Bundling

Last Updated: 10/22/2023

Issue: Bundling insurance products is a marketing technique commonly used by insurance companies. Insurers will offer discounts to consumers for “bundling” or purchasing several types of insurance (TOIs) from the same company, such as homeowners and auto insurance. Some companies will also offer combined deductibles that allow one deductible for multiple insured assets damaged by the same event.  

Consumers may prefer bundling because policies and bills are easier to manage, which can make consumers stay with one company longer for the convenience. However, purchasing TOIs separately can offer consumers more options and flexibility.  Due to the prices of bundled insurance policies, consumers may make purchase decisions based on price instead of the coverage of their respective policies. Insurers suggest comparison shopping for policies, and choosing a policy based on the coverage offered instead of simply the cost.  

From a regulatory perspective, bundled products raise a few potential issues, including violations of state anti-inducement or anti-rebating laws, unfair competition, and the unauthorized sale of insurance. 

Insurance and telematics: Bundling non-insurance products with insurance products, sometimes collectively called value-added products or services, is a new trend in the insurance industry. Bundled products can include telematics, connected devices, items from the internet of things (IoT), benefits services, and other items that fall into the risk management category. Items commonly included in bundles are intended to mitigate loss and reduce claims, while some devices can also provide data feedback to help insurers anticipate future risk.  

Insurers are providing technology to insureds with corresponding policies — home telematics, such as water leak detectors, with homeowner's policies and fitbit products with health or life insurance policies. Concerns have been raised regarding whether providing such products might violate anti-inducement and unfair competition laws, which prohibit insurers from giving or offering any incentives to policyholders, directly or indirectly. Such laws were created to protect consumers from making unsuitable policy choices and against predatory pricing, discrimination in insurance provisions, and insurer insolvency. Most states look to their version of the NAIC’s Unfair Trade Practices Act (#880), specifically Section H, to make this determination, but they are looking at pending revisions to Model #880 to further clarify its intent.  

Insurance and services: Another method of bundling is purchasing a product or service and receiving an attached insurance policy. Most notably included in this section are purchasing a travel package that includes travel insurance or joining an auto subscription service that includes auto insurance with the subscription. Travel insurance is typically offered as a point-of-sale item that can be added to a purchase, such as when buying a plane ticket or booking a cruise. Auto subscription services are a new trend where a company will offer a car;, insurance;, and depending on the service, roadside assistance and maintenance bundled together in one monthly subscription cost, with the subscriber able to switch the type of car they have at any time.  Auto insurance has also begun to be offered as a point-of-sale item in conjunction with an auto purchase, such as the recent Tesla offering. The companies that offer these services are often not licensed insurers, but they will collaborate with insurance companies to legally sell insurance with their products. State insurance regulators will monitor these partnerships to confirm that all insurance products are sold by a licensed agent or broker. 

Status: The NAIC Model #880 was adopted by 55 of 56 jurisdictions. The most recent action taken on Model #880 was in 2008. As of Dec. 9, 2020, the NAIC’s Executive (EX) Committee has adopted language proposed by the Innovation and Technology (EX) Task Force that amends Model #880 concerning the language regarding anti-rebating in Section 4(H). It was adopted by the full NAIC Executive (EX) Committee and Plenary at the 2021 Spring National Meeting in April 2021.