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On-demand Insurance

Last Updated 5/11/2022

Issue: On-demand insurance allows consumers to purchase insurance coverage on their smartphone whenever and wherever they want, usually when the asset requiring coverage is in use and at risk. Technological innovations over the past several years have significantly changed consumer expectations, transforming the way business is conducted. With businesses now using technology as a means of instant fulfillment of orders for goods and services, on-demand insurance products are on the rise. An attractive interface, customizable coverage, and ease of one-click purchasing all contribute to consumer appeal of on-demand insurance.

Background: A growing reliance on smartphones, mobile apps, social media and chatbots has impacted both the insurance industry and the consumer. Consumers today now often expect the same customer experience when buying insurance as when shopping on Amazon.

Insurers are faced with meeting the demands of tech-savvy consumers, particularly millennials who make up the largest generation of buyers. Millennials are more than twice as likely than other generations to purchase their policies online or through a smartphone rather than through an agent. Consequently, many of the leading insurance technology startups (or InsurTechs) in the on-demand insurance space are those targeting millennials. Simple transactions with no paperwork completed via smartphone are commonplace and consumers are coming to expect the same for insurance.

On-demand insurance allows policies to be purchased online without directly interacting with a broker or a company representative. Customers can buy insurance using their smartphones. There are generally no long-term contracts, no lengthy forms and no need to speak to a representative over the phone, making insurance coverage literally a simple swipe on a smartphone. Premiums for these micro-duration policies are paid in-app and claims are typically filed using a mobile chat interface.

Businesses in the on-demand insurance space are using innovations like the internet of things (IoT)artificial intelligence (AI), predictive modeling and big data. These innovations are helping to reinvent the way insurance products are created, underwritten, priced and distributed.

One company using an on-demand insurance model is Trōv, offering an app platform available to be licensed by insurers. Coverage can be turned on an off with a single “swipe”. The app also uses a chatbot to automate the claims process. Slice Labs, Inc. is a company offering on-demand insurance coverage for homeowners, renters, and small business owners. Slice has also partnered with AXA XL to offer on-demand cyber insurance for small and midsized businesses.

In the health care space, Bind Benefits offers an "on-demand" model, allowing consumers to design their own health insurance coverage based on their current needs or life events. While not a health insurer, Bind aims to reduce health care costs through its employer-sponsored and self-insured health plans which relies on United Healthcare's networks.

Types of On-demand insurance:

While on-demand insurance is still new, a 2019 report estimates the market to grow by nearly 30% by 2026. According to Insurance Thought Leadership, economic and technological changes have led to the rise of on-demand insurance products, including products with continuous underwriting, microinsurance products, and products for the gig (or sharing) economy workers.

  • Microinsurance refers to coverage of smaller risks via rapid underwriting including on-demand products like travel or event insurance, renters’ insurance broken out for specific high-value household items or pay-per-mile auto coverage.
  • Continuous underwriting is the use of constantly updated policyholder data to quickly determine consumer risk and alter prices and policy terms accordingly.
  • Gig (or sharing economy) insurance refers to the rise of freelance or ”gig” opportunities such as Uber and AirBnB. Insurers are creating products to allow these independent contractors to be covered by swiping right when they need to be covered.

Status: The changes brought about by the on-demand economy have led to an emerging breed of on-demand platforms. InsurTech startups like Trōv and Slice are helping consumers insure everything from apartments to laptops. However, as with any new industry, new issues and risks are expected. For example, since coverage can be turned on and off easily with a swipe on a smartphone, the possibility of fraud risks increases with consumers who only turn on their insurance when wanting to make a claim. Startups, state insurance regulators, and insurers should work to identify and address additional risk issues and provide appropriate consumer protection.

The NAIC tasked the Innovation, Cybersecurity and Technology (H) Committee to provide a forum for the discussion of innovation and technology developments in the insurance sector. The Task Force is also charged to discuss emerging issues related to insurers or licensees leveraging new technologies to develop products for on-demand insurance purposes-in addition to potential implications on the state-based insurance regulatory structure-including, but not limited to, reviewing new products, cancellations, nonrenewals, coverage issues, notice provisions and policy delivery requirements.

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