Editorial by Hugh Terry
Welcome to the “on-demand” edition of InsurTech Insights. On-demand and the advance of digital insurance go hand-in-hand and you will find lots of interesting articles on the subject.
I have found that on-demand has a definition “challenge”. At its most open, on-demand can be considered to mean any purchase process that is convenient and possible to complete digitally. Many will point out that this is little different from “straight through processing” and prefer a narrower definition that allows the insurance pricing to vary according to usage e.g telematics for the car or insurance for home share renters. The latter definition has a consumer appeal around fairness – you only pay for the time you are on risk.
This month, KPMG’s article, co-authored by Paul Merrey and Arturs Kokins hones in on the “demand for on-demand insurance” using the narrower definition and quite rightly makes the point that the transition will take some time and the market is somewhat limited – we are certainly not witnessing an on-demand revolution if we adopt the narrow definition.
Rick’s article examines on-demand from the broader definition and covers the user experience, the use of apps and the instant and immediate nature of the purchase process. Cuvva and Trov are reviewed as examples. Rick also points out the convergence of on-demand and usage-based policies, as well as the increasing automation of when the cover is turned on and off.
Personally I take a pragmatic view and see “on-demand” as a moniker – a term, or catchphrase, we can use to drive innovation in the industry. I think the two interesting areas we are seeing , which are correlated, are innovation in the terms of coverage (period and scope) and the increasing availability of new forms of data that allow new pricing models to be developed. Using telematics for car insurance as an example we see the data can be used to reduce risks and save lives (better driving, auto alert to emergency services on accidents) and create reward mechanisms, both price and non-price based, to encourage even less risky behaviour. This risk reducing capability can be applied to many lines of personal insurance. It is likely that pure usage-based insurance will be used for certain specific risks in combination with more traditional policies – for example the annual home contents policy that is augmented by on-demand insurance to cover items that are used outside of the home and subject to higher risk of loss. So pragmatically we will see more and more hybrid contracts which combine the advantage of both on-demand and traditional insurance contracts.
Do also browse the wide range of articles and white-papers we have collated below in this edition – and don’t forget to share with your colleagues!
Protection insurance is heading towards flexible, personalized, as-I-need-it, when-I-need-it cover. Driven by the sharing economy and the shift in agency towards the digital consumer, technology is enabling new ways of providing insurance. This is the world ofinstant, affordable, bite-sized, on demand insurance.
The past two years have seen the rise of a new trend in insurance: on-demand coverage. Challenger insurers like Trov, Cuvva and Slice allow customers to use a mobile app to purchase as-needed insurance for personal belongings, home and travel insurance, and by-the-mile car insurance.