On-demand insurance is one of the digital insurance mediums that allows their potential customers to either turn on or off their insurance so as to pay only for the period when the need for the protection will arise.
The process can be done with your app on your smartphone, it is faster, easier, the service is based on subscription, and with a clear pricing system.
On-demand insurance, compared to traditional insurance, has a really low policy per premium value and also a large transactional volume.
Users of this insurance type can choose to turn on and off their coverage very easily with their mobile devices.
What on Demand Insurance Fills
The On-demand insurance fills the gap such that where the normal traditional insurance may seem not flexible or it’s been over-insured.
Demand insurance has to take a consumer-first outlook to offer products that will cover the consumers for what exactly they will need when and when they will need it.
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This means making a design for an easy-to-understand product that has variable pricing methods and flexible terms.
With connected technologies, insurers will then have the ability to access discrete data concerning the coverage duration of the products and also the risk profile based on real-time.
Demand insurance data can then be used to determine the premium by taking the measurement of the extent of the usage as well as taking a gauge of the risk profile as well.
Some of the on-demand insurance requires continuous underwriting which is constantly updating the risk profile of any of the sections in order to make adjustments to the terms.
This is a highly robust rating system that can easily analyze and determine new rates based on the transformed and updated risk profile.
Types of On Demand Insurance
1. Microinsurance
Demand insurance typically cover risks that are smaller and for a specific period of time or event, just like travel insurance, event, and others
2. Asset and Liability insurance
Demand insurance cover for risks that arise as a result of sharing the use of such assets and liabilities, for instance, homeshare, rideshare.
3. Usage based Insurance
This demands a continuously based underwriting, that is constantly updating the risks profile of the individual or the object and this is made possible by the continuous flow of data from the technology.
Who is Eligible for On-Demand Insurance
This works best for customers who are exposed to risks not covered by traditional insurance or who are not exposed to risks often.
This type of insurance works on a Pay-as-you-go basis and the coverage is not traditional insurance rather it is based on the actual usage.
Conclusion
This type of insurance has its great benefits and pitfalls as well. The pitfalls include that it can be expensive such that the insurers need a large customer base in order to stay profitable.
It works better when people start buying the policy, that aside the benefits are worth it because the customer only gets to pay the premium only based on usage.