Insurance in the Digital Age

INSURANCE has an important social purpose. It allows policyholders to share the cost of potential risks that they all face, but cannot bear the cost alone. These might be any one of a wide range of risks associated with anything from sudden illness, damage to property or loss of income to environmental damage or terrorism, and insurance therefore covers a whole range of people or groups. It enables a young mother to afford medical care, or a building owner to repair damage following a terrorist attack.

Partly because of these many variables, it is a highly complex business and though perhaps not as obviously sexy as banking, it is essential to the global economy and financial system. As we saw in the 2008 bailout of AIG, the decision was taken to bail out the group to ensure the continuity of its insurance business after there were problems in its investment arm. The overall failure of the group would have had significant ramifications for the global economy.

As with many other industries, technology is disrupting the insurance sector. Companies now have the ability to collect and store huge amounts of customer data. The first change we are seeing is that insurers can no longer be certain they have the best data on their customers. It used to be that they did since they had the most frequent contact with them