How is Modern Online Insurance Different from Traditional Insurance?
Last Updated on October 27, 2022
Over the years, businesses have come to utilize technology to automate certain processes such as payments, inventory record-keeping, communication with customers, shipping, and more. Another area in which businesses have also progressed is insurance as more providers have gone digital, although traditional insurance is still offered today.
But, how exactly does modern online insurance differ from traditional insurance? This is a question that may be lingering in your mind as a small business owner looking to get insurance, along with what modern online insurance providers do uniquely from their traditional counterparts, the advantages and disadvantages of adapting to new technology, or, contrastingly, the advantages and disadvantages of keeping things old-school.
Well, worry not! These are exactly the questions we will be answering in this article.
Table of Contents
What Exactly is Modern Digital Insurance?
What are the Advantages of Modern Digital Insurance?
What are the Disadvantages of Modern Digital Insurance?
What are the Advantages of Traditional Insurance?
What are the Disadvantages of Traditional Insurance?
The Bottom Line
What Exactly is Modern Digital Insurance?
Most business owners are already familiar with traditional insurance, but, before comparing it with modern digital insurance, we must first understand how the latter actually works.
Simply put, modern online insurance is a type of business insurance that is offered and serviced online. Customers can purchase policies, make claims, and even have their questions answered without having to step into an insurer’s office.
Modern online insurance is made possible by insurtech (short for insurance technology). Insurtech refers to the use of technology to streamline the insurance industry and make it more efficient. This can include anything from using artificial intelligence to process claims faster, to using blockchain to create a decentralized database of policyholders.
Insurtech is a relatively new term, but the concept has been around for years. In recent years, however, there has been a surge in insurtech startups, as the industry looks to modernize itself.
Today, insurtech or digital insurance companies are those that use technology to offer their services online. In many cases, digital insurers can provide a more convenient and affordable experience than traditional insurers.
What are the Advantages of Modern Digital Insurance?
To expound on this further, below are the advantages that come with using modern digital insurance, both for businesses and customers:
Convenience and Compatibility with Changing Customer Needs
As mentioned earlier, one of the best things about modern digital insurance is that it is more convenient compared to traditional insurance. You can do everything online, from buying a policy to filing a claim. This implies that you won’t need to miss work so that you can visit your insurance provider’s location.
In addition, most digital insurers also have mobile apps that you can use to manage your policy, which is even more convenient. With a few taps on your smartphone, you can easily check your policy details, make a claim, or contact customer support. This is because digital insurance companies understand that customers today are far more likely to purchase insurance products online and through mobile devices, so they have invested heavily in developing user-friendly platforms that make it easy for customers to get the coverage they need.
Less Paperwork and Red-Tape
Another advantage of digital insurance is that there is less paperwork and red tape involved. Because everything is done online, there is no need to fill out physical forms or documents. This makes the entire process more efficient and less time-consuming.
In addition, because digital insurance companies have access to cutting-edge technology, they can automate many of the manual processes that are involved in traditional insurance. For example, they can use artificial intelligence to review and process claims faster. This means that customers can get the money they need to cover their expenses much sooner.
Competitive Pricing
Digital insurance companies can also offer more competitive pricing than traditional insurers. This is because they have lower overhead costs, are often more efficient in their operations, and are willing to pass on these savings to their customers in the form of lower premiums.
Improved Customer Service and Support
Customers of online insurance providers are more likely to receive superior customer care and assistance than those who buy from a traditional insurer. This is because they realize that today’s customers expect higher levels of service and support given the availability of modern communication channels.
In addition, digital insurers often have access to more sophisticated customer service tools, such as live chat and 24/7 phone support. Customers can get the help they need when they need it, without having to wait for regular business hours.
Uses Data and Machine Learning
Lastly, digital insurance companies are using data and machine learning to improve the customer experience. By analyzing the data that they collect from customers, they can identify patterns and trends that can help them better understand customer needs and preferences. In addition, they can use this data to develop more personalized products and services.
Digital insurance companies are also using machine learning to automate tasks, such as claims processing. This helps to improve efficiency and accuracy, while also freeing up customer service representatives to assist with more complex issues.
What are the Disadvantages of Modern Digital Insurance?
Of course, no insurance product is perfect, and there are also some disadvantages that come with digital insurance. Below are some of the potential downsides that you should be aware of:
Cybersecurity Concerns
One of the biggest concerns with digital insurance is the issue of cybersecurity. Because digital insurance companies store a lot of sensitive customer data online, they are potential targets for cybercriminals.
Investing in strong cybersecurity measures, such as encryption and two-factor authentication, is important for digital insurers. This will help to protect customer data from being compromised.
Lack of Personal Interaction
Another potential downside of digital insurance is the lack of personal interaction. Because everything is done online, customers won’t have the opportunity to meet with their insurance agent face-to-face. And, without a good relationship with your insurer, it might be more difficult to “feel like” the claim you filed is a priority since it’s dropped into a digital bottomless cue of other claims.
Potential for Technical Issues
Another thing to keep in mind is that digital insurance companies are reliant on technology. This means that there is always the potential for technical issues, such as website outages or problems with the mobile app.
Although most digital insurers have contingency plans in place to deal with these kinds of issues, it is still something to be aware of.
What are the Advantages of Traditional Insurance?
Modern insurance providers today offer perks that consumers find appealing. But, the advantages of traditional insurance are not to be ignored. We have listed some of them below.
Long-Term Relationships
Traditional insurance has the advantage of being able to develop long-term relationships with your insurer. Because you’ll most likely have the same agent for many years, you’ll be able to establish a rapport with them. It also makes it easier to get your policy renewed on a yearly basis.
Personalized Service
Another advantage of dealing with a traditional insurance company is the ability to get personalized service. Because your agent knows you personally, they can offer advice and suggestions that are tailored to your specific needs. This can be helpful if you are not sure what kind of coverage you need or if you have questions about the best way to protect your assets.
Stability and History
Traditional insurance companies have been around for a long time and are, therefore, more stable. In addition, they have good customer service and claims handling reputations. These factors can give you peace of mind in knowing that you will be taken care of if an incident should occur.
What are the Disadvantages of Traditional Insurance?
Lastly, there are potential disadvantages that come with traditional insurance. Below are some of the things to keep in mind:
Higher Premiums
One of the biggest disadvantages of traditional insurance is that it can be more expensive than digital insurance. Because traditional insurers have higher overhead costs, they often charge higher premiums.
This can make it more difficult to find affordable coverage, especially if you are on a tight budget.
Limited Coverage Options
One of the biggest disadvantages of traditional insurance is the limited available coverage options. Because insurers have been around for many years, they tend to offer products that are very similar to each other.
This can make it difficult to find a policy that meets your specific needs. In addition, it can be hard to compare policies from different companies because they all tend to offer similar coverage.
Less Flexibility
Lastly, a downside of traditional insurance is that it can be less flexible than digital insurance. For example, you may have to commit to a policy for a longer period or pay upfront for a year’s worth of coverage. Making this change now might make it difficult to adjust later if your business’s needs shift.
The Bottom Line
The business insurance sector is in a continuous state of change as the world progresses. How businesses conduct themselves and the risks they are exposed to are always changing, so the insurance industry has to adapt.
And while both traditional insurance providers and modern online insurance providers offer advantages and disadvantages upon availing of their services. Nonetheless, it cannot be denied that digital insurance companies are quickly becoming the new norm. After all, they offer a long list of benefits that still make them worth considering.