The insurance industry has come a long way from the underwriting of ship voyages in the 1600s. Nowadays, it's not uncommon to see insurance for space satellites. Risk management has changed fundamentally throughout the last few centuries, but in the last decade, technologies like AI/ML, big data, and the Internet of Things (IoT) have accelerated that growth exponentially.
As insurance became mandatory for bigger risks and longer journeys, the inverse also became true: insurers needed to offer coverage for smaller and shorter events. This became known as temporary insurance. Temporary insurance is a perfect example of how you can provide value to your customer based on their specific needs.
Temporary insurance enables you to:
- Widen your distribution
- Acquire customers quickly
- Cross-sell other insurance products
Advancements in insurtech are creating a fundamental shift in how temporary insurance is implemented in the insurance market today.
What is temporary insurance?
This is the age of personalization. That is why insurers tailor their products to customers' unique needs. A customer might want coverage for that short weekend trip in a rental car or health insurance while backpacking during summer vacation.
Temporary insurance can provide these solutions. It gives short-term necessary coverage for the individual and an additional stream of revenue for the insurer.
How tech is enabling temporary insurance in 2022
Leveraging AI/ML, Big Data, and IoT
Gone are the days of one-size fits all insurance where premiums were paid annually based on a few data points collected by the carrier and declared by the customer. We live in the age of big data, AI/ML, and IoT, where the following happens in tandem:
- Big data is collected from connected devices (sensors, GPS, telematics, etc.)
- That data is transformed, modeled, and stored for further computation
- Machine Learning models are trained to analyze the data
- AI gathers actionable insights, detects patterns, and makes predictions
This process ensures unique insights into each customer on a massive scale. Insurers can offer competitive, customizable temporary insurance products. This makes the customer more likely to purchase temporary insurance because they feel they have been catered to. This speaks to the tech transformation of temporary car insurance.
Digitization has enabled temporary insurers to offer features like:
- Instant quote generators
- Claims settlement
- Emergency callouts
- Policy management
Thanks to digitalization, you can now issue a temporary insurance policy by instantly generating quotes. Then you can take them to a platform that manages everything in one place. You can even offer features where customers can reach out in emergencies and upload photos of the damage to their vehicle.
This lowers admin costs, automates workflows, and boosts conversion rates for customers. Meanwhile, you provide a superior user experience, by allowing customers to file claims and contact insurers through the mobile app.
Underwriting equipped with rich, extensive data
We now have robust underwriting models which are armed with not only customer-provided data but also external factors like:
- Traffic conditions
- Telematics data
- Other events
This helps build a more precise environmental risk model. In doing so, insurers price premiums on a case-by-case basis for temporary insurance.
Not to mention, you have a comprehensive predictive analytics engine based on the above data points, which can predict hazardous conditions in advance. This helps you understand risk better and keeps your loss ratio in check.
New age insurance products
As the core processes of underwriting, onboarding, distribution, and settlement go digital, it gives rise to new opportunities for launching innovative insurance products like:
- Temporary insurance
- Usage-based insurance
- Embedded insurance
You have the data, you have the AI-powered risk engine, and now all you have to do is run an analysis and offer the best deal to the customer.
Embedded insurance helps you widen your distribution net as your products are now embedded within the digital journey of a customer. You can embed temporary insurance at the checkout page of an e-commerce store where all a customer needs to do is add the policy to their cart. With embedded insurance, you can ensure your temporary insurance gets bought instead of being sold.
This is a win-win, as customers don’t have to shell out a lot of money and know they are paying only for what they use. And you get your foot in the door with competitive pricing and personalized offers.
Acquire Customers and Cross Sell
Now, you understand how tech has made it possible to offer temporary insurance. This becomes a hook to acquire new customers. When you issue temporary insurance, you gain access to customer data and behaviour.
This data is leveraged to convert those customers to other insurance products catered to their needs. Cross-selling is a key advantage to the digital-first customer acquisition model, allowing you to bring on customers at a negligible additional cost.
In today’s age of hyper-personalization and delightful customer experiences, you will be left behind if you don’t offer new-age products like temporary insurance.
Technology can be disruptive for your company, changing how you acquire customers. This will impact your bottom line and give you an edge over other players.
If you want to know more about implementing temporary insurance, we should talk.