Insurance Industry Overview – Introduction

There is a financial product which has existed for thousands of years, without which much of our modern economy wouldn’t exist, and yet it’s a product no-one wants to have to use. Welcome to insurance.

Let’s go back in time.

We could go way back, but let’s stop in 14th century Italy where Francesco is a merchant.

Franceso’s business is doing great Most of the sea voyages carrying his goods are very profitable, but if a single ship sinks or the cargo is stolen, he will be bankrupt

So each voyage can either make him richer or very poor Francesco and his fellow merchants want to be able to develop their trading, without the risk of going out of business.

So they all pay a fee to hand over their risks to a 3rd party, an insurer.

For an individual, a catastrophe is an unlikely and unpredictable event, but when pooled together as a portfolio, the losses can be predicted and therefore priced by the insurer

Instead of an ‘all or nothing’ scenario, for the merchants who are insured, the risk is now an affordable operational expense.

And so the modern insurance industry is born.

From those contracts which protected Francesco’s goods from being lost at sea or stolen insurance has grown into a 5 trillion dollar industry covering risks from car accidents, to being sued, to cyber attacks

As well as the merchants, insurance has made society better off too Businesses and individuals can now offload some of their day-to-day risks to an insurer preventing unnecessary bankruptcies that affect families, employees, customers and suppliers.

This primer will unpack the complex insurance industry from what range of products exist, how they are created, how they reach customers and major technology trends impacting the industry.