The insurance industry is often referred to as a digital dinosaur in terms of innovation and being up to speed with what consumers need. Until COVID, the industry was notoriously inflexible. However, marked changes in lifestyle as a result of the pandemic have allowed tech-savvy insurtechs to meet the demands of the times by offering pay-as-you-go or on-demand services.
Insurtechs are now able to do what insurance companies aren’t: innovate and challenge the space, throwing over existing models to bring in changes in services. Adopting the pay-as-you-go model for insurance perfectly meets the requirements of today’s insurance customers who are transitioning through a time of societal change.
In the motor insurtech industry, for example, customers are more often driving a lot less due to increased inner-city living, the rise of remote work, and a more environmentally conscious generation of millennials taking the wheel. Car hires, eco-transport, and car share services are often preferred to purchasing cars. Also, the model is perfect for the gig economy for drivers that are freelancing, or on short contracts. With people driving less, customers are not wanting to pay full coverage insurance while clocking such low mileage.
Insurtechs in this space will be well poised to capture the crucial new generations of car owners and drivers: millennials. The flexible model of insurance will be highly appealing to this cohort, often associated with being early adopters and trendsetters, as well as great word-of-mouth advocates. The numbers already are reflected in the statistics, with insurtech Metromile sharing that 49% of their policyholders are millennials or younger. As pay-as-you-go takes off and experiences further adoption, disgruntled consumers of inflexible policies will likely jump ship after witnessing the proven success of these newer brands.
Pay-as-you-go also offers consumers easy, efficient sign-up processes that can be done from the phone, as well as a more affordable alternative to full-coverage insurance that inaccurately matches with the lifestyle of today’s consumer. Insurtechs such as Metromile are even open to allowing policyholders to pay premiums with cryptocurrency, recognizing that it is both becoming more mainstream, and is a way to provide faster payments.
The highly responsive way in which pay-as-you-go insurtechs are innovating their products to meet the requirements of today’s consumers is allowing them to increase market share in an oversaturated and highly competitive industry.