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Where Are Driverless Cars Taking Industry?

While more than half of individuals surveyed by Pew Research express worry over the trend toward autonomous vehicles, and only 11% are very enthusiastic about a future of self-driving cars, lack of positive consumer sentiment hasn’t stopped several industries from steering into the auto pilot lane. The general sentiment of proponents, such as Tesla and Volvo, is that consumers will flock toward driverless transportation once they understand the associated safety and time-saving benefits.

Because of the self-driving trend, KPMG currently predicts that the auto insurance market will shrink 60% by the year 2050 and an additional 10% over the following decade. What this means for P&C insurers is change in the years ahead. A decline in individual drivers would directly correlate to a reduction in demand for the industry’s largest segment of coverage.

How insurers survive will depend on several factors, including steps they take now to meet consumer expectations and needs.

The Rise of Autonomous Vehicles

Google’s Lexus RX450h SUV, as well as 34 other prototype vehicles, had driven more than 2.3 million autonomous miles as of November 2016, the last time the company published its once monthly report on the activity of its driverless car program. Based on this success and others from companies such as Tesla, public transportation now seems poised to jump into the autonomous lane.

Waymo — the Google self-driving car project — recently announced a partnership with Valley Metro to help residents in Phoenix, AZ, connect more efficiently to existing light rail, trains and buses by providing driverless rides to stations. This follows closely on the heels of another Waymo pilot program that put self-driving trucks on Atlanta area streets to transport goods to Google’s data centers.

In the world of personal driving, Tesla’s Auto Pilot system was one of the first to take over navigational functions, though it still required drivers to have a hand on the wheel. In 2017, Cadillac released the first truly hands-free automobile with its Super Cruise-enabled CT6, allowing drivers to drive without touching the wheel for as long as they traveled in their selected lane.

Cadillac’s level two system of semiautonomous driving is expected to be quickly upstaged by Audi’s A8. Equipped with Traffic Jam Pilot, the system allows drivers to take hands off the vehicle and eyes off the road as long as the car is on a limited-access divided highway with a vehicle directly in front of it. While in Traffic Jam mode, drivers will be free to engage with the vehicle’s entertainment system, view text messages or even look at a passenger in the seat next to them, as long as they remain in the driver’s seat with body facing forward.

While the Cadillacs were originally set to roll off the assembly line and onto dealer lots as early as spring of 2018, lack of consumer training as well as federal regulations have encouraged the auto manufacturer to delay release in the U.S.

Meanwhile, Volvo has met with similar constraints as it navigates toward releasing fully autonomous vehicles to 100 people by 2021. The manufacturer is now taking a more measured approach, one that includes training for drivers starting with level-two semi-autonomous assistance systems before eventually scaling up to fully autonomous vehicles.

“On the journey, some of the questions that we thought were really difficult to answer have been answered much faster than we expected. And in some areas, we are finding that there were more issues to dig into and solve than we expected,” said Marcus Rothoff, Volvo’s autonomous driving program director, in a statement to Automotive News Europe.

Despite the roadblocks, auto makers’ enthusiasm for the fully autonomous movement hasn’t waned. Tesla’s Elon Musk touts safer, more secure roadways when cars are in control, a vision that is being embraced by others in high positions, such as Elaine Chao, U.S. Secretary of Transportation.

“Automated or self-driving vehicles are about to change the way we travel and connect with one another,” Chao said to participants of the Detroit Auto Show in January 2018. “This technology has tremendous potential to enhance safety.”

See also: The Evolution in Self-Driving Vehicles  

We’ve already seen what sensors can do to promote safer driving. In a recent study conducted by the International Institute for Highway Safety, rear parking sensors bundled with automatic braking systems and rearview cameras were responsible for a 75% reduction in backing up crashes.

According to Tesla’s website, all of its Model S and Model X cars are equipped with 12 ultrasonic sensors capable of detecting both hard and soft objects, as well as with cameras and radar that send feedback to the car.

