Last Updated 1/9/19
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. This in turn has transformed 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 not only impacted the insurance industry, but also the consumer. A consumer today now expects 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 for millennials and younger generations and they 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 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 cutting-edge innovations such as the internet of things (IoT), artificial intelligence (AI), predictive modeling and big data. These innovations are helping startups reinvent the way insurance products are created, underwritten, priced and distributed.
One company already using an on-demand insurance model is Trōv. Through Trōv’s app consumers can insure personal items, such as smartphones and laptops, which are covered against accidental damage, loss, and theft with just a couple taps on a smartphone. After registering your items in the Trōv app, which pulls live valuation data from its database, a consumer can “swipe right” to activate coverage, or “swipe left” to end it. Filing a claim is also completely in-app using chatbots. Trōv recently expanded in the U.S., launching in Arizona last summer, after having already established itself in Australia and the United Kingdom.
Slice Labs, Inc. is another example. Slice offers on-demand home share insurance to hosts using home shareplatforms such as AirBnB. Users are able to pick and choose the dates for which they receive coverage for using their homes as a business outside the scope of a standard homeowners policy. Slice aims to protect hosts from lost income, vandalism, theft, insect infestations, etc. Slice also recently partnered with AXA XL to offer the world's first on-demand cyber insurance solution for small and midsized businesses.
Health care has also been undertaken by the nation's first on-demand health insurance model from Bind Benefits. While not a health insurer, Bind aims to reduce health care costs through its employer-sponsored and self-insured health plans which relies on UnitedHealthcare's networks. Through Bind's "on-demand" model, consumers are able to design their own health insurance coverage based on their current needs or life events. Core coverage includes preventive care, primary and specialty care, emergency and hospital care, chronic care, and pharmacy needs. Consumers then opt into "Add-Ins" or extra coverage outside the core offerings.
Types of On-demand insurance:
While on-demand insurance is still in its infancy, representing less than 1% of the global insurance market according to KPMG, the market is poised for growth and starting to take shape. According to Insurance Thought Leadership, one of the outcomes of recent economic and technological changes has been 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 and Technology (EX) Task Force to provide a forum for the discussion of innovation and technology developments in the insurance sector. Most recently, this included the NAIC Insurance Summit in June 2018. 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.
Committees Active on This Topic
Swipe Right for On-Demand Insurance
March 2018, CIPR Newsletter
Big Data Analytics: Changing the Calculus of Insurance
November 2017, CIPR Newsletter
How Artificial intelligence is Reshaping the Insurance Industry
April 2017, CIPR Newsletter
Media queries should be directed to the NAIC Communications Division at 816-783-8909 or firstname.lastname@example.org.
Shanique ("Nikki") Hall
CIPR Assistant Director