As I see it, there are 2 flavours of these InsurTech-driven start-ups.
The first are those that take a “traditional” insurance product, chunk it up into smaller pieces (perhaps even remove some unnecessary coverages) and make it available on-demand – an hour, a day, a week, a month, perhaps ultimately a year? Typically these are delivered via a gamified interface on a smart phone app intended to improve customer engagement and make these policies easily turn-off-and-on-able!
Secondly, there are those that are covering emerging risks that are currently difficult or expensive to insure with a traditional 12-month policy, e.g. an AirBnB host, an infrequent Uber driver, a gig economy worker or simply if you want to borrow your mate’s car for the weekend. The customer engagement is not the lead in this case and that’s why I see these as having a better chance of success.
With the first category, however, the value to the end customer is questionable. Undoubtedly the target market is based on the assumption that “Millennials” don’t have the time or inclination to research the most appropriate Contents Only policy (how many of us really do?). By taking photos of your most precious items (e.g. phone, bike, laptop) you can get flexible coverage, with monthly subscription premiums. But what’s the true cost of these? With a typical monthly premium of say £15, that’s £180/year. And this only increases as additional items are added for only “a couple of quid a month”. Whereas the average Home Contents policy is at a record low of £127 (source: ABI) covering a blanket £50k-£100k of belongings. The on-demand model is significantly more expensive for much less coverage – a heavy premium to pay for a smartphone app and some flexibility.
Back to the second category, where the following are great examples of providers developing innovative solutions to tackle emerging risks:
- Zego – Gig economy insurance provider raised £42m in June. Filling the insurance gap for gig economy workers.
- Qover - a Lloyd’s coverholder providing 50,000 Deliveroo drivers with insurance across Europe, recently raised another 8m Euros to help expansion of their insurance as a service platform for other insurers.
- Flock - backed by capacity from Allianz and Appointed Representative of Worry+Peace. The growing market of freelance drone pilots has provided an opportunity for Flock to build an insurance product to fit. Couple that with an excellent, simple to use UX - if you haven’t seen their claims platform, it is well worth a look too! Raised £2.25m in May 2018.
The demise of BackMeUp, Kinsu, Trov’s D2C proposition in the UK and tikkR show how price-driven the insurance market ultimately is. In the US, Traverse (from Travellers) is another proposition still trading - but for around $15/month to insure a modest bike, iPhone and Laptop, it’s difficult to see how this can compete with Lemonade’s Renters policy. A beautiful user experience cannot gloss over the fact that customers just want cheap insurance, and arguably the peace of mind that a broader policy provides.
Ultimately, the benefits of on-demand insurance are much clearer when applied to sharing and gig economy models. And with Lloyds of London providing a new £53m fund to tackle further emerging risks, I look forward to seeing more success from this second cohort of on-demand start-ups.