The Future is Insured

Insurance is an absolutely incredible technology which embodies the great civilizing achievements of modern society, and it is something that we will build into every facet of the future.

I know there is probably no more yawn inducing a topic then the topic of insurance. Insurance is something for people who wear suits and push papers across their desk. Insurance is something you need to have in order to go about your normal life, but its certainly not an interesting topic for a futurist, right?

The problem is that, as with most things of modernity, we have become used to the technology of insurance and are no longer impressed by it. Despite our blase attutides towards it, insurance is one of the great human innovations.

Think about it. Insurance is a completely abstract construction. When you pay someone for insurance, they are not actually giving you anything in return for your money, they simply promise to give you money in event that something unlikely happens. Fundamentally, insurance represents an ingenious coping mechanism to deal with the uncertain nature of the world.

All of the people who pay into an insurance plan are voluntarily working together to make sure that the resources are in place to cope when something goes wrong. Insurance allows us to share the risk inherent to life with people we don’t know and will never meet.

Insurance is a purely abstract financial mechanism, but its impact on your life when you need it are far from abstract. Think of the example of a tragic house fire. With insurance, your accommodation will be paid for, your house will be rebuilt and re-filled with the necessities of life. You are insured that your life will be made “whole”.

But what is the future of insurance. Over the years, insurance companies have devised many products to insure everything from crop yields to pet health. It is estimated that in 2009 insurance premiums made up as much as 6.9% of world GDP, and that 12% of all financial assets in the world were held by insurers (source). That is a staggering 22.6 trillion dollars, more then double the value of the US gold reserve. By some estimates the insurance industry as a whole is about the same size as the agricultural industry.

The insurance industry is a case in point of the increasing level of abstraction in life today , and how this increasing abstraction serves to make life much much more tolerable. Insurance, like many of our other social constructions, allows us to boil a completely ethereal property of the universe like risk down into a concrete value. How much is this risk worth?

The proliferation of new types of insurance will continue into the future as we seek to further continue to level the playing field. Sure, the advancement of certain technologies such as the self driving cars, or home automation systems may make types of insurance commonplace today unnecessary, but as long as we look to push the limits of what is possible we will need insurance to deal with the inevitable consequences of risk.

One can envision new innovative forms of insurance being devised to cover those times when life just does not seem fair. One company for instance has devised a divorce insurance to cover couples when marriages (increasingly) come to an end. New types of insurance range from dismaying to bizarre. This trend of finding new ways to smooth the bumps of life will continue on into our distant future.

It is through insurance that we can break down and monetize something as abstract as risk. If we ever outrun the need for insurance, then we will have outrun risk in life, and as Mohammed Ali said “He who is not courageous enough to take risks will accomplish nothing in life.”

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The Market Can Save Us

One of the biggest tech stories of 2013 won’t be a new gadget or a new milestone in space, but a seemingly minor regulatory change in the rules surrounding investment.

On April 5, 2012 Barrack Obama signed into law a piece of legislation may mark the beginning of a new age for capitalism. The Jumpstart Our Businesses Act (JOBS Act) allows companies seeking investment online to offer equity in exchange for investments. So essentially, instead of only being able to offer access to the product for sale or some sort of perk in exchange for your investment, people will actually be able to buy “shares” in the company seeking funds.

Think Kickstarter meets Wall Street.

If something like the Pebble Watch can raise over 10 million dollars by offering a chance to buy a product that was still in the prototype stage, how much money could they raise if they had instead offered equity in their company? Sometime soon, when someone with a good idea for a new gadget, or movie, or music album asks for money to finance their project, they won’t only offer you a chance at buying the final product, but they will also offer a percentage of the profits.

While today it is certainly easier then ever to buy stocks, there are still important barriers to entry, such as the high cost of share purchases or need to open an investment account. These barriers are many-fold higher for those with new ideas who are seeking funding to turn good ideas into reality. Just the cost of the paperwork necessary for a small company to go public is absolutely prohibitive, notwithstanding the time which is also necessary to do this.

By allowing internet portals to connect small investors with small enterprises needing investment, this smashes through barriers that prevent money from becoming investment. This democratization of the market will allow investment money to flow into new and exciting ideas almost instantly. This circumvents the types of regulatory barriers that allow large corporations to maintain such a stranglehold on the economy.

I am confident that the first big success of this type of funding venture will probably happen in 2013, and it will change the world.

As continual advances in computers and robotics drive up the profit of making and delivering goods and services to the consumer while simultaneously driving down the number of employees necessary to do this, we will enter an age when economic growth will become completely decoupled from job growth.

In a possible future of unprecedented economic boom but continually slumping job numbers, jobs and salaries as the primary mechanism of wealth distribution may become a thing of the past. By lowering the barriers that keep people from investing in new ideas, crowdsourced funding could simultaneously deliver much needed capital to the revolutionary ideas driving the next economic boom and allow a larger proportion of people to profit directly as well. If the techno-economic boom turns out to be as staggeringly huge as some have suggested, this new market could even become the dominant income stream for the majority of people.

As with any revolution, the democratization of the market will not be perfect. Yes, there will be an abundance of scams, but who is to say it will be worse then the darker walled-gardens of today’s market. The collective detective abilities of the internet can be surprisingly efficient at rooting out fraudsters. With efficient regulation and the vigilance of internet investors these problems can be solved.

Let this be the beginning of a new age where we can both support the change we want to see and share in the profits to be had.