Call for Volunteers Announcement - Working Party on Insurance on Demand
The 'on-demand economy' has been defined as 'the economic activity created by technology companies that fulfill consumer demand via the immediate provisioning of goods and services'. The corresponding annual economic activity has been estimated to total 57.6B USD (and has been characterized as 'changing the face of business' via its technology driven emphases on speed, flexibility, and personalization. The insurance industry has felt many of the impacts of this emerging economy as carriers evolve to address the coverage needs of its participants, who characteristically sport new age businesses along with exposures that blur the lines between personal and commercial activity. The inability for insurance to fully keep up has created underserved markets not limited to these participants -- along with opportunities for the entrepreneurially spirited to develop 'on-demand insurance' (ODI) solutions that meet new coverage needs in both duration and scope. Spurred in part by an influx of "InsurTech" entities, the industry is at last starting to pick up steam.
Scope of Proposed Research
The on-demand economy is not waiting for CAS to act, so incisive research will be necessary to establish relevance for the ODI marketplace. A CAS working party to research 'on-demand insurance' will assert our leadership and produce relevant discourse and analysis. Key areas for initial research include:
- Behavioral economics -- Critics of ODI may question its economics, characterizing cost or complexity as disproportionate to covered risk and surplus as deeply susceptible to depletion by adverse selection (e.g. individuals loading up on ODI before a catastrophe). It bears consideration on the economic decision making processes of individuals (behavioral economics) as it relates to product design, distribution methods, and regulation can best address these challenges.
- Products -- the activities and participants of the on-demand economy are a natural target for ODI, but there may be other risks as well if not better suited, for example, risks that can be explained via indices or automatic technological triggers (e.g. internet of things). It bears consideration which markets' needs are most effectively addressed by ODI, and in what manner.
- Actuarial approaches -- One might hypothesize that, from a pricing and administration perspective, 365 days of ODI cover may equal a corresponding traditional one year policy. This may not be the case, as risk loads, incurred but not reported (IBNR) provisions, and economies of scale attained through bundling may result in a vastly different actuarial experience.
The three research tracks are complementary because relevant products and sound actuarial approaches for ODI will support its economics. The deliverable will consist of a whitepaper highlighting considerations relevant to what the working party deems some of the most important concerns in the above categories.
We would like representation from pricing, reserving, and capital modeling, as well as actuaries serving in non-traditional capacities (ideally, in the administration of ODI) and regulation. The proposed working party is a spin-off of the CAS working party on microinsurance from whom a handful of members are carrying over, as well as new members who have identified the need for this research. We need a minimum of five additional volunteers to complete the envisioned work on deadline.
If you are interested in participating on this working party, please fill out the survey by July 21.