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.”