Should You Switch to Digital Insurance in 2022?

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You’re probably familiar with online banks that provide many of the same services as a traditional brick-and-mortar bank with better rates and fewer fees. That’s because online banks don’t have the overhead that a financial institution with branches have. The same goes with digital insurance — many of the top providers can provide the same coverage — or better — for less. 

Read: If Your Credit Score is Under 740, Make These 4 Moves Now

The question is, should you switch to digital insurance? This guide reviews some of the best online-only insurance companies and whether digital insurance is right for you.

Digital Insurance Pros and Cons

Take a quick review of how digital insurance works when compared to traditional coverage.

Pros

  • Often cheaper
  • Easier to purchase coverage online
  • Most tasks can be done online 24/7 or through the mobile app, including filing and tracking claims
  • Claims may process faster
  • Coverage details may be more transparent since the information is available online

Cons

  • May not offer as many coverage options
  • No face-to-face consultations
  • Not available in as many states as some of the major traditional providers
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What Is Digital Insurance?

Digital insurance is another term for online-only insurance. Some companies operate a leaner business model, providing an app for most of the servicing, as well as a phone number, email address or live chat option.

In many cases, digital insurance companies rely less on humans and more on technology to provide quotes, do the underwriting, perform risk analysis and even process claims. There are advantages to InsurTech– the process is often faster and less expensive since man hours aren’t involved.

Who Is Digital Insurance Best For?

Digital insurance is ideal for individuals who are comfortable with technology and don’t mind handling their needs through a website or mobile app. Fortunately, most tech-centric insurance carriers have well-designed apps and platforms that make the experience seamless and easy to understand, even for someone with no knowledge of how insurance works.

People with simple coverage needs are the best candidates for digital insurance. If you’re in need of a standard homeowners insurance policy or basic auto coverage, digital insurance is ideal. However, digital insurance may not be able to underwrite more complex situations requiring extra riders or add-on coverages.

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Types of Digital Insurance Companies

While digital insurance is relatively new when compared to traditional providers such as State Farm and Allstate, there are a variety of digital insurance companies serving the major types of coverage. They include:

Digital Auto Insurance

Most auto insurance carriers have adopted some form of digital auto coverage these days. For example, many of the larger, traditional car insurance providers offer discounts when you download their app that tracks your driving habits. However, there are some digital auto insurance companies that operate solely online or through the mobile app. They are:

  • Metromile: Premiums are based on the number of miles you drive. Low-mileage drivers could benefit the most.
  • Root: Premiums are based on a policyholder’s driving habits. Drivers with a safe driving record stand to save the most on premiums.

Digital Home and Renters Insurance

When it comes to digital home insurance, one company does it best — and it’s Lemonade. The provider does coverage differently than other insurance companies. It’s a peer-to-peer model run by artificial intelligence to provide the most affordable coverage possible and nearly-instant claims payouts.

Groups of policyholders are placed in a shared pool. Most of the premiums they pay go into the pool and are available to cover claims. According to Lemonade, the company only takes a small portion of the premiums to cover its operating expenses and donates whatever unused funds that remain in the pool to the charity of each policyholder’s choice. Therefore, anyone looking for standard home or renters insurance will likely save on coverage and have access to quick claims payouts should something go wrong.

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Digital Life Insurance

InsurTech has also reached the world of life insurance, making no-exam term life insurance easier and cheaper than ever. Customers can skip the health exam and get a policy right away, which can be advantageous to some individuals who would typically have trouble getting coverage through a traditional life insurance provider.

There are a few digital life insurance companies:

  • Bestow: Offers short-term and long-term plans with lengths of 10, 15, 20, 25 and 30 years, for individuals aged 18 to 60 years old. Policies are available for up to $1.5 million.
  • Haven Life: Offering up to $3 million in term life insurance for adults under the age of 59 with a medical exam or $500,000 with no exam. Adults that are 60 to 64 years old may qualify for up to $1,000,000.
  • Ladder: Offering term lengths of 10 years to 30 years and up to $3 million policies for applicants between 20 and 60 years old.
  • Sproutt: Save money on your term life insurance policy with Sproutt if you adopt a healthy lifestyle.

Takeaway

Digital insurance may not be as widespread at this time as the traditional model, but it’s growing in popularity. You’ll find that companies like Root and Lemonade offer affordable premiums and coverages that policyholders are happy with. 

In fact, Lemonade consistently ranks high in the J.D. Powers annual study of best insurance companies, beating out many of the best-known names in the industry. It ranks in third place behind USAA and Nationwide for overall customer satisfaction in renters insurance. That being said, next time you’re shopping around for coverage, be sure to get a quote from a digital insurance provider to compare — you may be pleased with what you see.

Digital Insurance FAQ

  • What is digital auto insurance?
    • Digital auto insurance is online-only coverage. That means there are no physical offices available -- everything is handled through the mobile app instead. However, coverage could potentially be cheaper since the company has smaller overhead than a traditional insurance carrier.
  • What is online-only insurance?
    • Online-only insurance operates similarly to an online bank. There are no branches and most everything can be handled using the mobile app.
  • What kind of company is OneDigital?
    • According to the company website, OneDigital offers an "insurance, financial services and HR platform [with] personalized, tech-enabled solutions for a contemporary work-life experience."

Information is accurate as of Oct. 24, 2022.

Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.

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About the Author

Cynthia Paez Bowman is a personal finance writer with degrees from American University in international business and journalism. Besides writing about personal finance, she writes about real estate, interior design and architecture. Her work has been featured in MSN, Brex, Freshome, MyMove, Emirates’ Open Skies magazine and more.
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