The future of societal risk - and what it means for insurance and long-term savings

In recent years it has become clear that we live in a world changing faster and more deeply than ever before. This inexorable change - driven by technology, and manifesting right across politics, society and economy, is widely underestimated, will be a significant disruptive force on the insurance industry, but will also present real opportunities for the market to flourish.

Underestimating change

We all have a feeling for how fast the world is changing. But it is the acceleration of change that is hard for us simple humans to get our heads around. We tend to think in a linear way, conceptualising progress as a straight-line graph, with societal developments churning on in the future at a similar rate to that which we have experienced in years gone by.

And that was ok for our ancestors, where the evolution of society was incremental and slow, albeit punctuated by seismic events, like the invention of the wheel or the harnessing of steam power. But in the modern world, most societal trends are exponential processes, which means that our ‘straight line’ brains underestimate more and more the further ahead we look.

What does this mean for societal risk?

Over hundreds of years, insurers have helped customers manage the financial consequences of the risks they face, but the future of risk presents challenges. Historically,  these  risks have developed and evolved gradually. Insuring a galleon in the 1700s isn’t much like insuring  an oil tanker in 2018, but the journey from one set of risks to the other has been relatively steady, and marine insurers have been able to adapt at their leisure.

The long-term outlook for societal risk is more volatile. While driving becomes much safer, natural disasters will become more frequent in much of the world. While we manage our health risks better than ever, longevity and long-term care costs could threaten a savings crisis. While physical liability risks may reduce, virtual or cyber liability risks will balloon.

And the tendency for humans to underestimate long-term change means that many of these trends are likely to be more extensive, or happen more rapidly, than expected.

Huge opportunity

Despite these challenges, there is also a huge opportunity for insurers in an exponentially changing, highly uncertain world. After all, helping society manage uncertainty is our purpose. The challenge is to be prepared to grasp those opportunities whatever they might be, and whenever they may come about.

We need to have tools in place to operate flexibly, to drive innovation at speed, and to be comfortable not only managing risks, but taking them as well. We must find ways to engage customers who struggle to comprehend how static risks affect them, let alone risks that evolve and change so quickly.

It's also more important than ever that we step forward to offer our expertise on risk to policymakers grappling with the challenges of rapidly evolving societies. We have expertise – whether the expertise of property insurers in modelling weather risks, or the expertise of life companies in assessing longevity risk - that can help governments and other institutions better understand, and plan for, the future.

If we can do all that, then our value to society and to the world will be strongly reinforced.

Find out more about the future of the insurance and long-term savings industry at the 2019 ABI Annual Conference. Find out more and book your tickets now.


Last updated 13/02/2019