May 9, 2024 4 min read

There Will Be More Than One Future to Insurance

A lot of thinking about the future of insurance is premised upon the notion that personalisation is that future. Yet the future of insurance is so important, it’s vital not to just assume that this is the only way forward. I look at other ways in which it is likely to be envisioned.

future of insurance
There are different ways of seeing the future of insurance

Personalisation involves the tailoring of price, cover and service around ever granular levels of data about policyholders’ behaviours and preferences. It’s been at the forefront of thinking about the future of insurance for about 10 to 15 years now. Recently however, its singular position has increasingly been questioned, on a number of fronts. For example, questions have been raised about the fairness of the approach, about its ultimate sustainability, and about the bias it is exposes decisions to.

Personalisation is less a technological trend and more of a sociological trend. We like to feel looked after on an increasingly personal basis nowadays. This has led to our adoption of devices to inform and facilitate this. Yet that facilitation has been shaped largely by people in the big tech firms. And those people have often been western and male.

This raises the obvious question: is their’s the only interpretation of how that personalisation is to be shaped? Of course it isn’t, but then, what other interpretations might there be? I’m going to outline some influences that could result in differing interpretations of personalisation. It’s very far from exhaustive, instead orientated around the point that there is more than one narrative for personalisation that insurance markets around the world are likely to align with.

Why It Matters

Before I do so however, I want to be clear about the value of considering such things. We know that insurance is important to the functioning of society. This means that a digital transformation of the sector should not only open up new opportunities, but at the same time, not create risks in relation to that important role. Weighing up those opportunities and risks needs to take account of a diversity of views, not just those of western and male technologists.

Some of you may think that this is positioning insurance within a political debate that it would rather stay out of. In my opinion, its involvement in such debates is inevitable because of the social importance of insurance. And this is realistic and to be expected, for as the French insurance philosopher Francois Ewald says, insurance is both a moral and political technology.

We saw how this nature of insurance influenced the situation around flood underwriting in the UK. And we are now seeing it influence the regulation of data for insurance purposes, particularly health data.

The dimension of that future for insurance I’m going to concentrate on here is that of the relative merits of personalisation versus pooling. And I’m going to look at two ways in which the current narrative (about personalisation being the most fair) could be out of kilter with many people’s views.

Gender and Decision Making

A Swiss Re report in 2021 looked at academic research into gender and decision making. This is what they found…

“Of the literature reviewed, 100% of studies that looked at reciprocity and gender, and 88% of studies that looked at altruism and gender, indicated that women display higher levels of reciprocity, altruism and fairness. One of the studies in the review found women to be more socially-orientated (selfless), while men tend to be more individually-orientated (selfish). Women, with significantly higher levels of reciprocity than men, tend to be more cooperative and friendly in response to friendly actions of others.”

Reciprocity is the practice of exchanging things with others for mutual benefit. In insurance terms, it influences the sense of social solidarity that underlies the idea of risk pooling.

What this research finding points to then is a likely gender difference in how the relative merits or otherwise of personalisation and pooling are weighed up. Or to put it another way, there is more than one way of looking at those things.

Non Western

Personalisation and the individualism upon which it is premised is largely an output of Western thinking. Yet as the name implies, there are other ways of thinking about this. Here’s an extremely high level look at two such variations.

In Japan, ethics involves the study of ningen. This emphasises our role as not just individuals, but as members of social groupings as well. We are individuals, and yet we are not just individuals, for we are also social beings. And we are social beings, but we are not just social beings, for we are also individuals. We are, at one and the same time, both individual and social.

This reminds me of these words from Francois Ewald…

“Insurance provides a form of association which combines a maximum of socialisation with a maximum of individualisation. It allows people to enjoy the advantages of association while still leaving them free to exist as individualisation.”

In Africa, ubuntu ethics is defined as a “set of values central among which are reciprocity, common good, peaceful relations, emphasis on human dignity, and the value of human life as well as consensus, tolerance, and mutual respect.”

My point here is that outside of Western thinking, there exists other traditions which put a differing emphasis on the relative status and interplay of individuals and society. Such traditions will undoubtedly influence the way in which the personalisation and pooling debate at the heart of what future we want for insurance is interpreted.

This in turn means that there are likely to be differing outcomes to that personalisation and pooling debate. And what that then emphasises is the need for some form of framework within which those differing outcomes can be discussed, finalised and applied. They don’t exist at the moment; someone needs to create them.

Strong Reciprocity

It’s worth remembering that Western thinking isn't always about individualism. I’ve written before about the concept of strong reciprocity…

“People can often make decisions that go beyond their narrow self-interest, reflecting instead wider community and social interests, even in situations where they’re not known to each other. This isn’t altruism, but a sense of what researcher are calling strong reciprocity – the ‘predisposition to cooperate even when there is no apparent benefit in doing so.”

So just as we often think and act in our individual interests, we are also prepared to think and act in support of community and societal interests. As with Japanese ningen, we are, at one and the same time, both individual and social.

Looking Forward

For the future of insurance to achieve all the things that all sorts of people want for it, the sector needs to recognise this diversity of thinking, to find ways of bringing it into the debate, and of using its input to retain and enhance the contribution insurance makes to societies around the world.

Get in touch here if you'd like to discuss this in greater depth.

To learn more about Japan and the study of ningen, read Prof. Andrew McStay's 'Automating Empathy'.

Duncan Minty
Duncan Minty
Duncan has been researching and writing about ethics in insurance for over 20 years. As a Chartered Insurance Practitioner, he combines market knowledge with a strong and independent radar on ethics.
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