We have TV on-demand, music on-demand, food on-demand — why wouldn’t we have insurance on-demand?
We know. It’s an interesting thought, and it’s more simple than you’d think. Instead of applying the same long-term traditional policy structure to smaller items like a new camera, think about quick wins and on-demand policy creation.
What are the key advantages?
The trend of on-demand insurance features a lot of advantages, the main one being flexibility, followed by the lower cost of a traditional underwrite. For example, if the usage of a policy is limited based on a user’s habits (such as limited driving on an auto policy), it drives the price down versus an annual policy. After cost and flexibility comes that ease of policy activation and claims. Companies that utilize machine learning to the capacity that many of these disruptors do allow for extremely fast processes with limited manpower needed.
How will the millennial shopping style affect it?
Overall, millennials prefer speed and personalization when it comes to their shopping habits. They don’t prefer to be locked into an annual contract when the option of a flexible policy is available. As usage-based/on-demand insurance becomes more popularized, it could become the preferred way of insurance from the generation that will be in the market over the next 3-5 decades.
As new transportation options continue to mature within the U.S., on-demand insurance is beginning to look more feasible for auto insurance. More people are beginning to car share and use on-demand service such as Lyft and Uber which limits drive time. As drive time becomes more limited, users will begin to look for insurance options that will save them money without needing an annual policy.
On top of auto transportation, biking opportunities are continuing to be more and more readily available with the expansion of Lime Bike and ofo throughout the U.S. If the trends continue to support biking, municipalities will begin to create new programs that will allow for more bike lanes and routes which will continue to promote the bike sharing efforts and as a result, support usage-based insurance.
Who Are a Few of the Big Players?
While insurance on-demand is an emerging industry, there are a few companies that have taken the lead.
Trov, founded in 2012, is an entirely mobile on-demand insurance service. Users can insure any of their personal belongings whenever they want at the tap of a button and once clicked, the item immediately becomes insured.
Tapoly provides a very unique on-demand insurance service for freelancers, contractors, and the gig economy at large in the U.K. If a user is renting out an Airbnb for a week, they would go to Tapoly and get an insurance policy for the room or home just for that week. The policy would then expire until a new one is needed for the next occurrence.
Sure is straightforward. If you need travel insurance for your trip coming up go ahead and flip the switch in the app and you’re covered. The advantage of the Sure app is the number of partnerships they have, allowing for far more products than competitors. The policies can all be managed at an on-demand level, as well as having all policies in one dashboard/application.
Cuvva is likely the biggest disruptor in the on-demand space. They have the ability to provide auto insurance by the hour. Going on a trip and need coverage for 6 hours? No problem. This is a great option for users who do not drive often and only need their vehicles insured for the limited time they are in the car.
There are tons of on-demand insurance companies that are coming out of hackathons, incubators, etc. each year. The space will continue to become more and more saturated until on-demand insurance becomes a standard option for users. Traditional insurance companies will need to learn to coexist with the companies catering to new generations purchasing habits by either acquiring, transforming, or merging.
Should Insurance Providers Start a New Product Line?
Absolutely. Competitors are already finding ways to begin their on-demand journey as well as partnering with companies already doing so. Institutions will have to decide which lines of business will have a usage-based model as well as decide whether M&A is a better route versus hiring new product managers and staff driving a new product launch.
However, the industry as a whole is considering usage-based models as something that won’t have an impact for another 5-10 years in market share, so there is plenty of time to get ahead of disruptors.
Contributers: Tallwaver Louis
Written by Jessica Lizza