Insurance in the future

Traditional indemnity insurance indemnifies an insurance taker in case certain circumstances arise. It is typically a cash indemnification whereby the insurance taker receives an amount for i.e. a car that was stolen, a house that burned or you have been subjected to theft. A so-called insurance event triggers a cash indemnification for the loss suffered.

But this type of insurance and indemnification is in the process of being outdated. In the Nordic countries we get 2.5 – 3% richer on average every year. Norway, Denmark and Finland are presently the countries with the biggest growth, while it was Sweden about 20 years ago. In the long term the difference in growth rates are levelled out. This implies that consumer spending in the Nordic countries in approx. 25 years will be double of what it is to-day, and consumer spending today is double what it was in the beginning of the 1980’es. This growth has been going on for over 160 years. We have become incredibly rich compared to the 17th century when the Nordic countries were among the poorest in Europe.

Wealth changes our requirements for insurance. 50 years ago it was a big problem to suffer a significant material loss. Money tied up in a house or the interior of the house, such as din-ner service and other expensive things that were inherited from generation to generation, and if a family was subjected to theft it could affect the following generations. Today, we just buy new things when the old things are gone, break or break down. An expense of DKK 10-20,000 does not impede a family’s future. But only few families manage loosing a house or a car without being indemnified by the insurance companies. There is still a basis for securing things – only not in detail.

Back on track

We know disaster when we see it. Two cars crashing into each other on the road and the in-jured persons being taken to the hospital as fast as possible. But what happens after?

Modern people are not so interested in the indemnification for the car. Of course, it is nice that somebody pays for a new car if it is totalled, but we are far more interested in whether we can return to our ordinary lives again. A physical injury to the body, brain damage or whiplash making us unable to continue our usual life, is far more disastrous than a totalled car. We wish to be able to continue living our lives as quickly as possible.

In connection with a Danish anniversary of the Danish Insurance Association in 2007, we ex-amined what Danes are most afraid of. This was also examined by an insurance company in Norway and the results showed the following:

We are most afraid of sudden death among our closest family and friends. Second come the climate and water pollution. Cancer and other deadly deceases are third, but still at the same high level as the other two. Next comes – very interestingly – loosing your course of life, i.e. loosing your memory, becoming heavily obese, being hit by stress, being attacked, becoming divorced or experiencing adultery. We do not want to loose the possibility of continuing our course of life as planned.

At the bottom of the list comes fear of a back ache and ranking lowest is a broken machine, a strike, being fired from the job and a leaking roof. These areas were typical areas of con-cern 20-30 years ago, where material loss due to loss of job and strikes frightened many. Today, the problem with buying a new washing machine or having the roof fixed does not concern many people.

The material basis for traditional indemnity insurance is thus disappearing. Private customers will in future to a much larger extent want to be able to revert to their course of life. There is greater value in the insurance companies making customers able to live a normal life after a traffic accident instead of giving them a large indemnification. Money does not have the same significance today and will become even less significant in future.

But could you not buy the treatment yourself, if you receive a large indemnification? Yes, but such payment does not take place until long after the accident has occurred. Help here and now is what is interesting in respect of insurance coverage in the future.

The new luxury

When most people have access to almost any goods and have no material needs, we find other areas that we start to define as what we wish to obtain. When you go to bed hungry, you wish for food, but when all material aspects are more than fulfilled, there are other areas we value. Modern people miss what is disappearing, i.e. silence and the possibility of experi-encing peace and quiet.

The German philosopher Hans Magnus Enzensberger in an article from the mid-1990’es lists a number of areas that he sees as the future areas of luxury: Time, attention, space, peace and quiet, the environment and safety. Enzensberger views these areas as something that will become luxurious in the future, but actually we must see it as the new areas in which our consumption will be in the future. Already in the 1990’es there was status in having time, and products and services that were related to having time became luxurious products. An afternoon at the golf course is a luxury, because not everybody has the time – that it is also expensive is no disadvantage.

Time is a very important luxury. Modern people can only obtain a career and a high income by working a lot and for a long time, and they are at the same time expected to be available for the business they work for, family, fiends and other obligations all the time. Internet ac-cess and mobile phones have made being connected all the time a part of everyday life.

Attention has also become a scarcity. All media incessantly fight for people’s attention and only if you disengage from everything, you may have the opportunity to direct your full at-tention to other people, or wherever you may wish to direct it. The full use of sight, hearing, feeling and knowledge without the interference of the mass media is also a luxury today. You may call it the luxury of being disconnected – mass media free and with your mobile phone and internet connection closed.

