Macroinsurance: The Future of Insurance Coverage?

Imagine having only one insurance policy that gave you all the coverage you need. One policy that takes all your risks and unifies them into one package.

Imagine having only one insurance payment to deal with. One bank draft that took care of your auto, home, life, health, and liability insurance all with one quick payment.

Having separate lines of business for each policy might soon be a thing of the past. Instead of the insurance companies' one-size-fits-most approach, we'll have consumer-centric insurance policies that begin with the policyholder and builds around them and their needs.

While this kind of macroinsurance is still in its infancy, it's an interesting and exciting concept worth exploring. Here, we'll cover what it could mean for insurance consumers and insurance companies.

What Macroinsurance Means for the Consumer

Macroinsurance will change the way insurance is bought and sold. Consumers will no longer have to shop around and apply for policies with different companies for each line of insurance they want to purchase.

With a one-stop shop for all insurance lines, insurance customers can expect to see:

• One company that will write them a single multi-line insurance policy
• One underwriting process that encompasses all the risks they face
• Only having to worry about one payment
• All-risk coverage tailored to each individual policyholder's needs

This won't eliminate consumer choice. Unless we face an improbable scenario in which one single monopolistic company issues all of the country's insurance policies, we will still shop around and choose the insurance company that suits us best or makes us the most reasonable offer. The difference will be that each of these companies will be able to write multi-line policies that can cover any type of insurable risk (for related reading, see How to Pick the Right Insurance Company).

Price and quality could still vary across companies. Other factors will still play a role in consumer decisions, such as the quality of customer service and how convenient it is to deal with the insurer. But when you find an insurer you like dealing with, you won't have to seek out another company just because your home and auto insurer doesn't sell life insurance policies.

What Macroinsurance Means for Insurance Companies

This is where the rubber meets the road. The true test of how Macroinsurance will work out in the industry is with the companies themselves. If there are issues with its implementation, then it can be doomed, no matter how high the demand for it is.

Anyone wishing to issue macroinsurance policies faces a number of hurdles. Companies need to be concerned because:

• Actuaries must design the product – Combining different lines goes beyond the current popular practice of bundling policies. With bundling, the insured gets a discount but the lines are still separate. Integrating the various lines is more challenging. Actuaries also need to know how the final product will work with the consumer, given that each situation is different.
• Pricing needs to be developed – Each individual insurance policy is priced at different rates using different underwriting methods. Before companies can issue macroinsurance policies, they'll need a new method for pricing that can encompass all lines as one. Whatever that method will be, it needs to balance affordability for the consumer while maintaining the integrity of the policy.
• Underwriting needs to adapt – As the new products are designed, underwriting practices must evolve so they can determine a policyholder's insurability without canceling out the benefits or guidelines of other insurance lines.
• Agents need licensing – Agents usually carry a specialty license. Most of them focus on one or maybe two lines of business. With all of the policies becoming one, an agent will need to go through special training to get licensed on all the lines they would need to sell through an all-risk policy.

One of the ways insurance companies could tackle these difficult complexities is by delegating their actuarial and underwriting tasks to artificial intelligence algorithms capable of managing these fine-tuned and highly customized policies. Because of that, we might only see genuine macroinsurance offerings hit the scene once we have the technology to handle it (see 5 Ways New Technology Will Change the Way You Buy Insurance to learn more about coming changes to the insurance landscape).

The Time to Adapt Is Now

As Macroinsurance slowly becomes reality, insurance companies need to jump on board or get left behind.

Technological advances give the consumer a greater ability to communicate with their insurers, enabling them to have quicker access to things like quotes, underwriting, and claims. As the process of purchasing and handling one's insurance policy becomes increasingly streamlined, macroinsurance will be the next logical step in the development of convenient policies.

Insurers that don't adapt will become overwhelmed and have to cede much of their business to the cutting edge insurers who can meet this demand.

Summary

Macroinsurance is designed with the consumer in mind. To be successful at producing and selling this product, the policy has to be built from the ground up, considering the customer's needs as well as their plans for the future. The challenge is finding the right connection between the different lines and having them work together. Not to mention having the ability to make modifications as the life situation of the customer changes.

One thing is for sure, however: once insurers hammer out the details, consumers will be ready for the convenience of being insured under a single macroinsurance policy.