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How does on-demand insurance company Trov prevent insurance fraud or high prices?
Anything can be insured for the right price... this product is offered for devices at higher risk, which would be logical purpose of owner needing coverage for a specific length of time. Typically this would be a type of adverse selection, but TROV targets customers that typically would not require insurance on their device, but as you said they may be traveling and putting their devices at added risk. Like all insurance companies, their Loss Ratio (Losses/Premiums) will depend on the law of large numbers and spread of risk. As we know, the majority of the time trips are taken, electronics make it back home safely. Like many tech companies, their advantage over conventional insurers is likely low overhead costs. Being on a mobile platform, they likely have a fraction of the claims handling cost of a conventional insurer. Payments are likely automated by linking bank accounts, so there is little transaction cost burden on this company. In short, their operation is likely highly automated with few staff and low expenses, allowing them to take on a higher loss ratio than conventional insurers and still leave room for profit. Without having ever used this service, I can tell you they likely price in anticipated fraud, the same way Walmart prices in inventory loss (shoplifting) into their prices. I personally would share your concern that it'd be difficult to combat fraud on such a platform, especially with no claims adjusters whom are typically the first line of defense. Again, I answer this never having used their service, but I work as an Analyst at a large insurer and these would be my assumptions based on what I know of TROV.