The “Demand” of On-Demand Insurance

When it comes to traditional insurance, issuing a policy often involves interactions with a carrier, broker, or agent and regularly involves paperwork that only drags out the process. On top of the little to no scope for customization on policies – customers have had to endure an overdrawn process of underwriting that most people weren’t aware of upfront. 

As more industries simplify their business process, customers demand that services and delivery times be reduced to save time and, most importantly, money. Due to this, in today’s market, one of the key criteria for buying insurance is not just about the right price – it’s the convenience and overall experience that make the most significant difference. 

In the past decade, the emergence of on-demand insurance has bridged the gap of traditional insurance by being more flexible – leaving more room for customers to worry less and live comfortably, knowing that they are in total control of their insurance like never before.  

What Is On-Demand Insurance?

On-Demand insurance allows users to be responsible for how and when they need coverage. The overall concept of on-demand, as opposed to traditional, is to provide low-policy premium value. 

Customers can decide when to turn off and on their coverage, leaving their monthly premium adjustment based on when needed in the customer’s eyes.  

From getting the quote to filing the claim – everything’s done through the customer’s phone and is ready to go in a matter of minutes. The service allows consumers to buy and manage insurance as needed without the hassle of long-term commitments. 

This usage-based insurance utilizes artificial intelligence (AI) and machine learning systems that leave policies designed to be accessible and easy to purchase online.

How Does On-Demand Insurance Work? 

Traditional coverage isn’t flexible and is often too expensive. On-demand insurance can take traditional insurance and dissect it into smaller parts, providing services that cater to different scenarios and occasions.

Considering the efficiency of on-demand, the three types of products that fits the molds best are the following: 

Microinsurance – Coverage that focuses on smaller risks via rapid underwriting, including products like travel or event insurance, renters’ insurance broken out for specific high-value household items, or pay-per-mile auto coverage.

Products for Gig Workers – The ability to cover the risk of assets or liabilities arise when sharing assets. These include home share (Airbnb), rideshare (Uber, Lyft), or skill-sharing (Task Rabbit). On-demand can provide efficiency by contracting usage-based insurance to maintain security over assets, purchases, and services. 

Salty’s unique Embedded Insurance® Integrated platforms and on-demand coverage go hand in hand and ultimately fast-tracks the process of finding policies fast and easy. Salty integrates its Embedded Insurance platform directly into the purchase process and creates customer-centric policies. Salty’s platform creates a seamless experience driven by artificial intelligence. It saves customers time, money and protects their investment right at the point of purchase.

What Challenges Does On-Demand Face?

The Risk of Fraudulent Claims

Customers will likely take advantage of the insurance services, manipulating the system unjustly. They may switch on their insurance after the damage is done, leaving time to pretend that the damage was unavoidable and file a claim. 

This risk of claims is a considerable worry for insurers; it directly affects their profitability, regardless of their service being traditional or on-demand. For the insurers to reduce the impact of fraudulent claims, companies will have to develop different methods within their business models that minimize their damage, such as tracking systems.

Insurers Need Better Exposure 

Currently, the on-demand feature has a higher user rate than a traditional policy, giving insurers room for a higher profit margin. This also means that companies can lose revenue if the demand and volume aren’t enough to provide the right premium size. The more consumers buy the product, the higher the chances will be an overall profit. Does it begs the question – How many companies are willing to run a business model like this that deals with potentially higher risks and lower overall profitability?

Risk or Reward?

On-demand carriers and insurtech companies have brought more traction to the market over the last few years. As the technology behind insurance is on the rise, companies are pro-actively introducing on-demand products to the market in response to the current customer’s demands for instant results. 

On-demand insurers or insurtech companies have been gaining more and more traction over the last couple of years. They are proactively experimenting and introducing new on-demand products to markets in response to the rapidly changing customer needs – and we are expecting to see incumbents and disruptors alike make their noise in the marketplace.

On-demand insurance may not be the default offering for all insurance types, but it is gaining popularity with tech-savvy customers.