Caution, Autonomous Adoption Ahead

The road to fully autonomous vehicles is expected to be taken in a series of increasing steps. We have largely entered the first phase, where drivers are still in charge, aided by various safety systems that intervene in the case of driver error.

As we move closer to full autonomy, drivers will assume less control of the vehicle and begin acting as a failsafe for errant systems or by taking over under conditions where the system is not designed to navigate. We currently see this level of autonomous driving with Audi Traffic Jam Pilot, where drivers are prompted to take control if the vehicle departs from the pre-established roadway parameters.

In the final phase of autonomous driving, the driver is removed from controlling the vehicle and is absolved of roadway responsibility, putting all trust and control in the vehicle. KPMG predicts wide-scale adoption of this level of autonomous driving to begin taking place in 2025, as drivers realize the time-saving and safety benefits of self-driving vehicles. During this time frame, all new vehicles will be fully self-driving, and older cars will be retrofitted to conform to a road system of autonomous vehicles.

Past the advent of the autonomous trend in 2025, self-driving cars will become the norm, with information flowing between vehicles and across a network of related infrastructure sensors. KPMG expects full adoption of the autonomous trend by the year 2035, five years earlier than it first reported in 2015.

Despite straightforward predictions like these, it’s likely that drivers will adopt self-driving cars at varying rates, with some geographies moving faster toward driverless roadways than others. There will be points in the future where a major metropolis may have moved fully to a self-driving norm, mandating that drivers either purchase and use fully autonomous vehicles or adopt autonomous public transportation, while outlying areas will still be in a phase where traditional vehicles dominate or are in the process of being retrofitted.

“The point at which we see autonomy appear will not be the point at which there is a massive societal impact on people,” said Elon Musk, Tesla CEO, at the World Government Summit in Dubai in 2017. “Because it will take a lot of time to make enough autonomous vehicles to disrupt, so that disruption will take place over about 20 years.”

Will Self-Driving Cars Force a Decline in Traditional Auto Coverage?

At present, data from the National Highway Traffic Safety Administration indicates that 94% of automobile accidents are the result of human error. Taking humans largely out of the equation makes many autonomous vehicle proponents predict safer roadways in our future, but it also raises an interesting question. Who is at fault when a vehicle driving in autonomous mode is involved in a crash?

Many experts agree that accident liability will be taken away from the driver and put into the hands of the automobile manufacturers. In fact, precedents are already being set. In 2015, Volvo announced plans to accept fault when one of its autonomous cars is involved in an accident.

“It is really not that strange,” Anders Karrberg, vice president of government affairs at Volvo, told a House subcommittee recently. “Carmakers should take liability for any system in the car. So we have declared that if there is a malfunction to the [autonomous driving] system when operating autonomously, we would take the product liability.”

In the future, as automobile manufacturers take on liability for vehicle accidents, consumers may see a chance to save on their auto premiums by only carrying state-mandated minimums. Some states may even be inclined to repeal laws requiring drivers to carry traditional liability coverage on self-driving vehicles or substantially alter the coverage an individual must secure.

Despite the forward thinking of manufacturers such as Volvo, for the present, accident liability for autonomous cars is still a gray area. Following the death of a pedestrian hit by an Uber vehicle operating in self-driving mode in Arizona, questions were raised over liability.

Bryant Walker Smith, a law professor at the University of South Carolina with expertise in self-driving cars, indicated that most states require drivers to exercise care to avoid pedestrians on roadways, laying liability at the feet of the driver. But in the case of a car operating in self-driving mode, determining liability could hinge on whether there was a design defect in the autonomous system. In this case, both the auto and self-driving system manufacturers and even the software developers could be on the hook for damages, particularly in the event a lawsuit is filed.

Finding Opportunity in the Self-Driving Trend

Accenture, in conjunction with Stevens Institute of Technology, predicts that 23 million self-driving vehicles will be coursing across U.S. highways by 2035.

