The potential for the insurance industry to leverage connected technology and big data to create tailor-made policies for all is huge. However, while an exciting proposition, it risks creating a marginalised group of ‘uninsurables’.
It no longer feels like the stuff of science fiction to imagine that one day insurers could create a ‘market of one’ across products, and provide individuals with a personalised policy, premium and risk profile.
The rise of the connected car and the development of telematics technology means that, for a growing number of drivers, policies already more closely reflect individuals’ own driving abilities rather than simply those within the same demographic pigeonholes.
Household insurance could follow suit. Trov, a service through which you build your own personal belongings inventory and are able to insure accurately against this, provides a picture of what could be possible here. In addition to smart home devices and detailed topographical mapping available to insurers, a more granular approach is possible. The same is true of health insurance, with the potential to reward and revise via policies in response to reading vital statistics via wearables.
This is on one front incredibly exciting, offering insurance customers a ‘fair’ premium shaped to individuals, while at the same time delivering insurers a granularity of information to develop and more closely align products to needs.
Yet, danger exists in the consideration that the poorest risk individuals among us will be singled out in high definition. With future insurer models focused on the detail, a market segment of ‘uninsurables’ may arise. Short of this, but to similar effect, premiums could become prohibitive for the group. A question at this point lies in where along the line between business sense and social good the insurance industry must sit. Another is whether high-quality data could unintentionally lead to a scenario of increasing Flood RE-esque solutions.
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– This article is reproduced with kind permission from Verdict Financial. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Image composite: yoshi-5/Maksim Kabakou, Shutterstock.com
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