From Andreessen Horowitz:
Insurance is all about distributing risk. With dramatic advances in
software and data, shouldn’t the way we buy and experience our insurance
products change dramatically? Software will rewrite the entire way we
buy and experience our insurance products — medical, home, auto, and
life. Here’s how:
By changing the way insurance companies price risk
So many more signals are available for insurance companies to better
price the premiums we should pay. Drivers that drive carefully in safe
neighborhoods vs. recklessly through accident-prone intersections ought
to pay different amounts to insure the same car — but all that data
isn’t reflected in an annual odometer reading. Water damage is one of
the top sources of claims for home insurance customers: Why don’t we
charge customers with water sensors less, since if they know water is
leaking, they can stop it before the damage gets expensive to repair.
New data sources, better data, ongoing data reporting — all are
possible now with mobile phones and inexpensive Internet of Things
devices.
By empowering an ongoing relationship between an insurer and insured
Today, our relationship with an insurer revolves mostly around a
monthly billing statement sent to us from a mainframe application. You
can tell because big chunks of the billing statement are printed in ALL
CAPS IN A FIXED WIDTH FONT … the only fonts that existed at the time the
applications were written.
How about an insurance company that empowers you to make smart
lifestyle decisions? Examples: the car insurance company that routes you
around dangerous intersections; the home insurance company that
automatically summons a plumber when it detects water on the floor near
the water heater; or the health insurance company that connects you with
friends that are also trying to lose weight?
By encouraging us to keep safe, insurance companies can keep their
payouts low. And we all bask in the glow of an insurance company that
has our best interests at heart — because even though our interests are
really aligned, it doesn’t always feel that way.
By changing the way insurance companies pool capital
Historically, we’ve seen mutual insurance companies (insurance
companies owned by policyholders) and stock insurance companies
(insurance companies owned by shareholders). We expect to see more
crowdsourced insurance companies, just as we’ve seen in other parts of
the financial system. Crowdsourcing works great for personal loans,
student loans, small business loans — why not for insurance? From the
investor’s point of view, it’s great to diversify by investing in an
asset class that should move independently of the stock or bond markets.
From the insurance company’s point of view, it should be a cheaper way
to pool capital....MORE
