Risk & Business Magazine Bowen Miclette & Britt Spring 2017 | Seite 6

IS INSURANCE OBSOLETE?
BY: BILL HARTNETT
HARTNETT ADVISORS
Is Insurance Obsolete?
How Exponential Technologies Are Changing
The Nature Of Risk
T
he concept of insurance goes
back thousands of years,
independently developed by
the Chinese, Phoenicians,
and others. All of these
societies had one thing in common —
their economies relied on trade and
usually shipped goods by water.
Our “modern” insurance industry
started over 300 years ago at Lloyd’s
of London. Again, it was the risk of
shipping goods by water, this time to and
from the New World, that was beyond
any single individual or organization.
A formal method of spreading and
sharing the financial consequences of
unforeseen events was created out of
necessity and has changed very little
ever since.
Insurance truly is the DNA of capitalism.
Without the ability to manage risk, our
modern, market-based economy would
not be possible. Buildings would not get
built. Companies would not be formed.
Goods would not be shipped. Virtually
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every aspect of economic activity is in
some way made possible by insurance.
But advances in technology in nearly
every field are starting to challenge the
concepts that the insurance business is
founded on and changing the nature of
risk.
THE IMPACT OF EXPONENTIAL
TECHNOLOGY
In the mid-1960s, Gordon Moore —
one of the founders of Intel — made
the observation that the power of a
microprocessor was doubling every
one to two years. That observation has
come to be known as Moore’s Law, and
in a very real way, the truth it speaks
to is responsible for the world we live
in today. Moore’s Law describes an
exponential phenomenon that means
the chips in today’s PCs are roughly a
billion times more powerful than the
ones in computers from the sixties. To
put that in perspective, if you take 30
steps in a straight line, you are about
one hundred feet away from where you
started. But if you doubled your steps
each time, in just 30 doublings you
would have taken a billion steps and
walked to the moon and back.
Moore’s Law has brought us things that
were considered impossible 40 years
ago: smartphones, Netflix, Amazon,
the Internet itself. And it has begun to
impact every industry. From retail to
manufacturing to finance to medicine,
every business is feeling its exponential
force. Insurance is no exception.
Exponential advances in several key
areas are combining to change the
very nature of risk and challenging the
fundamental principles of the insurance
business.
AUTONOMOUS VEHICLES
The best example of how exponential
technology will fundamentally change
insurance is the rapid development of
autonomous vehicles. Nearly every car
(and non-car!) manufacturer is investing
heavily in the sensors and software
needed to make driverless cars a reality.