As a result, insurers could realize an $81 billion opportunity as autonomous vehicles open new areas of coverage in hardware and software liability, cybersecurity and public infrastructure insurance by 2025, the same year that KPMG predicts the autonomous trend will begin to rapidly accelerate. Simultaneously, Accenture predicts that personal auto premiums, which will begin falling in 2024, will hit a steeper decline before leveling out around 2050 at an all-time low.

Most of the personal premium decline is due to an assumption that the majority of self-driving cars will not be owned by individuals, but by original equipment manufacturers, OTT players and other service providers such as ride-sharing companies. It may seem like a logical conclusion if America’s love affair with the automobile wasn’t so well-defined.

Following falling gas prices in 2016, Americans logged a record-breaking 3.22 trillion miles behind the wheel. Even millennials, the age group once assumed to have given up on driving, are showing increased interest in piloting their own vehicles as the economy improves. According to the National Household Travel Survey conducted by the Federal Highway Administration, millennials increased their average number of miles driven 20% from 2009 to 2017.

Despite falling new car sales, the University of Michigan Transportation Research Institute shows that car ownership is actually on the rise. Eighteen percent of Americans purchase a new car every two to three years, while the majority (39%) make a new car bargain every four to six years.

Americans have many reasons for loving their vehicles. Forty percent say it’s because they enjoy driving and being in their cars, according to a survey conducted by Cars.com.

ReportLinker reveals that 83% of people drive daily and that half are passionate about the behind-the-wheel experience of taking on the open road. Another survey conducted by Gold Eagle determined that people even have dream cars, vehicles that they feel convey a sporty, luxurious or efficient image.

Ownership of autonomous vehicles would bring at least some liability back to the owner-occupant. For instance, owing to security concerns, all sensing and decision-making hardware related to the Audi Traffic Jam Pilot system is held onboard. With no over-air connections, software updates must be made manually through a dealer.

In situations like these, what happens if an autonomous vehicle crash is tied to the driver’s failure to ensure that software was promptly updated? Auto maintenance will also take on a new level of importance as sensitive self-driving systems will need to be maintained and adjusted to ensure proper performance. If an accident occurs due to improper vehicle maintenance, once again, the owner could be held liable.

As the U.S. moves toward autonomous car adoption, one thing becomes clear. Insurers will need to expand their product lines to include both commercial and personal lines of coverage if they are going to take part in the multibillion-dollar opportunity.

Preparing for the Autonomous Future of Insurance

Because the autonomous trend will be adopted at an uneven pace depending upon geography, socioeconomic conditions and even age groups, Deloitte predicts that the insurers that will thrive through the autonomous disruption are those with a “flexible business model and diverse product mix.”

To meet consumer expectations and maintain a critical focus on customer acquisition and retention, insurers will need a multitude of products designed to protect drivers across the autonomous adoption cycle, as well as new products designed to cover the shift of liability from driver to vehicle. Even traditional auto policies designed to protect car owners from liability will need to be redefined to cover autonomous parameters.

Currently, only 25% of companies have a business model that is easily adaptable to rapid change, such as the autonomous trend. In insurance, this lack of readiness is all the more crucial, considering the digital transformation already underway across the industry.

According to PwC, 85% of insurance CEOs are concerned about the speed of technological change. Worries over how to handle legacy systems in the face of digital adoption, as well as the need to accelerate automation and prepare for the next wave of transitions, such as autonomous vehicles, are behind these concerns.

As insurers look toward the complicated future of insuring a society of self-driving automobiles, we believe that focusing on four main areas will prepare them to respond to the autonomous trend with greater speed and agility.

Make better use of data

Consumers are looking for insurers to partner on risk mitigation. To meet these expectations, insurers will need to start making better use of data stores, as well as third-party sources, to help customers identify and reduce threats to life and property. Sixty-four percent want their insurer to provide real-time notifications about roadway safety, while, on the home front, 68% would like to receive mobile alerts on the potential of fire, smoke or carbon dioxide hazards.

“Technology is changing the insurer’s role to one of a partner who can address the customer’s real goals – well beyond traditional insurance,” said Cindy De Armond, managing director, Accenture P&C core platforms lead for North America, in a blog.

