The INSURTECH Book

Six Mega-trends that Will Take Insurance Back to the Future

By Susanne Møllegaard

CEO and Co-Owner, Process Factory

The insurance industry started out as a safety net among peers. Over time the help has become organized, leading first to mutual insurance companies and later to stock insurance companies. As much as this development has led to a greater degree of professionalism, it has also led to a kind of alienation. Furthermore, there is a problem with the basic structure of the insurance products, since the interests of the insurer and the insureds are not aligned. Broadly speaking, the insurer will be better off if premium levels are maximized and claims costs are minimized, whereas the opposite will be true for the insureds.

Basically this has led to a situation of mutual mistrust between the involved parties. The lack of trust inspires the insureds to act with caution when notifying a claim or even to fraudulent behaviour, and the insurer to apply strict underwriting rules, complicated insurance terms, and costly claims processes. The consequences are high cost levels leading to high premium levels and low customer satisfaction.

The great news is that all this is about to change.

A number of mega-trends today are influencing the insurance industry in ways that many consider will bring back trust (see Figure 1). Paradoxically enough, the old-fashioned trust mechanisms are recreated by the application of modern technology and modern ways of coexisting in the sharing economy, ...