Prevention – a future business model for insurance?

The concept of prevention is not new to the world of insurance. It is in fact the spearhead of a strategy aimed at underlining the accountability of the policy holder faced with a risk. With information campaigns highlighting the causes of accidents in everyday life or training sessions in safe driving (such as the post-driving licence course of Crédit Agricole Assurances/PACIFICA), insurance companies have launched numerous initiatives with a clear objective: fewer claims means less money to hand out in compensation.
With the advent of Web 2.0 and the Internet of Things, however, a new economic challenge is looming on the horizon for insurers. Armed with all kinds of detection and alarm systems, our environment is awash in the promise that risk might disappear in the future, challenging the very foundations of insurance.

Towards a drop in the frequency of traditional risks

There are a growing number of studies on this. McKinsey, for example, predicts a 43% drop in the number of house insurance claims between now and 2025. KPMG, meanwhile, announces an 80% drop in the frequency of car accidents between now and 2040. Expected progress in research in human health (genetics, biotechnologies) should also lead to a significant increase of life expectancy in coming years.
Housing, cars and health are three major insurance markets, the value of which may well drop off sharply within the next decade or two. That is a grim forecast in a fiercely competitive marketplace where the traditional players are being hounded by the InsurTechs (the ecosystem of start-ups building on new technologies to revolutionise the existing economic models in insurance) and are afraid of potential new incomers such as Google, capable of moving into the health sector.
Such a pessimistic viewpoint can, however, be offset by the emergence of new risks related to the development of the digital world and to the constant increase in the average costs resulting from the shifting sands of jurisprudence and the continuous increase in the values insured.

From insurer to preventer?

In a recent editorial published in Les Echos,1 Jean-Claude Sudre, an expert in InsurTech and connected insurance, downplayed the competitive risk. In his opinion, the InsurTechs need insurers to grow and a player such a Google would take too long to gain a foothold on the insurance market which is, by definition, complex. The expert preferred to call for the birth of a new species, the “preventer”, with the insurer being the ideal actor to play the part, placing the emphasis on the business model of innovative prevention and organising a reduction of the risk at the cost of albeit considerable investments in technologies and human resources, and new services that could be billed in the form of subscriptions.
Some twenty years ago, insurers already took a small step towards prevention when they undertook to pay at least 0.5% of the amount of car insurance policies into actions to promote road safety. Today, they will perhaps have to take a giant step if they want to go on living.

1 The future of insurance lies in prevention, J.C. Sudre, Les Echos, 6 June 2016