In the fast-paced world of on-demand marketplaces, staying ahead of potential risks while managing costs is essential for growth and sustainability. Usage-based insurance (UBI) has emerged as a game-changer for small to medium-sized platforms, offering scalable coverage that adapts to real-time usage. But, like any new model, there are many questions surrounding UBI. In this blog, we address some of the most frequently asked questions about UBI for on-demand platforms and explain why it might be the right choice for your business.

1. What is Usage-Based Insurance (UBI)?

Usage-based insurance is a type of policy that charges premiums based on the actual usage or activity of the insured party, rather than flat fees. For on-demand marketplaces, this typically means paying for insurance only when workers are actively engaged in a task (such as completing a delivery or providing a service). UBI relies on real-time data, often collected through mobile apps or telematics, to track activity and calculate coverage needs.

Example: A driver for a ride-sharing platform is only insured when they’re actively driving a passenger. When the driver is off-duty, they don’t pay for coverage.

2. How Does UBI Benefit Small to Medium On-Demand Marketplaces?

For smaller platforms, UBI offers a way to scale insurance coverage in a cost-efficient way. By adjusting premiums according to actual usage, UBI helps on-demand platforms reduce overhead costs and ensure they’re not paying for coverage they don’t need. As the platform grows, UBI can easily adapt to accommodate new workers, regions, or service areas without the hassle of re-negotiating traditional insurance policies.

Benefit: It’s a cost-effective way for smaller platforms to maintain flexibility while offering comprehensive protection to their workers and customers.

3. What Types of Coverage Are Included in UBI for On-Demand Marketplaces?

UBI for on-demand platforms can include several types of coverage depending on the platform’s needs. Common coverage options include:

General Liability Insurance: Protects against third-party claims for injuries, property damage, or accidents involving customers or bystanders.
Workers’ Compensation Insurance: Covers medical expenses and lost wages if a worker is injured while providing a service.
Professional Liability Insurance: Provides protection if a worker’s services cause financial harm to a client due to negligence or errors.
Vehicle Insurance: For platforms with delivery or transportation services, UBI can cover vehicle-related incidents, such as accidents or damage.
Example: A delivery driver is covered for accidents and injuries while on duty but not during personal time.

4. How Do You Monitor Usage for UBI?

UBI policies rely on real-time data to monitor usage and determine premiums. Many on-demand platforms implement mobile apps, GPS tracking, or telematics devices to track the activity of their workers. This data is then used to calculate how much insurance coverage is needed and adjust premiums accordingly.

Example: A courier service uses a mobile app that tracks when couriers are delivering items. The app sends data to the insurance provider to ensure coverage is active only during deliveries.

5. Can UBI Be Customized for My On-Demand Platform?

Yes, one of the main advantages of UBI is its flexibility. Insurance providers can tailor policies to suit the unique needs of your platform. Whether you operate in the transportation, delivery, or freelance services industry, UBI allows you to select the right coverage and adjust it based on activity patterns. This customization ensures you only pay for what you need and protects your business from a wide range of potential liabilities.

Example: A freelance marketplace could choose professional liability insurance for its workers, with the option to activate coverage during paid projects, rather than covering personal time.

6. What Are the Cost Benefits of UBI for On-Demand Marketplaces?

UBI offers significant cost savings for on-demand platforms. Traditional insurance policies typically require you to pay flat premiums, regardless of usage. With UBI, you only pay for the coverage you use, which makes it much more affordable for small and medium-sized businesses. As your platform grows, your premiums grow proportionally with the activity levels, ensuring that your business pays for what it actually needs.

Cost Benefit: A small platform with a limited number of active users or workers will pay much less than a large-scale operation with significant daily activity.

7. How Does UBI Improve Risk Management for On-Demand Platforms?

The data-driven nature of UBI allows on-demand platforms to better manage risk. By closely monitoring usage, platforms can identify trends, such as unsafe driving or unproductive working hours, and take proactive steps to mitigate potential risks. This helps reduce claims, lower premiums, and improve the overall safety and reliability of the platform.

Risk Management Example: A ride-sharing platform notices frequent speeding violations among drivers. With this data, the platform can implement better driver training or set stricter safety protocols to prevent accidents and reduce insurance claims.

8. How Do I Know if UBI is Right for My Platform?

If your platform is growing and you want to control costs while ensuring your workers and customers are adequately protected, UBI could be an ideal solution. It’s especially beneficial for businesses with fluctuating activity levels, such as seasonal demand, or those looking to offer scalable coverage that adjusts based on actual usage.

When to Consider UBI: When your platform has inconsistent activity levels, a large independent contractor workforce, or operates in multiple regions with different legal requirements.

Conclusion: Why Choose Bunker for Usage-Based Insurance?

At Bunker, we specialize in providing usage-based insurance solutions tailored to the needs of on-demand marketplaces. Whether you’re managing risk for drivers, freelancers, or service providers, our flexible coverage ensures you only pay for what you use. With real-time data tracking and customized policies, we help you reduce costs while offering comprehensive protection for your platform and workers.

If you’re interested in learning more visit https://www.buildbunker.com/ or contact us at support@buildbunker.com

Want to go a step further? Please email scott@buildbunker.com or set up a call using https://calendly.com/bunker-sales/usage-intro!