Given the market buzz about subscriptions, it’s worth defining our terms. Traditionally, insurance has been paid for via lump-sum premiums, with an annual renewal that also gave customers an option to switch providers. Customers might have choices for various levels of coverage and add-ons, but coverage was generally fixed within yearly cycles, which facilitated the pooling of risks.
Subscription policies offer ongoing coverage with a monthly payment, with increased flexibility to modify coverage or add options on-demand (e.g., insurance for trips, for gig economy work). They may also provide access to ancillary services (e.g., home security and monitoring, concierge auto maintenance) offered via a trusted network of providers. The addition of high-value content to help consumers reduce their risk profiles and lead healthier lives may offer more opportunities for value-adding engagement.
More than product bundles, subscriptions are designed around highly intuitive digital experiences, with insureds able to “turn on” and “turn off” coverages and features (e.g., adding or removing family members from policies or additional locations to commercial policies) as easily as they might a streaming service. Predefined packages keyed to life events (e.g., buying a home or having a child) make it easier for customers to understand their needs and find the right solution and features. Premium “flexing” may be based on usage, with certain rebates applying. Risk is still pooled, though distribution can vary (e.g., via agents or brokers, directly through company websites or within digital journeys).
Again, it’s possible that some segments will resist subscription models, but the idea behind them – that customers can more easily access the coverage they want – will drive broad appeal, in our view. While subscriptions may feature some on-demand and usage-based capabilities, they don’t equate to standalone “pay as you drive” or “pay as you live” policies. Typically, those products are built around mobile apps enabled by global positioning systems (GPS), telematics and artificial intelligence (AI) that automatically turn on coverage and shift risk responsibility to policyholders.
It's worth noting how insurance coverage is embedded in the subscription models offered by other companies, which changes insurers’ route to market. As more automotive manufacturers offer flexible leasing, purchase or subscription access to vehicles, insurance is typically embedded in a single price or fee.
This arrangement can be advantageous for insurers in lowering the cost of distribution by minimizing the need for brokers and price comparison websites. Customers may like the convenience of a fully integrated customer experience. However, carriers with visible brands and strong loyalty may view white labelling of policies as a threat when it could actually create opportunities for co-branded partnerships and new routes to market.