to build a compliant insurance business
π Strategic partnerships provide specialized knowledge without diverting focus from core competencies
Regulatory Complexity and Risk Management
When software executives investigated adding insurance to their platforms, they quickly discovered the regulatory complexity that awaits. Insurance requires navigating 51 different state regulatory environments, each with its own licensing requirements and compliance standards.
Software expertise doesn’t automatically translate to insurance knowledge. A specialized understanding of licensing, claims handling and underwriting falls well outside most software teams’ core competenciesβand building this expertise in-house diverts focus from what these companies do best.
Technology Gaps and Legacy Infrastructure
Vertical software companies have built their businesses on modern cloud architectures with well-architected APIs and real-time data flows. Unfortunately, the insurance industry hasn’t kept pace. Many carriers still operate on systems built decades ago that weren’t designed for the seamless experience customers expect.
Software leaders exploring this space often encountered InsureTech companies offering to bridge these technology gaps, but most only solved part of the puzzle. They provided the data exchange “rails” without addressing the complete solution platforms needed and are often missing critical components like distribution, user experience design and claims workflows that would make insurance feel like a natural extension of the product.
Business Model Challenges and Resource Constraints
Financial modeling in vertical software revolves around metrics like ARR, CAC and ARPU – the language of SaaS businesses. Insurance operates with an entirely different financial vocabulary: GWP, loss ratios, reserves, reinsurance and risk pricing. This fundamental difference makes it difficult for software executives to evaluate how insurance fits into their growth strategy.
Companies that explore building insurance capabilities in-house quickly realized they lack the internal expertise to build a profitable, compliant insurance business. This competency gap presented a real barrier to companies attempting to develop insurance capabilities without specialized partners.
Partnering For Success
When faced with these challenges, vertical software companies have three options:
Build
Buy
Partner
- Overcome regulatory complexity: Partners with insurance expertise handle compliance across all jurisdictions
- Bridge technology gaps: Embedded insurance providers bridge legacy systems with modern APIs built for SaaS platforms
- Address business model challenges: Revenue-sharing structures create low-risk growth channels
- Optimize customer experience: The right partner helps position insurance naturally within existing workflows
This strategic approach allows vertical software companies to expand their offerings without diverting focus from their core competencies.
Implementation Challenge:
Regulatory Complexity
Partnership Solution:
Insurance Expertise: Multi-state compliance frameworks
Implementation Challenge:
Technology Gaps
Partnership Solution:
Implementation Challenge:
Business Model Challenges
Partnership Solution:
Implementation Challenge:
Customer Experience
Partnership Solution:
Choosing the Right Embedded Insurance Partner
β³TL;DR
π Finding the right partner is critical for successful embedded insurance implementation
π Look for software-first mindset, modern APIs, vertical expertise and comprehensive support
π The best partners combine SaaS understanding with insurance capability
π A tailored approach for your specific vertical yields better results than generic solutions
Software-First Approach
Look for partners who understand SaaS business models and metrics. The ideal partner approaches embedded insurance from a software perspective first, with insurance expertise supporting that foundation. This contrasts with traditional insurers attempting to build distribution channels without truly understanding vertical software dynamics.
Developer-Friendly APIs
Technical integration should be straightforward and well-documented. The right partner offers modern APIs designed specifically for vertical SaaS integration, with sandbox environments for testing and comprehensive documentation. Their technology team speaks your language and understands your development priorities.
Vertical-Specific Expertise
Generic insurance products rarely address the unique risks of specific industries. The best partners have deep knowledge of your vertical market and can tailor protection products to your customers’ specific needs. They understand the nuances of your industry’s workflows, risk profiles and customer expectations.
End-to-End Support
Success requires more than just technology. Choose partners who provide comprehensive go-to-market enablement, including:
- Marketing resources and messaging frameworks
- Sales training for your customer-facing teams
- Compliance management across jurisdictions
- Claims experience design and optimization
- Ongoing performance analytics and optimization
Software-First Approach
Partner understands SaaS business models, metrics, and workflows
Developer-Friendly APIs
Modern, well-documented APIs designed for vertical SaaS integration
Vertical-Specific Expertise
Deep knowledge of your industry’s workflows and risk profiles
End-to-End Support
Marketing, sales training, compliance and claims optimization
Questions to Ask Potential Partners
When evaluating embedded insurance partners, consider asking:
- ZHow many vertical software platforms have you successfully implemented with?
- ZWhat's your approach to compliance across multiple states?
- ZHow do you measure and optimize insurance conversion rates?
- ZWhat does your claims process look like from the end-user perspective?
- ZHow will you support our go-to-market efforts?
- ZWhat ongoing optimization and analytics will you provide?
The Opportunity Ahead
Vertical software platforms are evolving into complete ecosystems that deliver deeper value to users. Embedded insurance represents one of the most practical and impactful ways to expand platform capabilities.
For vertical SaaS leaders, the opportunity is clear: differentiate, drive new, high margin revenue and solve customer pain points by embedding protection at the moments that matter.