Insurance Companies Won’t Exist When Machines Refuse to Insure Anyone

In Wednesday’s Money Morning I wrote about your data. How your data will enslave you to the government. How at every turn the government will try to find a way to access every piece of information about you.

It’s a pretty dramatic and desolate picture of our future. The problem is it’s a real possibility. After all, the more information the government has about you, the more they can manipulate you.

But it’s not just the government who want your data. There are private companies lining up as well. These companies are in many cases as nefarious as the government. Sometimes, even worse.

I’m talking about insurance companies. They want all your data too. They want it for exactly the same reasons as the government. To know more about you, to control you. To take every piece of digital info about you and turn it into a profit for them.

Insurers are already coming under fire because of non-payment of claims. Just see CommInsure. And that’s with barely any tangible data. Imagine what they’ll be like with terabytes of data about you.

Insurers are sticklers for the detail. Just read any 60–100 page long insurance product disclosure statement. They outline every reason when they will and won’t pay a claim.

But in the future, it won’t be a caseworker making the decisions. It will be a computer. A cognitive computer. A smart, intelligent machine. Artificial intelligence perhaps. It will draw on all your personal data. Every piece of data you’ve ever made will be used.

They’ll use it when you apply for cover. After all, they want to make sure they minimise their risk — this is insurance, it’s all a game of risk.

However to bring ‘evil corp insurer’ down, perhaps all our data is exactly what they need. The more the better. Flood them with every single aspect of your personal health. Terabytes of data. In doing so we might actually end the reign the almighty and all-powerful insurance company has on the world.

In fact with so much data — too much data — society could bring major insurers to their knees.

How might this be possible? Well let me explain.

When you know everything, you always make the right decision?

This might sound a little silly to begin with but stick with me… Imagine you knew everything about everything. You had all knowledge in the world. You knew exactly what would happen with every decision you ever make.

You know that if you turn left around a corner you will step into a pothole and fall down it. This means you will break your leg and be off work for four months.

However, you also know that if you turn right you’ll be fine. You’ll simply walk along a nicely paved and safe street. Nothing happens.

You turn right of course.

Perhaps you know that if you consume more than 612 grams of red meat per week, in 3,448 days you will suffer a heart attack. You know precisely how your body digests and absorbs various nutrients. You love red meat, but you are 100% certain in that quantity it’s not good for your health.

But if you consume 611 grams or less per week you’ll be fine for the rest of your life. No problems.

Obviously you consume less than 611 grams per week.

If you knew everything there was to know you would always make the right decision. We all would. The same thing will be the case when insurers know everything.

Know everything, insure no one

Let’s assume that in the coming future your insurance company knows everything about you. In order to cover you for any kind of insurance you must present them with your entire personal history. This includes a data dump from all of your wearable tech devices.

This is the (not too distant) future, remember. You have personal fitness trackers. You have smartwatches and smartphones. You have hundreds of Internet of Things (IoT) devices that track you, monitor you and provide you with information to help you be smarter, more efficient, happier and healthier.

The insurance company will use all this data to make a precise and highly informed decision. They know everything there is to know. But this is far too much data for a human to interpret. So they use their artificial intelligence decision makers.

When they analyse the data they uncover everything about you.

Your geolocation data shows that you visited a cigar store 16 months ago, and then again 7 months ago. Your application said ‘non-smoker’, but now you’re a smoker.

Also, you also move in a particular pattern around your city. You have city ‘hotspots’ on your personal ‘heat map’ which indicates you either are or soon will be type 2 diabetic. You’re not diabetic. But where you go, who you’re with and how long you stay in any given place can indicate the higher risk.

Ed note: the diabetic example is real. In 2013 I wrote about Alex ‘Sandy’ Pentland and their ability to use big data to predict diabetes.

As such, the insurance company turns down your application. In fact, with so much data about every single person applying for insurance, the artificial intelligence decides everyone is too high risk.

The ponzi scheme comes crashing down

With so much data, so much ‘certainty’ about health risks, the artificial intelligence turns down everyone for insurance cover. Humanity is too big a risk to the company.

That’s not good. Because insurance companies work solely on the basis that more people pay premiums than make claims. If they pay out more than they take in premiums, insurance companies fail. In fact, insurance is the biggest legal ponzi scheme known to man.

However soon enough, artificial intelligence will start making decisions for insurance companies. No team of humans can disseminate that much data.

The outcome is no one gets cover anymore.

For anyone healthy enough to get cover, well they won’t need it. All their wearable technology and personal data tells them they don’t need it. So why bother?

Insurance companies will be left with no customers. Anyone that wants it won’t get it – too high risk. And anyone they will cover won’t get it because they’re too low risk and they know it.

Intelligent machines and incredible amounts of data sounds divine to insurance companies today. But be careful what you wish for. Technology gets smarter and more efficient every day. At the speed it currently advances, it might completely turn the insurance world upside down.

Instead of these behemoth financial giants having all the power, the power will return to the people. After all, being worth billions doesn’t last long when you have no customers.



Sam Volkering is an Editor for Money Morning and is small-cap, cryptocurrency and technology expert.

He’s not interested in boring blue chip stocks. He’s after explosive investments; companies whose shares trade for cents on the dollar, cryptocurrencies that can deliver life-changing returns. He looks for the ‘edge of the bell curve’ opportunities that are often shunned by those in the financial services industry.

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