On-Demand Insurance: A Relevant Alternative to Standard Products?

The ongoing digital transformation of the insurance industry has given rise to several new business models. One of those is on-demand insurance, which was pioneered by InsurTech firms such as trov, Slice and Lings, and is now slowly being considered by incumbent insurers as well. On-demand contracts differ from traditional policies in that they allow a completely flexible choice of the time of coverage. Rather than having a fixed term of one year without the possibility to terminate prematurely, the customer can switch his insurance on and off at any time. The interaction with the insurer happens exclusively via app, implying a state-of-the-art user experience that particularly appeals to the younger and more technology-affine generation. Current providers mostly insure smartphones, cameras or bikes. Yet, pay-per-mile car insurance is also becoming increasingly popular, spearheaded by firms such as Metromile in the US and Friday in Germany. In these cases, sensors detect whether coverage is required so that the customer does not need to become active himself.