Space and room is a scarce commodity for modern people. The traffic jam on the free way or the queues in the supermarket lines, in the centres of the compact cities or on the way on holiday with 300 others jammed together in monkey class shows that we participate in the modern overconsumption, but at the same time we lack space and room around us. If you have the possibility to obtain more space or go on a vacation where no one else is, that is the new luxury of having room and space around us.

Peace and quiet is another scarcity. The absence of noise has become very desirable because we are almost everywhere in our modern society surrounded by noise or bombarded with music and information in a noisy way.

Nature and purity has also become scarce. The real nature is no longer close to us, but is confined to closed areas far away – even in the Nordic countries. Also, it is difficult to obtain fresh air, clean water and food without contamination or additives. Thus, it has become a luxury in our time to be able to eat food prepared from clean produce, to breathe clean air and to be surrounded by nature in abundance.

Finally, security is mentioned, but in the Nordic countries it is not that relevant in our picture of modern society. But the increasing use of security systems and alarm systems, neighbou-rhood watch and an increasing fear of i.e. violent crimes, even though statistics show a de-crease in violence, show that the perception of safety and security is becoming a scarcity. This means that complete security also today is a luxury.

Pension – course of life reward

With our modern lives being characterised by hard work, time pressure and lack of purity, safety and peace and quiet, it has increasingly become a political promise that everybody is certain to have some good years after the race on the labour market and in the family with raising a family. The time after the labour market – the third age – has become a special benefit, which we are by now all entitled to.

Traditionally – and increasingly over the past years – consumers are saving for their third age through pension schemes with insurance companies and financial institutions. Savings, life insurance and annuity pensions are all created based on the principle that you have your savings paid out – often over a number of years. But for most people it is difficult to under-stand how they obtain a certain pension payment. In this respect they are at the mercy of the pension advisers. But consumers know what they have been promised. So if the compa-nies promise wonders and a high standard of living for pension life, they risk getting a lot of complaints when the result of the pension savings turn out to be a life with less material strength than expected.

This development opens up a new market as it will become important to obtain the reward – to become old enough and healthy enough to live the third age to the fullest. This implies that securing life up to and during the pension age will in future be a great part of the pen-sion market. Consumers need health insurance, a back-on-track insurance and savings at once, and a guarantee that they will live long enough to benefit from it and have the energy to enjoy them over a number of years.

New insurance types

Consumers will cultivate help instead of indemnification and will increasingly secure this new luxury instead of the old material indemnification. This implies that we will see new insurance types in the future instead of or as a supplement to the traditional indemnity insurance types. We already know health insurance in connection with insurance against critical de-ceases, but in reality we ultimately seek a “keep me on track insurance”, whereby the insur-ance companies take care of our lives and see to it that we are cared for regardless of de-cease and accidents on the way. This implies health checks, exercise programs, dietary counselling and maybe even life coaching. A soft package will probable be on the market quickly, while the grand model will be rarer at first.

Securing our capacities in the labour market and our leisure time. Modern people are wor-ried. Before it was only for the stars, but in the future it is for everyone. We want to be sure that we can work and want to have our work capacity insured – and we want help not in-demnification, if our capacity changes.

Securing the new luxury will also become a new product: Anti-stress efforts, life coaches to plan your life, absence of noise, absence of big crowds of people, room to develop, securing the risk of attacks, terror – absence of risk.

The biggest problem in connection with a burglary in a modern home is the feeling of insecu-rity. It is far worse to feel insecure in your own home than to loose DKK 30,000 worth of electronics. So in the future we will want the insurance companies to secure us against bur-glary – not in case of a burglary. There will also be a large growth in other types of insurance that provide a certain service instead of indemnification.

With this development in mind the following five items could be a wild guess at which insur-ance types may be offered in the future compared to the products of today:

• Obesity insurance
• Education insurance – and you will become something, guaranteed
• Divorce insurance
• Peace and quiet insurance – we take care of all the troublesome stuff and the bills
• Senior life insurance. Secures a certain period in action in your senior life – money, health, spirits

The future has begun

The increasing material wealth will change insurance in the future. We want to insure the things we most fear to loose. The changes in this fear will result in significant changes in the future insurance market for private consumers.

Published here, 2008