Armond believes that as insurers focus more on the customer’s prevention and recovery needs, they can become the everyday insurer, integrated into the lives of their customers rather than acting only as a crisis partner. This type of relationship makes insurer-insured relationships more certain and extends longevity.

For insurers and their insureds, the future is likely to be more about predicting and mitigating risk than about handling claims, so improving data capture and analytics capabilities is essential to agile operations that can easily adapt to new trends.

See also: Autonomous Vehicles: ‘The Trolley Problem’  

Focus on digital

Consumers want to engage with their insurer in the moment. Whether that means shopping online for coverage while watching a child’s soccer game or making a phone call to ask questions about a policy, they expect to be able to engage on their time and through their channel of choice. Insurers that develop fluid omni-channel engagement now are future-proofing their operations, preparing to survive the evolution to self-driving, when the reams of data gathered from autonomous vehicles can be used to enable on-demand auto coverage.

Vehicle occupants will one day purchase coverage on the fly, depending on the roadway conditions they encounter and whether they are traveling in autonomous mode. Forrester analyst Ellen Carney sees a fluid orchestration of data and digital technologies combining to deliver this type of experience, putting much of the power in the hands of the customer.

“On your way home, you’re going to get a quote for auto insurance,” she says. “And because your driving data could basically now be portable, you could do a reverse auction and say, ‘Okay, insurance companies, how much do you want to bid for my drive home?’”

To facilitate the speed and immediacy required for these transactions, insurers will need to digitally quote, bind and issue coverage.

Seek automation

In the U.K., accident liability clearly shifts from the driver to the vehicle for level four and five autonomous automobiles. As driverless vehicles become the norm, the U.S. is likely to adopt similar legislation, requiring a fundamental shift in how risk is assessed and insurance policies are underwritten. Instead of assessing a policy on the driver’s claims history and age, insurers will need to rate risk by variables related to the software that runs the vehicle and how likely owners are to maintain autonomous cars and sensitive self-driving systems.

The more complicated underwriting becomes, the more important automation in underwriting will be. Consumers who can get into a car that drives itself will have little patience for insurers that require extensive manual work to assess their risk and return bound policy documents. Even businesses will come to expect a much faster turnaround on policies related to self-driving vehicles despite the complexity of the various coverages that will be required. In addition, on-demand coverage will require automated underwriting to respond to customer requests.

According to Lexis Nexis, only 20% of commercial carriers have automated the quoting process, and less than half are investing in underwriting automation.

Invest in platform ecosystems

McKinsey defines a platform business model as one that allows multiple participants to “connect, interact and create and exchange value,” while an ecosystem is a set of connected services that fulfill multiple needs of the user in “one integrated experience.” By definition, an insurance platform ecosystem in the age of autonomous vehicles would be a place where consumers and businesses could research and purchase the coverage they need while also picking up related ancillary services, such as apps or entertainment to make the autonomous ride more enjoyable.

Consumers are in search of ecosystem values today. According to Bain’s customer behavior and loyalty study, consumers are willing to pay higher premiums to insurers that offer ancillary services, such as home security monitoring or an automotive services app, and they are even willing to switch insurers to get time-saving benefits like these.

More important to insurers is the ability to partner with other carriers on coverage. Using a commission-based system, insurers offer policies from other carriers to consumers when they don’t have an appetite for the risk or don’t offer the coverage in house. This arrangement allows an insurer to maintain a customer relationship, while providing for their needs and price points.

See also: Autonomous Vehicles: Truly Imminent?  

As the autonomous trend reaches fruition, insurers will need to have access to a wide range of coverage types to meet consumer and business needs, and not all carriers will be able or want to create the new products.

Extreme Customer Focus Prepares for the Future

Insurers can prepare for autonomous vehicle adoption by establishing an extreme customer focus, dedicated to establishing enduring loyalty as insurance needs change. Loyal customers spend 67% more over three years than new ones. As the insurance marketplace opens up to the sale of ancillary services, gaining wallet share from loyal consumers will certainly help to boost revenues as demand for traditional products decline, but to stay competitive, insurers will need a broader mix of coverage types.

