All Aboard the Digital Insurance Train: A Guide for Smart Shoppers
By Moritz Kudermann
- ~3 Min
Exploring Digital Insurance Policies: Crucial Information for Buyers - Insured customers online: Key aspects that consumers need to be aware of
Cash, groceries, auto insurance - in 2023, people are buying more than just the basics online. Even insurance policies are moving to the digital space, thanks to the fast-growing industry of Insurtechs. But are these online insurers as good as the traditional ones? Here's a rundown of what consumers should know before diving into the digital insurance world.
What's this digital insurance thing?
First things first, let's clarify the terminology. A company doesn't become an "online insurer" just because it lets you sign up online. Instead, the term refers to companies that do most or all of their business online, cutting out the hassles of traditional paperwork and face-to-face meetings. These Insurtechs use automation and digital tools to offer a smoother, more convenient insurance experience.
Some Insurtechs act as brokers, matching customers with the best policies from traditional insurers. Examples include Clark, Wefox, and Check24. Others, like Friday and Lemonade, offer their own policies, meaning they bear the insurance risk and pay out when claims are made.
So, what's so great about digital insurance?
One of the main draws of Insurtechs is their simplicity. They aim to make insurance less complicated and daunting, especially for younger people. Gone are the days of endless forms and slow, laborious processing. Instead, you can sign up for a policy with just a few clicks, right from your phone or computer. Even if you need help, you can get it via phone or video call.
But what about prices? Do Insurtechs Really Save You Money? That's a common question. While Insurtechs proudly boast about savings, don't get too excited just yet. Philipp Opfermann, who oversees finance and insurance at the consumer center in North Rhine-Westphalia, says they don't necessarily offer cheaper deals.
Uh-oh, what about the downsides?
The quick and streamlined processes of Insurtechs come at a cost. For one, they're not always equipped to handle complex claims. When things get tricky, as often happens with insurance, human intervention is required. This can lead to delays and frustration. Moreover, if something goes wrong with an Insurtech, you won't be able to visit a branch and discuss your concerns in person.
What about the risks?
When it comes to Insurtechs, there's a higher risk of bankruptcy, especially for young companies. This isn't because they're digital - it's because they're new and may not have enough financial resources to fall back on. This isn't just a problem for Insurtechs - established companies can also go under. However, there's a safety net for long-term policies, like life, disability, or private health insurance, in case of insolvency.
So, which digital insurance is the best?
Picking the best Insurtech is tough, given their relative youth in the insurance world. Some companies, like Element, have already faced insolvency, but that doesn't mean the whole industry is bad. In fact, it's important to remember that insolvency can happen to traditional insurers as well.
Opfermann advises cautious consumers: "You can't truly assess an insurance's quality until you encounter a claim. Reviews on sites like Finanzfluss and Finanztip can help, but don't always make or break a decision." Keep in mind that complaints about long processing times and poor accessibility should raise red flags, whether you're looking at Insurtechs or traditional insurers.
What insurances can I easily get online?
Standardized insurance policies, like travel health and bicycle theft insurance, are relatively simple and easy to manage on your own. These types of insurance present lower financial risks and terms, making them ideal for the digital platform. Plus, if you encounter troubles, you can easily switch providers.
- Insurance
- Digital Insurance
- Consumer
Additional Insights
- Personalization: Insurtechs use advanced data analysis to offer tailored insurance plans, appealing to consumers seeking specific coverage.
- Regulatory Compliance: Insurtechs may face challenges complying with traditional regulatory standards, leading to operational hurdles.
- Privacy and Data Security: The reliance on personal data increases the risk of cyber attacks, compromising customer privacy.
- Trust: Building trust with consumers can be difficult due to the novelty of these platforms and concerns about data handling.
- Established Trust: Traditional insurers have a long history, offering consumers a sense of stability and trust.
- Well-Defined Regulations: Traditional insurers are well-versed in regulatory compliance, ensuring a more predictable service environment.
- Comprehensive Coverage: Traditional insurers typically offer a wide range of coverage options and have the expertise to handle complex claims.
- Less Personalization: Traditional insurers may not offer the same level of personalized policies as Insurtechs.
- Slower Processes: Traditional insurers often have slower processes due to their legacy systems, resulting in inefficiencies.
- Higher Costs: Traditional insurers may have higher operational costs, leading to higher premiums for consumers.
- In the digital insurance world, consumers might find it beneficial to consider the community policy, as some Insurtechs foster a sense of community and provide vocational training to their customers, thereby empowering them to navigate the insurance landscape more effectively.
- For small businesses seeking insurance, it's essential to look into policies offered by Insurtechs that use technology to streamline the process, potentially leading to more affordable premiums and increased efficiency in managing policies.
