16 February 2022

What Is Insurance as a Service?

The “as a service” model, also known as “anything as a service” or XaaS, seems to have sprung up overnight in a wide range of industries. Insurance is now exploring the possibility of insurance as a service, driven by customers’ desire for on-demand coverage, usage-based insurance, and other features that tend to treat insurance as a service rather than a product.

Here’s what insurers need to know about insurance as a service.

Understanding the “As a Service” Model

The “as a service” model began with software and data delivery. In the late 20th and early 21st century, software was typically treated as a product. Users purchased software in the form of physical disks containing the program they wished to use. Similarly, a person or company who wanted more data storage space typically purchased the hardware required, storing and operating it in their own home or business.

As computing became integrated with everyday life, however, delivery models for software, platforms and infrastructure began to change. Today, it’s more common for personal and professional software users to buy a subscription to necessary programs, often hosted online. Similarly, companies can now purchase the infrastructure and platform access they need without having to build their own data centers from the ground up.

The XaaS model has proven so popular in computing that other companies have begun adopting it as well. In an as-a-service model, “offerings are neatly sliced up and portioned out to create customized services that meet the specific needs of each client at a price that makes sense for them,” writes Stephen Watts at BMC.

Two businessmen are shaking hands in office, close-up

What Does Insurance as a Service Look Like?

Thanks to its rapid adoption and popularity, as-a-service models are “becoming a preferred method of moving through life,” notes Daniel Newman, founding partner and a principal analyst at Futurum Research and CEO at Broadsuite Media Group. The approach is widely adaptable to a range of situations.

As customers become more used to as-a-service options, they begin to project this approach onto the businesses, products and services they consume. When something they need, like insurance, doesn’t live up to their expectations, they wonder why.

Insurance as a Service appeals to customers for a number of reasons, including:

Flexibility. When insurance coverage is provided as a service rather than a product, customers can access coverage when they need it and deactivate it when they don’t. For customers who spent the first months of the pandemic wondering why they were paying to insure a vehicle when they had nowhere to drive it, this flexibility is highly appealing.
Mobility. Insurance as a Service provides customers with access to coverage anytime, anywhere. Options like embedded insurance further improve mobility by eliminating the need for the customer to plan for coverage separately. Instead, coverage comes as part of buying a vehicle, house, or other item for which that coverage is needed.
Democratization. For customers, acquiring insurance as a product has traditionally been a tedious business, requiring the assistance of an agent or broker, travel to an agent’s or broker’s physical offices, and a great deal of paperwork. Customers realized that the insurer controlled the information and thus the nature of the product. Insurance as a Service, however, allows customers to regain some control of their own data and of the relationship by making it easier for them to compare and switch coverages.

Insurance as a Service is a new way of looking at coverage. At first, it can seem at odds with traditional methods of distribution — and in some ways, it is. Yet rapid digital disruption in the insurance industry has laid the groundwork for insurance as a service options that meet customers’ expectations while also allowing insurers and agents to streamline their own work, improve customer relationships, and even mitigate or prevent risk. Done well, insurance as a service can offer the best of both worlds to carriers, agents and customers.

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