The future of insurance
Will it be utopia or dystopia?
Insurance is rapidly changing, so it’s one of the core concepts of society. Insurance’s original design was to use the strength of the many to help the unlucky few.
Centuries ago it was your family, village or church that helped you out when shit happens, but this was the space that insurance companies filled and managed to turn into a business roughly 300 years ago.
The simplified insurance business model
A key component in insurance is risk, or actually the probability that you have enough customers that don’t need your help in order to pay the ones that do. The insurer also needs to have enough to cover operational costs. As you can guess, most insurance companies have a lot of money left even after that.
The insurer also has the position of the one assessing the damage and deciding on if they should pay what person 2 is claiming. Are they truthful or fraudulent? Does it add up?
But why this history lesson?
Above is how insurance was built. The next generation of insurance are looking quite different.
Personalisation in insurance
This is not a new topic at all. When you were young the car insurance was sky high in comparison to your parents.
This is a calculated decision from the insurer, as their data showed that in order to reach profitability the insurer asks the 18 year old for more money than the 65 year old. This is due to the fact that they know 18 year olds are involved in more costly claims than anyone else.
So only at one data point price changes drastically. In 2018, it was revealed that Facebook has over 52 000 data points per user
The access of data and insight for insurance companies is in fact about finding optimal product portfolios with as high margins as possible. So what if the same “engines” that choose what content Facebook shows you instead decide your insurance price.
We’re already here but as your next youtube video probably won’t affect you that much, you insurance coverage will.
For example, the issue in the United states around healthcare and insurance is often in the news. Tragic cases of people being unable to afford or even be eligible for health insurance. This creates tremendous suffering for millions of Americans.
Ruedis hierarchy of financial needs put insurance just above 🆘 fund
Insurance is a base need that creates the freedom and safety to move up in the financial ladder.
The other thing is that we all know that shit happens. As a house owner this has become my mantra. There is always something that goes the wrong way, brakes or needs financial resources in order to be fixed.
So for me insurance is a key component to relieve myself of some worries.
So in the time of integrity, how far should insurance companies be allowed to request information from you or via available data sets? It may be age on car insurance today but what if becomes driven from 100 000 different data points that in a mere magical way puts the price in front of you.
Facebook told them you have 7 photos of you smoking cigarettes — 7% increase of your life insurance
Mercedes sent their three years of stored speed data of your car — 22% increase of your car insurance + 5% increase of life insurance.
Your bank sends over number of charges including alcohol — 32% increase of life insurance
23&me sent over your DNA mapping of the probability for deadly diseases — 335% increase of your life insurance
It may sound ridiculous but all the technology needed is already here and most likely already part of many insurance companies’ less visible backends.
Ask yourself, what data is out there that can make insurance less eligible for insurance?
The future is not a decision of technology
In the end, the question comes down to the consumer when they buy the insurance.
Would you as a 65 year old want to pay a more expensive car insurance because you know that the 18 year old will get the same price? Or will you as 18 accept having your phone monitor every turn and brake you make in your car?
You might therefore jokingly say that the future of insurance is whether consumers want a socialist or capitalist insurance system. Technology sits in between as the enabler for both sides.
Do you want your price or do you want a fair price?
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Views are my own.
