The Question That Insurtech Is Avoiding

There’s a lot of it about. Insurtech and technology, that is. New ways of doing stuff. Breaking traditional distribution models and deconstructing established supply chains. Who could not be excited? But there’s another side to this coin, and that’s the issue of established practice. Insurance isn’t a new gig, like telematics, but something that’s been around for three centuries. Some might argue even longer, as there are records of even the ancient Egyptians sharing and aggregating risk. Protecting the few by collaborating with the many. Over the centuries, insurance hasn’t been an easy ride. What do we mean by appropriate compensation, or, in insurance parlance, by the principle of indemnity? How to deal with those at fault, or, in insurance language, the matter of subrogation. See also: Where Will Unicorn of Insurtech Appear?

But in the old way of doing things, we all knew where we stood. Insurance contracts had evolved over decades, and where there had been differences in interpretation the legal system had sorted things out for us. There was a sort of certainty and framework to our business and a more certain relationship, even if the topic of trust remains contentious -- the level of trust between policyholders and carriers has always been low, despite a degree of contractual certainty.

Now, here we are in a Brave New World of insurance. Things will never be the same because of technology, the experts say. Some say insurtech is mainly just about new distribution channels, customer management and operational efficiency, but that leaves the rest of the insurance proposition.

It feels like we're throwing a ball onto a sports field and asking the two competing teams to sort out the rules for themselves.

Will there be winners and losers? Of course. The winners will be the legal profession, which will spend years, perhaps, discussing where the liability for death rests as a result of a driverless vehicle incident. Was it the manufacturer - as a product liability issue? Was it the occupant of the vehicle - extending the concept of occupiers liability? Was it the system administrator, which ran the system and which surely must be involved somehow? Maybe even the victims themselves: "Don’t you know you need to be more careful, with all these unmanned gadgets all around us?’"

We can’t all just contract out of responsibility. The proverbial buck must rest somewhere.

Think forward a few decades. Let’s accept that the insurance industry will have been re-engineered and reimagined, with robots, chatbots and wobots. Let’s assume that physical risk is calculated in a more granular way and that underwriting risk management is absolutely aligned to the risk appetite of a carrier. And we have somehow managed to be proactive, to have better responsiveness to climatic change and everything else. And ubiquitous devices provide us with bottomless barrels of information, from which our systems draw insight through advanced analytics.

See also: 3-Step Approach to Big Data Analytics

Someone, somewhere, will need to address the question -- what does all this mean contractually to the insurance industry? After, all isn’t insurance just no more than a contract, between two parties? Or was that concept somehow lost, somewhere inside the Innovation Hub, or among the bits and bytes of technology?

Isn’t it time that someone slowed the momentum of change and had a real hard think about the legal implications for insurance?