From private to social insurance

Climate and sustainability risks are today, in 2030, no longer merely emerging, but well documented. With the necessary tools, we monitor, evaluate, assess, and price these risks in depth. The active population today also knows how better to deal with climate risks and consumes fewer products that are harmful to the planet. That also includes insurance products.

There are also new risks, such as new diseases, against which people need insurance. Or more than ever: cyber risks. We already knew these in 2022, of course, but today we experience more organized attacks. And that brings us to an important point.

President of the Actuarial Association of Europe

Not all risks are insurable in 2030, for example: major cyber-attacks. Why not? When you insure people or businesses against something, you group similar risks together, make everyone pay a premium and compensate those individuals and businesses that are victims of the risk. But that requires risks to occur randomly. If they arise through "organized action against society," insurance no longer works.

So we had to find other ways to respond to those risks. Either we accept them, avoid them, or mitigate them. Technology, such as artificial intelligence, which has been fully deployed today, helped identify a reply to these risks. For example, how do you offer the right insurance to the right customer through distribution channels? Or how do you determine not to offer certain products to certain people? The only question is: how far do we go in using AI and data?

By using today’s technology, we gather more data than ever and price risks are calculated more precisely than in the twenties. But the use of data and AI is becoming more and more regulated. Something I support, by the way: your data should not be used against you. It should be used to your advantage. So, in certain cases, insurers are allowed to use data to price risks more precisely – but certainly not always. For example, not to charge health insurance premiums at a higher price to people we know are at greater risk of becoming ill. Over the past few decades, we have seen some unethical use of data and AI, but ethical rules have emerged from the lawsuits that followed, which we use today to check whether the solutions proposed by AI are ethically acceptable.

There are also types of insurance, for which insurers use less data for pricing, or for profiling with the purpose of inclusion. Healthcare insurance is a good example, as the government demands that insurers extend coverage to people who previously did not have access to this type of insurance.

Thus, for some policies, insurers are currently moving from private to social insurance. And not just for pensions or healthcare, but also for climate risks, where everyone gets basic coverage, with little differential pricing. And I support such an inclusive approach. Indeed, everyone should have access to some level of service, including from the insurer.

Three letters, ESG, are determining this move. Environment (E) is already very present. We've come a long way in approaching the Environment over the years. But today, Social (S) and Governance (G) risks carry much more weight. Not coincidentally, these are the two areas that are the most regulated in 2030. Governance risks are the opportunities to protect against data abuse, a subject I referred to earlier in this article.

Social risks today come mainly from demographic evolution. Aging puts pressure on pension and healthcare systems. That is why the government is calling for insurance to be more widely available. And insurers are seizing their opportunity. This is our natural habitat - certainly healthcare - that we focus on, devising customized products. 

Actuaries are still absolutely necessary. For pricing, reserving, monitoring balance sheets, managing risk, finance analysis, claim handling, among others, but also to check whether AI is being used to make ethical choices. The Actuarial Association of Europe wants to make it clear to the European institutions that European actuaries have all the necessary skills to provide these services in 2030. This situation is a result of up-to-date training and better selection criteria than ever for recruitment.

And, as always, we continue to adapt to new trends and the needs of our stakeholders. We continue to identify, explain and propose solutions for new risks. This has been our role as actuaries for 100 years, and will remain so.