While current coverages have remained largely unchanged over the decades, the coming years will see an industry in flux as insurers phase out outmoded types of coverage while phasing in new products and services. In this environment, the platform ecosystems may be the most critical aspect of bridging the gaps.

Today, they allow insurers to fulfill the needs of price-sensitive consumers while also meeting the evolving needs of their customers. Tomorrow, platform ecosystems will provide the “flexible business model and diverse product mix” that Deloitte says will be critical to success for insurers in the autonomous age of driving.

Your Social Posts: Hackers Love Them

Social media is embedded in our lives—Facebook alone had 1.79 billion daily users as of September 2016—which means cyber criminals are not far behind.

As companies increasingly rely on this digital channel for marketing, recruiting, customer service and other business functions, social media also has become a highly effective vehicle for cyber attacks. Outside of the corporate network perimeter and an organization’s control, it throws traditional security approaches out the window.

A growing category of digital risk monitoring vendors, identified by Forrester Research Inc. in a recent quarterly Wave report, are catering to this problem. According to the report, digital channels—social, mobile, web and dark web—“are now ground zero for cyber, brand and even physical attacks.”

The ways in which cyber criminals weaponize these channels are limited only by their imagination. Hackers can create fake corporate accounts for harvesting customer credentials, impersonate company executives, damage the brand’s reputation and post legitimate-looking links that contain malware.

See also: Hacking the Human: Social Engineering  

According to Cisco’s 2016 annual security report, Facebook, for example, was the top mechanism last year for delivering malware, through social engineering, in order to gain access to organizational networks.

“(Social media) is a business technology platform, and because it’s been adopted at all levels of business … organizations have to figure out how to protect it,” says Evan Blair, co-founder and chief business officer at ZeroFOX, a digital-risk monitoring (DRM) vendor launched in 2013.

“And it’s a gold mine for intelligence on individuals,” he adds.

Social media—the ideal weapon

The sheer volume of traffic on social networks is a magnet not only for businesses but also for the criminal element.

According to the Pew Research Center, 79% of internet users are on Facebook, the most popular social network. About a third of internet users are on Instagram, and a quarter are on Twitter.

Better click-through rates and lower advertising costs, among other things, are compelling companies to throw more money at social media advertising (Hootsuite estimates social media budgets have nearly doubled, from $16 billion in 2014 to $31 billion in 2016).

But it’s not just the growing numbers of users and increased brand presence that creates an attractive playground for bad actors. It’s easy to create accounts and instantly attract followers—which means it’s easier than email for reaching a massive number of people with a phishing attack.

Adding to the problem is that social media can be highly automated because it was built on an open API (application programming interface) that allows developers access to proprietary applications.“It’s a frictionless environment that allows you to communicate immediately,” says Devin Redmond, general manager and vice president of digital risk and compliance solutions for Proofpoint, another DRM vendor.

Blair says: “Social media was built with automation in mind. You can create an account that interacts completely autonomously.”

Even though email remains the medium of choice, according to various security companies, email phishing is on the decline. Social media phishing, on the other hand, is growing.

Why organizations are at risk

Eric Olson, vice president of intelligence operations at LookingGlass, says what makes digital risk a high priority is that it’s a business risk that touches multiple facets of an organization. It not just about cybersecurity—it also involves compliance, human resources and legal, among others.

He says it’s important for security practitioners to focus on the how — e.g. phishing — rather than the channel it came from.

“You have to be able to keep eyes in all the dark corners,” Olson says.

A new technique Proofpoint identified in 2016 is angler phishing. Bad actors create a fake social media account on, say, Twitter, using stolen branding. They watch for customer service requests addressed to the legitimate account for a bank or a service like PayPal. They then tweet a reply with a link to a lookalike fake website where the customer is asked to enter login credentials.

Despite this growing threat, however, many security practitioners are not aligned with social media, Redmond says.

