The Upper Hand: Navigating Online Insurance Markets for Cost-Efficient Coverage
Important Facts About Buying Insurance Online: What You Need to Understand - Understanding Digital Insurance Policies: Crucial Information for Consumers
By: Moritz KudermannDuration: Approx. 3 Minutes
In the digital age, it's no surprise that everything from shoes to insurance policies can be purchased online. In fact, with around one in five contracts closing digitally in 2023, it seems we've moved beyond just buying daily items online, now including insurance policies in the mix [1]. But when venturing into the world of online insurance providers, what advantages and pitfalls should consumers be aware of?
So, What Exactly is a Digital Insurance Policy?
First, it's essential to clarify what constitutes a digital or online insurer. While the option to digitalize the contract serves many companies, it doesn't make them purely online or digital unless their functioning is predominantly digital. These entities, often referred to as Insurtechs, are characterized by their technology-driven, automated processes [1].
There are brokers - such as Clark, Wefox, or Check24 - that act as intermediaries for traditional insurers, and firms like Friday or Lemonade that offer their own policies. The former reaps a commission for brokering the contract; the latter both undertakes policy-issuance and bears the insurance risk [2].
Perks and Pitfalls of Digital Insurance Policies
Young people often view insurance as cumbersome and antiquated, and Insurtechs are striving to change that misconception with their emphasis on simplified processes. Clark, for instance, promises a paperwork-free experience on their homepage, allowing new customers to sign up easily via apps [1]. When it comes to claims, the process remains primarily digital, and online consultations are available for those seeking advice [2].
The question remains: are digital insurance policies cheaper? Philipp Opfermann, responsible for finance and insurance at the consumer center in North Rhine-Westphalia, reveals that prices may not always be lower [2].
Watch Out for These Challenges
The convenience of automated processes can come with its set of difficulties, particularly when it comes to complex claims that can't be processed by Insurtech systems. Those cases are then handled by humans, which can lead to delays. Moreover, should there be a problem or concern, customers wouldn't have a physical branch to visit [2].
For consumer protection officer Opfermann, longer processing times caused by the complexity of a case isn't inherent to digital insurance policies. However, simpler claims are often processed quickly, regardless of the method of policy procurement [2].
Another hurdle arises from the increased risk of bankruptcy for Insurtech startups, compared to established, more stable companies. Not because of their digital nature, but because youthful entities have fewer financial resources to rely on in case of insolvency. In December 2024, for example, Berlin-based digital insurer Element filed for insolvency, leaving around 400,000 customers scrambling to find a new insurer [1].
However, this issue primarily concerns short-term insurances, like liability insurance, where change-over is easy. Long-term insurances, such as life, disability, or private health insurance, have safety nets for consumers even in the case of insolvency [2].
Choosing the Best Online Insurer
With numerous Insurtech providers vying for customers' attention, it's difficult to discern which one is the best. As these companies are often relatively new, the insurance industry's historical perspective doesn't always apply [3]. Philip Opfermann, insurance expert, reminds us that: "the quality of an insurance company often only becomes apparent when making a claim" [4].
It's difficult to evaluate the quality of an insurer before signing the contract. However, online reviews on portals like Finanzfluss or Finanztip can offer invaluable insights into customer experiences with these providers [4]. If a significant number of users report long processing times or poor accessibility, consumers should be wary, regardless of the insurer's nature [4].
Which Insurance Policies are Particularly Suitable for Online Purchase?
Standardized insurance policies, such as travel health or bicycle theft insurance, are typically well suited for self-procurement [4]. Given the manageable financial risk and policy term, as well as the ease of switching providers if necessary, consumers can confidently venture into the digital market for such policies [4].
Keep These Tips in Mind
When considering an online insurance provider, remember:
- Assess Your Coverage Needs: Determine your insurance requirements and what your budget allows, comparing coverage limits, deductibles, and additional features [5].
- Read Reviews: Examine reviews from existing customers to gauge the insurer's reputation and service quality [3].
- Compare Policies: Examine quotes from various insurers to secure the most cost-effective deal, using resources like The Zebra for streamlined comparison [5].
- Evaluate User Experience and Security: Assess the quality of user experience and the implemented security features to safeguard your data [3].
- Consider Customer Service: Look into the availability and effectiveness of customer service support channels [1].
- Check for Personalization and Innovative Solutions: Consider providers that leverage AI for personalization, and invest in technology for enhanced ease of use and streamlined processes [2].
- Review the Fine Print: Carefully read the policy terms, ensuring the coverage, exclusions, and conditions meet your expectations and comply with legal requirements [2].
Armed with this knowledge, consumers can confidently navigate online insurance markets, making well-informed decisions that prioritize cost-effectiveness and peace of mind.
- Insurance
- Online Insurance
- Consumer Protection
- When evaluating online insurance providers, it's crucial to consider the lifestyle-focused benefits offered by some vocational training programs, as they could equip consumers with the necessary skills to effectively manage their financial affairs and navigate the intricacies of online insurance markets.
- As consumers delve deeper into the world of online insurance policies, they may find that embracing new technology can streamline the process and enhance their overall experience, potentially leading to more cost-efficient coverage through innovative business models and automated processes.
