You've heard of microinsurance – the zoomed-in model in which coverage can be purchased for any number of "individual events, activities, or things for a short period," as described by Strategy Meets Action partner Mark Breading. It's one of several long-standing efforts to disrupt the traditional market via innovation, and it's working. Formally regulated in 2009, microinsurance is making a splash.
The next big idea
While some firms have been putting their attention on the "micro" side of the insurance spectrum, others have been looking in the opposite direction. What if, instead of buying different types of insurance for different aspects of people's lives, they could buy one type of insurance, once, and get coverage for everything? That's the question behind macroinsurance.
Let's talk about Sherpa
With a name like Sherpa, you'd expect this new firm to be blazing a trail. It's setting out "to provide customers coverage across all insurance sectors using a single underwriting process," said Breading. No agents, no commissions. Just a tech-based approach, driven by multiple data sources, artificial intelligence, and deep analytics, backed by credibility-establishing industry collaboration from Gen RE and Guy Carpenter.
Macroinsurance is no longer just an idea. On the contrary, the first steps toward making it a reality are in the works – so it behooves us to think about what this may mean for the industry.
What's not to love?
One underwriting process. All-risks coverage. For customers, the simplicity of that arrangement is compelling. Yet if macroinsurance takes off, it will create chaos for industry processes – and it'll take some time for the dust to settle.
Pricing precision won't happen overnight. Whether a team of actuaries collaborates on the design of new products, or "actuarial is completely revolutionized” with the help of AI and advanced analytics, Breading said, it'll take time.
Underwriting too will need time, as macroinsurance puts the focus on the person, not the product – a simple difference with big implications. "Any way you look at it, underwriting becomes a completely new game in the macro-insurance world," Breading said.
Distribution could be interesting. Until now, most agents have specialized by line of coverage. The agent who sells home and auto coverage, may not be the best source for business insurance or other specialty coverages. Will states soon offer a microinsurance license for agents? Only time will tell.
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