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How are digital nomads impacting the insurance industry?

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The term “digital nomad” refers to a person without a fixed residence who makes a living from working online. These nomads typically travel frequently while connected to their work via their laptops.

Data published in The Guardian shows that there are now 40 million self-described digital nomads globally. Researchers expect this number to rise to 60 million by 2030.

The pandemic has fueled their growth, as remote working means that people can take their work abroad. Many countries are encouraging this trend, and offer “digital nomad visas”, specifically designed to attract flexible workers.

Data published in Euronews states that 8% of digital nomads globally are British. It means that about 3.2 million Brits are living this kind of lifestyle.

If the trend continues to grow, how will the insurance industry adapt?

Digital nomads aren’t like “traditional” insurance customers who typically stay in the same location and work a steady job. That means they may not always be able to access the insurance coverage that they need.

In general, digital nomads pose 3 main challenges for insurers.

1. They don’t have a long-term fixed address

Unlike the standard home insurance customer, digital nomads move around frequently and lack a permanent fixed residence.

Nomad List—a digital nomad platform—regularly surveys how often nomads move. They found that the typical digital nomad moves to a new city every 2 months on average and to a new country every 8 months.

The lack of a fixed address is a challenge for insurers. Most insurance policies require customers to have a fixed location because it helps them accurately assess the risk level. For example, the risk of crime and injury changes from place to place, meaning it would be difficult to provide accurate coverage for travel insurance.

Similarly, health costs are different from country to country. So, it’s challenging for insurers to make sure that nomadic customers have the medical coverage they need in each location. So if someone has been travelling in Southeast Asia and then moves to the US, their medical coverage may no longer be high enough.

Flexibility of location is a fundamental part of the digital nomad’s lifestyle. However, this makes it difficult for insurers to accurately determine risk.

2. Digital nomads may need income protection alongside flexible travel cover

Digital nomads are unique in combining flexible, long-term travel with dependence on their gadgets for work.

Imagine that a standard, sedentary employee or self-employed person loses or breaks their work laptop. They may not be able to work until they fix or replace their device. However, if a digital nomad loses their device, it might be more of a problem.

For instance, if a self-employed musician in Southeast Asia loses specialist equipment, they may not be able to replace it in their current location. Alternatively, they may not be close to a computer repair shop to fix their laptop. In this case, they might go weeks without being able to deliver on their contracts.

Digital nomads may want a form of cover that goes beyond standard travel gadget protection. Rather, they may want income protection alongside their travel or health insurance policies.

For insurers, the challenge is providing this protection when nomadic customers live a flexible lifestyle.

3. There’s no single “digital nomad”, so there can be no one-size-fits-all insurance

There are many different kinds of digital nomads. And as more people adopt this lifestyle, the variety of people who need insurance is likely to grow further.

For a long time, many people assumed that most digital nomads were self-employed. But an increasing number of people in stable jobs now enjoy the freedom to work wherever they want. Crunch found that just 46% of digital nomads are self-employed, suggesting that most are employed.

Different people have different insurance needs. For instance, someone employed may already have gadget protection, while someone working primarily in the gig economy may not. They have different roles, too—such as programmers or writers—and likely have different devices that they need to insure.

Similarly, different nomads are travelling to different places with different levels of risk. Some may be travelling for years, while others may choose a nomadic lifestyle for a shorter time. In this case, they may want to avoid locking themselves into a 12-month contract.

Overall, digital nomads are a hugely diverse bunch, and when it comes to insurance, they all have different needs.

There are 40 million digital nomads in the world, and as many as 8% of them are British. If this number continues to grow, there could be a market for digital nomad insurance. However, creating this product is a challenge, as the needs of individual customers may be very different.

1. Provide a “backpacker plus” policy for digital nomads

Insurers aren’t going to create a new insurance product if they don’t see a demand for it.. Instead, insurers could adapt existing policies to serve more flexible working travellers.

For instance, many digital nomads could benefit from backpacker insurance. These travel insurance policies cover the customer in multiple locations for a longer period than standard travel cover. Customers often have the option to add gadgets to their cover, too.

However, the limitation of this kind of cover is that digital nomads are making a living while abroad. They’re not typical backpackers who have saved up to go travelling,  they’re actively working.&

This means they likely have additional needs that backpacker policies don’t cover, such as income protection if their gadgets are damaged.

To solve this, insurers could offer a type of “backpacker plus” insurance. It could incorporate contents cover on a few select items, alongside income protection and health insurance. This way, insurers can give digital nomads a single insurance product that solves many different problems.

2. Offer more flexible, easy-to-update policy terms

Digital nomads have a relatively unpredictable lifestyle. While some digital nomads are constantly on the move, others may stay in one place for 6 months.

They may want to get coverage for their belongings in the property they’re temporarily renting. However, they’re unlikely to opt for a 12-month contents policy, as they’d have to pay a cancellation fee to end it early.

Similarly, digital nomads are unlikely to take out a 12-month travel insurance policy in Europe, as they may want to ultimately go elsewhere.

Clearly, a one-size-fits-all digital nomad policy is almost impossible to create, given the differences in their choices and needs. Given these differences, it’s difficult for insurers to access all the data they might need to assess risk accurately.

Even if a unique insurance option for backpackers wasn’t viable, insurers could offer more flexible policy terms. At the same time, they can make it easier for digital nomads to provide information that insurers can use to assess risk.

For instance, insurers could offer a policy that lets customers update their location each month on an app to automatically adjust their premiums. This could reduce the inconvenience of customers having to cancel and set up new policies every time they change location.

This way, insurers can have all the information they need to determine risk and calculate premiums while giving customers the flexibility they want. It’s not ideal for digital nomads who move particularly frequently, but it’s an easy way for insurers to adapt current policies to more flexible lifestyles.

Insurance for digital nomads is still a young market, and the industry is still assessing the demand for this kind of insurance policy.

At Confused.com, we’re at the forefront of tracking and understanding new consumer trends. As consumer champions, we constantly monitor consumer demand and make the case to insurers if enough customers request a new type of product.

Consumers can provide us with feedback at different stages through the quote journey. We then aggregate this feedback, and if we see particular trends, we report this information to the insurers themselves.&

Ultimately, we want to ensure that each customer who comes to Confused.com can find the insurance they need. That may be digital nomad insurance, but it could also be flexible home insurance for renters, or pay-by-mile motor cover.

We do this by regularly inviting new insurers to our panel to ensure our customers have choice. We’re constantly looking out for insurers who are offering digital nomad insurance, among other innovative offerings, so we can offer these benefits to customers.

Digital nomads may often be going underinsured. But if they’re to get the coverage they need, a different kind of insurance product is necessary.

This could be a reinforced ‘backpacker plus’ policy, or a product whose terms can be regularly updated. But in either case, what’s needed is greater flexibility.

With the number of digital nomads on the rise, insurers could take advantage of this growing market.

Learn more about emerging insurance trends at Confused.com.

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