With the future of insurance being a particularly hot topic of discussion, we asked futurist and XPRIZE CEO Peter Diamandis to weigh in. Peter foresees a wave of disruption washing over the insurance industry. Though disruption is not always a bad thing, Peter predicts that exponential technological disruptions—computation/digitization, artificial intelligence, machine learning, sensors, networks (especially social networks) and genomics—will be game changers.
Here’s what Peter had to say:
I have been advising a new company called Lemonade that is rebuilding the insurance model from the bottom up—it is the world’s first “peer-to-peer” (P2P) insurance company. Imagine this: 90 seconds to get insured, 3 minutes to get paid. Zero paperwork.
P2P reverses the traditional insurance model. They treat the premiums you pay as if it’s your own money. With P2P, everything becomes simple and transparent. Lemonade takes a flat fee, pays claims really fast and gives back what’s left to charitable causes you care about.
This week Lemonade launched their service and announced that they’ve been licensed as a full-stack insurance carrier by the state of New York for homeowner and renter’s insurance. The work they’ve been doing is brilliant, so I’ll be using them as a strong example of some of the following ideas.
Let’s talk about four exponential change drivers of this upcoming Insurance Revolution:
Fraud consumes as much as 38% of all the money in the traditional insurance system, inflating premiums by $1,300 and making the claims process protracted and unpleasant. This happens because there is a lack of transparency in a largely analog (rather than digital) system with many humans in the loop.
If you could digitize the entire process—from signing up to submitting a claim—and give the insured individual full transparency over the status of their request, adding in automation and machine learning, you can dramatically reduce processing time and costs.
This is what Lemonade does at its core. “Technology drives everything at Lemonade” said Shai Wininger, President and co-founder. “From signing up to submitting a claim, the entire experience is mobile, simple and remarkably fast. What used to take weeks or months now happens in minutes or seconds. It’s what you get when you replace brokers and paperwork with bots and machine learning. Zero paperwork and instant everything.”
- Social Networks
Social networks will allow us to create true peer-to-peer insurance models. Imagine finding a group of peers, who you trust and can vouch for, and coming together as a group to self-insure. You skip the centralized, expensive middleman insurance carrier and instead, a technology stack (app, database, AI-bot) manages a decentralized network of people who pay premiums and file claims that the group approves.
This takes out an enormous percentage of the cost structure of traditional insurance— instead of paying fees and insurance company salaries, your peer group will be able to decide what to do with the extra cash that wasn’t paid out.
At Lemonade, you actually have the option to donate underwriting profits to nonprofit organizations of your choosing. Their hope is to remake insurance as a social good, rather than a necessary evil.
When talking about life insurance, it’s going to be difficult to ignore genomic data. Your DNA is your medical future. Its predictive of what is likely to inflict or kill you.
In 2008, a federal law called the Genetic Information Nondiscrimination Act (GINA) was passed to protect people from genetic discrimination in health insurance and employment. The law states, “Genetic discrimination is the misuse of genetic information.” However, life insurance companies are exempt from GINA.
I imagine that, soon, groups with great genes will coalesce and self-insure. It’s in their best interest to do so. You’ll be able to upload your genomics data and find others in your peer group that have similar or better risk profiles than you do.
For life insurance companies, I believe there is a beautiful alignment of incentives coming soon—These life insurance companies will use genomics information to help their clients stay alive longer. Why? Because the longer they are alive, the more premiums they can pay.
- AI and Sensors
Sensors will have the biggest impact on insurance. They will allow insurance policies to be based on actual data (usage, health, etc.), rather than general heuristics and rules. And in the next five to ten years, there will be hundreds of new sensors coming to market.
Sensors tracking healthy behavior such as how much you exercise and what you eat, will get you low insurance costs. In fact, a number of health insurance companies are already using health sensors in their policies.
One notable company called Oscar uses technology to simplify the entire health insurance experience. You can use their app to talk to a doctor and get prescriptions without leaving home.The app also helps you keep track of your health history on a timeline. You can even earn rewards for staying active with a free Misfit step tracker.
In the near future, with the peer-to-peer model, you’ll soon upload everything from what you eat to the number of steps you take per day, and find a group with similar health profiles and self-insure.
In the realm of auto insurance, Progressive is already making sensors available to their customers. It’s called the SNAPSHOT Automotive Sensor package, and it’s a sensor you put in your car that tracks how well you drive (do you brake hard? Speed? Take high-speed turns?). When your insurance policy is based actually on how you actually drive, rather than just your age, sex and what kind of car you own, safer drivers win.