On-Demand Insurance

Abstract

On-demand insurance is growing rapidly with predictions that by 2030 the global insurance market will evolve to contain highly dynamic, usage-based products that are tailored to individual customer behaviours and will transition from an annual renewal model to a continuous cycle, with products that constantly adapt to individual behavioural patterns—driven by application of data and individualised risk models. The availability of “big data” in conjunction with technological advances in artificial intelligence (AI), predictive analytics and blockchain create the foundation and operational capacity for new on-demand insurance products and opens doors to new and exciting opportunities within the insurance industry. Globally, insurtech start-ups have taken the lead in addressing the demand for customisable on-demand insurance, but large institutional insurers are responding to this trend by engaging emerging technologies and delving into transformational options to complement traditional services. Big data in conjunction with AI-driven analytics can be used to more precisely delineate the scope of cover provided. For example, big data and AI analytics enable insurers to monitor an insured&s;s activities in real time (such as motor and health risks) with the data about that insured&s;s behaviour (such as speeding in an insured motor vehicle). In principle, this enables an insurer to vary the scope of the cover or premium payable by way of real-time variations, which could extend to a policy termination or premium increases if certain behaviours occur. This chapter considers on-demand insurance and the associated technological developments supporting its global growth and development, as well as the risks and challenges to be addressed. The fraud implications of on-demand insurance and the potential for distributed ledger technology or blockchain initiatives to assist in fraud detection and risk prevention are also addressed.