Image via Flickr user Michael Daddino

Insurance is all about distributing risk. With dramatic advances in software and data, shouldn’t the way we buy and experience our insurance products change dramatically? Software will rewrite the entire way we buy and experience our insurance products — medical, home, auto, and life. Here’s how:

By changing the way insurance companies price risk

So many more signals are available for insurance companies to better price the premiums we should pay. Drivers that drive carefully in safe neighborhoods vs. recklessly through accident-prone intersections ought to pay different amounts to insure the same car — but all that data isn’t reflected in an annual odometer reading.

By empowering an ongoing relationship between an insurer and insured

Today, our relationship with an insurer revolves mostly around a monthly billing statement sent to us from a mainframe application. You can tell because big chunks of the billing statement are printed in ALL CAPS IN A FIXED WIDTH FONT … the only fonts that existed at the time the applications were written.

By changing the way insurance companies pool capital

Historically, we’ve seen mutual insurance companies (insurance companies owned by policyholders) and stock insurance companies (insurance companies owned by shareholders). We expect to see more crowdsourced insurance companies, just as we’ve seen in other parts of the financial system.

by Frank Chen

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