How Digital Insurance Is Revolutionizing the Future for Policyholders

Advancements in technology have transformed the insurance industry, leading to digital insurance platforms that use artificial intelligence and other tools to cut costs and provide faster customer service and claims processing. While digital insurance offers many great benefits, there may still be scenarios where you want to deal with a human insurance specialist instead.

Keep reading to learn more about digital insurance and how it can benefit you as an avenue for coverage.

What Is Digital Insurance?

Digital insurance leverages technology to streamline buying insurance and filing insurance claims for consumers while helping companies accurately set premiums and efficiently manage claims. It relies on technology like online portals, mobile apps and analytics powered by machine learning to deliver services quickly and conveniently.

“Unlike traditional insurance, where you rely on agents, paperwork and sometimes a lengthy back-and-forth process to start your coverage or file claims, digital insurance brings everything online,” Andrew Pickett, the lead trial attorney and founder of Andrew Pickett Law, told SmartFinancial in a message.

Digital insurance brings a new level of accessibility and convenience to consumers, allowing policyholders to manage their coverage anywhere and anytime.“Think of it as insurance at your fingertips — whether you’re getting a quote, updating your policy or submitting a claim, it’s all done via an app or website,” Picket added.

How Does Digital Insurance Work?

With automation, digital insurance processes can happen in real time, eliminating the need to play phone tag with a human representative when getting a quote or processing a claim. “When you input your information, algorithms handle the risk assessments and pricing instantly,” noted Pickett.

A digital insurance company can use artificial intelligence-powered customer service to help guide customers through specific processes or answer questions using seemingly realistic conversations on their apps or websites.

Digital infrastructures can also allow you to customize your policy on the fly rather than wait for a human to list every available add-on or discount. For auto insurance, some companies leverage telematics technology to help them calculate rates based on real data collected on when you drive, how much you drive and how safely (or recklessly) you drive.

Is Digital Insurance Secure?

Many digital insurance providers take customer data security seriously. While your insurer won’t be immune to every potential cyber threat, digital insurance platforms typically maintain thorough cybersecurity measures to guard your data. They may use various cybersecurity techniques, such as data encryption, secure cloud storage and multi-factor authentication, to limit access to customer data to only the data owners and necessary company employees. This level of security is also in their best interest, as allowing for data breaches or ransomware attacks to occur may harm their reputation and lower their customer base.

However, it is still worth reviewing any company before handing sensitive information over to them, including your home address and other personal details that could be used for identity theft. Research if an insurer you’d like to enroll with has had any cyber breaches in the past and what they’ve done to rectify the issues to see if you’re comfortable starting a policy with them.

How Much Does Digital Insurance Cost?

While the exact savings will vary, with no guarantee that every digital policy will be cheaper than its traditional equivalent, automation has been shown to reduce claims costs to the insurer by up to 30%, which could result in savings passed on to you.^[1]

Digital insurance can be cheaper than traditional insurance due to its reduced operating costs. For example, primarily or exclusively online platforms do not always need to maintain a physical office or as many physical offices as a mostly non-digital insurance company. Further cost reductions come from using technology and artificial intelligence that reduces staffing needs.

However, hidden costs in digital insurance may come from frustration and difficulty dealing with a largely automated system.

For example, if you prefer dealing with a human being in all aspects or aren’t technology savvy, the benefits of digital insurance may not offset these limitations that could cost you time or patience. Make sure you factor in the insurance experience alongside financial costs to save yourself a future headache.

What Types of Digital Insurance Can You Buy?

Many types of insurance, including auto, health, life, homeowners, renters, have undergone a digital transformation. However, insurers in niche areas or those who sell highly customized insurance lines, such as those for rare collectibles, will usually require a real human to appraise whatever is being insured.^[2]

Additionally, complex businesses that provide large accounts may still need more traditional and hands-on underwriting approaches.^[3] It may be difficult for an automated platform to account for all of the nuances or analyze the necessary data to provide a quote accurately in these scenarios, and they will still typically require a human touch.

What Are the Benefits of Digital Insurance?

Digital insurance offers customers a faster, more accessible and often cost-saving alternative to traditional insurance options. “You can customize your policy almost instantly, and the claims process, which is usually the most frustrating part of insurance, is often significantly simplified,” Pickett said. Rather than visiting a physical office or calling an agent on the phone and waiting for the usual lengthy claims or quote-gathering process, digital insurance allows you to do it all online at your fingertips.

Digital insurance can be cheaper than its traditional equivalent, and these savings may be passed on to you as an enticement to their services. Additionally, through extensive data analytics assisted by machine learning, digital insurance providers can improve accuracy when setting client rates by considering real-time assessments of rates in the area and other factors.^[4] Through predictive analytics, they can better anticipate your needs and develop new offerings.

Top Digital Insurance Providers

Here’s a brief list of some major digital insurance companies alongside what they offer:

• Lemonade: Offers renter's, homeowner's, life and pet insurance^[5]
• Root Insurance: Offers auto insurance policies and renters insurance^[6]
• Oscar Health: Offers health insurance plans in addition to virtual care through its app^[7]
• NEXT Insurance: Offers technology-first small business coverage^[8]
• Hippo: Offers home insurance^[9]
• Metromile: Offers pay-per-mile car insurance (owned by Lemonade)^[10]

Keep in mind that coverage may not be available for every digital insurance company in all states.