“The pace of adoption of social by enterprises and the pace of the risks that are evolving around that are growing much faster than people are addressing those risks,” he says.

An emerging space

The offerings of the vendors in this space vary. For example, ZeroFOX focuses largely on social media. Proofpoint covers social, mobile, web and email. LookingGlass integrates machine readable/open source feeds, analyst services, threat intelligence tools and appliances.

Whatever approach they take, more security companies are likely to join in because the market is still growing.

But even savvy companies are struggling to secure these channels. The hacking of Microsoft’s Skype for Business Twitter account in 2014 is proof—the Syrian Electronic Army wasted no time tweeting negative messages after taking over the account. They got some 8,000 retweets.

See also: Social Media And The Insurance Implications  

“Social media is the best attack platform for a nation-state actor and sophisticated cyber criminals, not just because it’s the easiest one to leverage for compromise, but it’s also completely anonymous,” Blair says.

Redmond expects mobile to be another rising digital frontier, as more bad actors use fraudulent apps to do things like harvesting credentials.

“If you look at it through the lens of bad actors, they’ve figured out all these are effective vehicles,” he says. They don’t have to break in any more — they just have to pretend they’re someone else.

He adds, “They can do that more rapidly, at a greater scale, with less chance of detection.”

This post was written by Rodika Tollefson and first appeared on ThirdCertainty.

Ideas Transforming Developing World

The recent refugee crises in Southeast Asia and the Mediterranean demonstrate how developing world problems are increasingly becoming the problems of the developed world. Instability and economic weakness in poorer countries are leading to significant challenges for richer nations.

Aon’s Political Risk Map analysis finds significant instability across much of the developing world, compounded by cycles of war, famine, drought and disease, and this is only likely to get worse as climate change and rising populations make sustaining poorer countries more difficult than ever.

But the developing world also has huge potential. According to a recent PWC report, leading up to 2050, the 10 fastest-growing economies are all likely to be developing countries, while many developed economies will find their growth hampered by slowing productivity and the needs of their aging populations.

For the health of the global economy — as well as to relieve pressure on developed world countries’ ability to cope with increased migration — helping the developing world become more stable and sustainable is in everyone’s long-term interests. Yet, until recently, most attempts to help had been based around charities and aid.

This is starting to change. Below, we round up some interesting, innovative projects — many driven by the private sector — that could have a significant positive long-term impact on the developing world.

In-Depth

The reasons for the slow growth of the developing world economies are well-documented: poor infrastructure, lack of education, lack of money, high levels of disease, susceptibility to extreme climate events, political corruption and instability.

Solving this is a long-term challenge, not something that can be fixed with a bit of international aid to mitigate the effects of the latest crisis. With governments often focused on the short-term periods before the next election, it is increasingly business that is starting to come up with innovative and effective solutions.

Improving access to knowledge

It might seem strange to suggest technology-based solutions to education in societies where many struggle to earn enough to feed themselves. But to build viable societies and thriving economies, we need to provide the workforce of the future the skills it needs. Everything starts with education — but how can we provide access to reliable, quality education in underfunded countries with poor infrastructure and a serious lack of trained teachers?

According to recent Pew Research Center data, a majority of people across the developing world now have access to a mobile phone. This is a real game-changer.

Access to a mobile means having access to information, and access to information means having the ability to make improvements to your way of life. Even basic feature phones can improve literacy rates, according to the World Bank, while smartphones, computers and tablets have the potential to radically change the educational landscape of developing countries.

By enabling access to the internet, a single connected device shared by a community can provide access to structured remote learning programs, as well as all the knowledge on the World Wide Web. And while internet access may still be a challenge for the most remote communities, there are several initiatives under way to provide universal global Internet — Google’s Project Loon, which uses high-level balloons to provide wireless connectivity, and Facebook’s satellite-based Internet project are merely two of the most high-profile.

