What is an online insurtech anyway?
An online insurtech isn’t what you would consider a traditional insurance company. Many new online insurtechs have entered the insurance industry, and there are good and bad things to consider.
THE GOOD:
- Insuretechs have fast and friendly websites created to provide quick quotes and easy to purchase policies. This is where the good ends.
THE BAD:
- They are not backed by traditional insurance companies with years of experience, knowledge and reserves. They are normally backed by several layers of investment companies who’s number one goal is a return on their investment. You never really know who is going to pay your claim.
- Unfortunately, these new online insurtech companies have joined the industry during the most challenging insurance climate in a generation. During the years 2022 – 2025, many insurance companies failed and have withdrawn from markets, so you can only imagine how the insurtechs are struggling, and they are.
THE UGLY:
While these online insurtech websites are very easy to use, they are programmed to offer lower prices by underinsuring the structure and leaving out or limiting very important coverages.
- Lower Dwelling Coverage: In my recent quoting experiences, I entered all of the information on one of my own rental properties. The website prompted dwelling coverage of $201,000 to rebuild a 1900-square-foot rental property, about half of the actual rebuild cost. In the event of a total loss, I would only be able to rebuild 1/2 the house! Whether it be a total loss or even a partial loss, the policy contains language that will further penalize me for underinsuring. How does coinsurance work in a commercial property insurance policy? | Anderson Insurance Group
- No Extended Dwelling Replacement option is available. Extended Dwelling Replacement will add an additional 25% of dwelling coverage in the event of a total loss. For example, $400,000 in dwelling coverage X 125% = $500,000 max dwelling coverage. The absence of this option is a glaring weakness in coverage.
- Fair Rental Value/Loss of Rental Income: The “recommended” Plus coverage from this company only included $20,100, not nearly enough to cover twelve months of lost rents, the minimum amount of time it would take to rebuild this property.
- Water Damage Sub-limit Limitation: This is perhaps the most glaring deficiency in their coverage. Many insurtechs will include a sub-limit for damage from water, the most common claim received by insurance companies. Sub-limits are a new strategy to limit an insurance company’s exposure to a specific loss. Every year, we have several water losses that exceed $100,000, and these new insurtechs can have water damage sub-limits of $30,000 or less.
These are just a few of the deficiencies of the coverage offered by insurtechs. Only a seasoned and experienced insurance agent is going to recognize the coverage that the insurtech company has omitted.
Another big risk of buying online is that you represent yourself. You are the one making the declarations on the application and if the coverage you need to rebuild or repair your home is not there, you are out of luck. Whether you were aware or whether the slick website offered the coverage or not, you make the final decision and representation of your coverage. When you insure with a local and knowledgeable insurance agency and an important coverage has been left off, you can pursue a claim against that agent’s errors and omissions policy for not including that coverage.
In biblical times, they would call today’s insurtechs wolves in sheep’s clothing. These slick and impressive online proposals are programmed to omit important coverage and offer a lower price which in the end, will cost you much more than you may have saved.
Avoid the confusion and deception of the cyber insurance world by reaching out to a knowledgeable and experience agent at Anderson Insurance Group today.
Anderson Insurance Group – Salt Lake City – Utah