October 31, 2018
How the Nature of Risk Is Changing
by Kirstin Marr
Are Uber or Lyft vehicles classified as work or personal? Insurance companies have to find answers for this type of problem on a daily basis.
Back in 2001, famed technologist and futurist Ray Kurzweil boldly proclaimed that the human rate of progress was doubling. He added that, by the time the 21st century ends, the progress would feel like 20,000 years’ worth of transition instead of 100.
At the time, Kurzweil’s statement sounded a bit dubious. But with how rapidly technology has transformed over the last two decades, it now seems that the world’s ability to change quickly was drastically underestimated.
We live in an age defined by acceleration, and this incredible pace of change has exceeded many industries’ capacity to handle it. Changes that once took an entire generation for people to adapt to now takes 10 years. The possibilities of this rapidly changing landscape are endless, and so is the risk that comes with it.
The Far Reaches of Risk
It should come as no surprise that risk evolves alongside technology transformation. Advancement is a double-edged sword. It can simultaneously create a greater level of safety for the status quo and change the very nature of risk, forcing insurers to build new coverage solutions to address previously unforeseen concerns.
For instance, autonomous vehicles might be safer drivers than humans, but they’re also vulnerable to cyberattacks and malware. In many cases, driverless cars are blurring the lines of established risk categories. For proof, just take a look at the sharing economy. It’s less than a decade old, yet it’s raised major questions in terms of how coverage works. Are Uber or Lyft vehicles classified as work or personal? And does the coverage shift throughout the day as drivers turn their ride-sharing service on and off? Insurance companies have to find answers for these types of problems on a daily basis.
See also: How to Adapt to the Growing ‘Risk Shift’
It’s an understandably complex and intimidating concept for many insurance leaders. However, while progress may be rapid, it’s not entirely unpredictable. The future can be bright for those who remain engaged with the changing landscape of risk. Here’s what those leaders can expect:
1. Humans will gain a deeper understanding of risk.
While technology’s race toward the future provides ample opportunity for confusion, it also provides the tools to parse that confusion and come to a better understanding of risk. Telematics, machine learning, data analytics and more all give insurers much greater insight into how risk touches every aspect of life.
Commercial auto insurers are testing the waters of telematics to explore how they can be applied to evaluate individual driving behaviors. Companies can examine individual driving habits to see how those routines inform the kinds of services and discounts they can offer customers. Instances like these are only going to become more common. This type of granular data sharing will have a direct impact on how coverage is constructed and provided in the future.
2. The way humans and technology relate to risk will change.
As automation continues to be integrated into daily life, coverage will have to properly account for and balance the effect computers and humans each have on rates.
Amazon has more than 100,000 automated and robotic systems integrated into its operations working with human employees to maintain efficiency. The online retailer has almost certainly had to consider how to provide coverage for its employees while they work in tandem with heavy machinery, something companies in similar situations will also have to consider.
Regulation for this is still being crafted. Insurers will need to make sure they continue to stay up-to-date on how and when machines can take over from humans and how that will affect risk.
3. Customer service will look a little different.
Thanks to the Internet of Things, insurers will be able to learn about incidents in real time and process claims before a policyholder even gets involved. These instantaneous notifications are clearly useful for insurance companies, but, used correctly, they can also be a major selling point for consumers.
Machine learning could have a similar impact on customer service. It can be used to pinpoint a highly customized plan for every individual without the customer having to do most of the groundwork.
See also: Insurers Grappling With New Risks
This age of acceleration is intimidating, and it certainly shows no signs of slowing down. Leadership, however, should look at all this innovation as an opportunity, not a threat. Insurers can leverage tech to improve the customer experience from quote to claim, and, as technology advances, so will the tools that help insurers understand risk.
There’s no denying that infrastructure, demographics and risk are all changing at breakneck speed. To keep up, insurers must not just follow change — they need to grab it by its horns and embrace the new before it becomes old hat.