Access to the internet can also bring significant health benefits. Connected devices are increasingly being used for some remote medical examinations through organizations such as Peek and CardioPad. Education campaigns to improve knowledge about nutrition and basic hygiene via mobile could also have immense impact; improving knowledge about child nutrition in the poorest countries could boost their GNP by 11%, cut child deaths by a third, and increase wages by up to 50%, according to the Scaling Up Nutrition movement. Even simple text message alerts about disease outbreaks, such as those used in Sierra Leone during 2014’s Ebola outbreak, have the potential to save tens of thousands of lives.

Improving access to finance

Technology could also help tackle the developing world’s funding challenge. According to the Bill and Melinda Gates Foundation, only 41% of adults in developing countries have bank accounts. Without bank accounts, saving for the future — to invest in improving farms and businesses and to weather unexpected financial shocks — becomes much harder, as well as far less secure. It can also restrict the ability to buy products and services that people need to improve their lot in life.

Access to physical banks remains a serious challenge for remote communities — which is where mobile phones again come in. Vodafone’s M-Pesa money transfer system is one of the best-known examples of mobile-based payments, reducing the need for a traditional bank account, but there are plenty of alternatives (such as Africa’s Airtel Money, or Bangladesh’s bKash). “The mobile phone is becoming ubiquitous and is a natural distribution channel,” says Aon’s latest Global Insurance Market Opportunities report. “It offers the promise of more efficient distribution and an improved ability to scale quickly.”

Yet the ability to make payments is one thing, but getting hold of the money to pay them is quite another. This is where microfinance comes in.

First established in the 1970s, the microfinance concept is simple: provide reliable, low-interest loans of relatively small sums to the poorest in society to enable them to invest in essential equipment or materials to start or improve their businesses. With the rise of mobile, the logistics have become considerably easier — and the concept has been spreading exponentially. With basic seed capital becoming more accessible to small businesspeople across the developing world through organizations such as the Nobel Peace Prize-winning Grameen Bank, the potential for economic growth is stronger than ever.

But while loans are a good start, the next phase in microfinance is set to focus on providing additional financial security through microinsurance. Funded by low payments, if crops fail, natural disasters strike or illness or injury hit, low-cost insurance for the world’s most vulnerable can help them recover — where previously they may have had no safety-net. People with microinsurance have also been shown to invest more in developing their businesses. This has been shown to encourage the use of healthcare services, prevent the spread of diseases and help reduce the burden on government budgets for pensions, healthcare and aid.

Teach a man to fish

The key to both these approaches is to help the world’s poorest help themselves — not merely teaching them to fish rather than giving them a fish but providing them with the ability to buy their own fishing nets, rods and boats and with the security of knowing that if any of these are broken, they will be able to replace them.

Where previous efforts at helping the developed world to develop have focused on providing vital infrastructure, healthcare or nutrition one community at a time, the shift in recent years toward helping the developing world help itself is proving a revolutionary innovation. It’s still early days, but the signs are that by focusing on improving access to knowledge and finance and empowering communities to focus on building sustainable improvements, the developing world is starting to have a better chance of developing than ever before.

Talking Points

“From better health to increased wealth, education is the catalyst of a better future for millions of children, youth and adults. No country has ever climbed the socioeconomic development ladder without steady investments in education.” – Irina Bokova, Director General, UNESCO

“There has been a strong social mobilization to use cell phones, television and whatever technology the government and private health care sector can to disseminate public health messages… Modern technology is vital here, and it can be this simple.” – Ladi Awosika, CEO, Total Health Trust

“The problems and risks facing low-income populations are vast and complex. Offering microinsurance to these segments brings with it all the complexities of their daily life which need first to be understood and then addressed by microinsurance stakeholders; education levels, house-hold budgeting, behavioral economics, choice, priorities and inconducive infrastructure to name but a few. These barriers change from community to community, from region to region and are often vastly different to those faced by the more traditionally served clients in developed insurance markets.” – Marco Antonio Rossi, President, Brazilian Insurance Federation

This article originally appeared onTheOneBrief.com, Aon’s weekly guide to the most important issues affecting business, the economy and people’s lives in the world today.”

Further Reading