Digital channels and insurtech are tightening their grip on the insurance industry, replacing face-to-face and the telephone as the primary way of delivering products and services.

Insurers that don’t embrace new business models and enhance their digital user experience face the consequence of being displaced by those that do.

Digital services must be entirely responsive to customers’ needs, easy to use and fast.

Only then will customers experience the brand positively and their time on the website or app is more likely to convert into a sale. Insurers have been successfully adapting their counter fraud strategies and controls to deal with the increased fraud risks represented by the digital channel.

However, the market continues to evolve at a rapid rate, driven by customer demand and modern day life styles. One of the more recent trends to emerge can be categorized as the development of ‘on demand’ or ‘micro-duration’ insurance, largely driven by the life styles of the Millennial generation.

As a broad definition for the UK, the Millennial generation can be loosely defined as those aged between 18 to 34 years old. Many are now leaving education or at an early stage in their careers.

The Millennials are a critical mass that cannot be ignored and yet they are the most under-insured generation on record. Insurers are acutely aware that this demographic are their long term customers and that establishing a relationship with them is vital. The issue is that many traditional insurance services do not have relevance to a large proportion of this audience. It can be argued that rising living costs are removing some of the need for insurance for this generation.

Many are still living at home with parents and owning a car can be a financial commitment beyond their means. What they need is flexible insurance and what has become attractive to Millennials is the ability to insure their belongings. Insurers have responded with App based, on demand / micro-duration cover. Insurers have to embrace new business models and enhance digital user experience to approach new generations and Millennials.

The industry drive to innovate and engage with the Millennials is unquestionable, but what of the fraud risks associated with on demand and ‘micro duration’ insurance and the associated automated and rapid claims service?

Without effective counter fraud tools, the cost to insurers to cater for this innovation can be extremely high. Risk can no longer necessarily be spread over an annual policy cost. The flexibility of the on demand or micro-duration offering means a very low up front cost to the policyholder with the ability to make a claim swiftly.