Post-mortem of on-demand insurance, or, renaissance with COVID-19 from the insurtechhand ?
First of all, we must ask ourselves what is on-demandinsurance?
On-demandinsurance or “insurance ondemand” or “safe switch”is a concept born several years ago with a dream of the insurancesector: “in the new sharing economy, customers want to buy something once and forget it until they need it again. The famous purchase by use. So, for insurance it is the same: “the insured will be able to activate or deactivate his insurance when he wants, we will give him the power.”.
From there, was born the insurance on-demand that has mainly has 3 features:
- continuous subscription and the ability to adjust prices based on risk,
- low unit cost insurance if it is by product or per day, by definition, the low unit cost,
- graduality of coverage, for example, car insurance coberturas for an Uber driver can be differentiated in the event of personal use or professional use.
From there, there was many tests of concepts or developments of insurtech,thinking that customers would be delighted by this type of innovation of the insurance sector. However, after all these years, we realize that the initial model failed to find the market.
But what did we learn: that, the insured, does not have a fun activating and deactivating their insurance. It’s a pink fattening taskfor him. The initial thesis was that the client was going to have fun, or at least it would be comfortable, activate/deactivate his insurance when he wanted. In the end, we were asking for a positive action knowing that, for the most part, the customer found no grace in doing a repetitive task without much value. So, because this value proposition doesn’t respond to a pain in the insured or a real need, it didn’t work. It is very simple: a hypothesis is tested and a first concluse isreached.
The clearest example is Trov,the world leader in on-demandinsurance, who announced in August 2019 that he is abandoning his Insurtech D2C (directdirect to consumer)activity in the UK after7 years and states: “To saythe obvious, there was no product market adjustment for this type of value proposition. And when there was an adjustment, the market was simply too small and the product, just too complicated”
However, it is very likely that now that we live quarantine for COVID 19, putting together an on-demand home rent product that covers the costs of the house in the event of an inpatient stay, would become a relevant value proposition for the assured. So far, as far as I know, it doesn’t exist.
Is on-demand insurance that’s so?
If we extend the definition of on-demand insurance to the “new-old trend” of pay-as-you-go insurance (PAYD) then we find examples for 15 years with telematics in Italy for example. In this case, the Insurance”Switch”has a future, if we do not ask the insured for an action of acting/ deactivation since it is a friction for him (e.g. : Insurance per kilometer of Sura with Jooycar in Chile). In other words, the use has to be done automatically and it is clear that with the rise of the internet of things and the arrival of 5G, this could be a “boom”. Now, with the long period of confinement, with the car stuck in the garage, more than ever this value proposition of: “I pay only if I use my car”, becomes a relevant value proposition.
Now, at the mundial level, car insurers feel uncomfortable having to charge premiums to “self-without risk.” We see a global movement of insurance renewals with discounts between -20% or -40% (knowing that in March, accidents fell by up to 90%). The firstis: what does the customer think that overnight, he sees his insurer drastically lower its price?
So,what is the central problem that is intended to be addressed with on-demand insurance? ?
That people have the right to pay premiumswhen they wish and not pay premiums when they do not require them.
And in this direction, the idea is that insurance embedded in platforms of the collaborative economy (such as AirBnb or Blablacar)or digital platforms (such as Rappi, Glovo, OrderYa)canpermiteto share the car or share the house and have anadapted insurance, without it being a monthly or annual payment. In this way, customers only pay for insurance when the asset is actually in use and “at risk”. For example, Slice Labs (US) is a pioneer in integration with collaborative economy platforms.
In this context, in Europe, most Of the Insurance Switch is telematics insurance as in Italy, which, for example, almost 20% ofcars are equipped withtelematics.
There are also some Insurtechs that have an alternative approach “switch”, such as:
- Friday (LUX) – Auto : insurance solution per kilometer where customers can buy insurance coverage from 1 cent per kilometer. Friday’s payment per kilometer is aimed at infrequent, second-car drivers and customers who like flexibility and fairness.
- Trov (UK) – Home : in partnership with Halifax (LLoydsLLoyds), asktenants to activate basic home coverage with a monthly subscription, and easily enable or disable protection for individual items, completely from a connected device, and without the involvement of any agent.
- Zego (UK) – Auto/ Moto : provides an online platform to buy insurance from cars / motorcycles on request for delivery drivers. Users can secure them by the time they are delivering the goods/products. Zego offersinsurance per hour and starts his premiumfrom £0.65 per hour. Both the vehicle and the passengers are insured.
- Flock Cover (UK) – Drones, with Allianz : offers drone insurance on demand for drone pilots for a minimum duration of one hour. Provides coverage for commercial and recreational pilots that can be adapted to each flight through the Flock app.
- Cuvva (UK) – Auto : offers a pay-as-you-go car insurance model for infrequent drivers in the UK
- Tapoly (UK) – Freelancers : on-demand insurance for freelancers, independent traders, contractors, letters of origin, equipment lenders or others that are part of the sharing economy. Need-focused on-demand insurance products: gig economy such as gadget, travel coverage, cycling coverage, home rental and professional compensation.
- Poleecy (IT) : temporary insurance on blockchain: travelinsurance, home insurance, cryptography policy, visa policy, captain’s goods policy,temporary car insurancepolicies and transportation in general.
- Wilov (FR): they are aimed at customers who do not drive their cars the insured has to pay every 24 hours each time he pulls out his car and averages approximately 1 euro. To activate the counter, users simply have to install a connected badge in their vehicle and connect it to the Wilov app on their smartphone.
In the case of LatAm,there are many telematics providers that allow the development of insurance by use for Auto such as Jooycar, Scope Technology, Location World, Octo and several solutions are working with Sura (CHI), PortoSeguros (BR), SegurosxKm (MEX) or Miituo (MEX)
There are also some interest value propositionsin Argentina such as:
- I find myself to take out AP insurance temporarily. In this case, we know that the pain of professionals, sometimes informal, is that they cannot access the building or closed neighborhood without AP insurance
- WeCover with Orbis and Galicia Safe for an on-off sobresafe bicycle, cell phone,computers, tablets or musical instruments on
- Zurich Now promotes its value proposition with a model close to Trov
- RUS withcar-sharing platforms such as Andemus, Sowtos or Cocoche
Finally, we realize that our entire sector will require adapting to insurance much closer to the need of customers, to the new economy and above all, to the new worldorcoming.