The ‘Adam and Eve’ of Insurance

My approach to writing analyst reports

When I write analyst reports I like to create a report that flows from the general to the specific.

I don’t mean only insurance or technology matters but thinking through broader societal trends and then diving down into their current and potential future implications for the non-health insurance industry. I almost always use this approach when considering the impact or future implications of either current or emerging technologies on insurance commerce, channels, and customers.

A “square one” question about risk with two parts

A few weeks ago I was thinking about the answer to “a square one question” about risk with two parts that required me to consider the:

1. emergence of risk: where did risk come from originally?
2. evolution of risk: how does risk change or, more generally, how does the risk landscape change?

Technology, of course, is an immediate factor that comes to mind. Technology obviously changes the risk landscape by introducing new risks, altering existing risks, or eliminating existing risks.

But it is more than technology, whether a current or an emerging technology, that transforms the risk landscape. There are other factors at play. Certainly, we – our own human species and our actions (or lack of actions) – alter the risk landscape.

That was my ‘aha moment’. To arrive at an answer, I shifted my mental model from the specific to move to and remain at the general while keeping in mind my objective: to identify where every risk, regardless of type of risk came – and continues to come – from.

Essentially, I wanted to identify the ‘Adam and Eve’ of risk and therefore identify the primary source of insurance.

The ‘Adam and Eve’ of the insurance industry

As I was considering the ‘Adam and Eve’ of risk, I thought about the various insurance lines of business – such as property or casualty or life insurance and annuity – that offer risk mitigation / management solutions to people, families, and businesses.

I realized that I was looking for the origin of risk that involved either natural forces or human forces or the combination of both forces. There was the answer to my question: the ‘Adam and Eve’ of risk, and therefore of insurance, are Nature and Human.

By ‘Nature’ I include:

• all flora, fauna (inclusive of humans), and fungi
• all oceans, lakes, ponds, and waterways
• all geological layers of the Earth.

By ‘Human’ I include all humans and their actions during the times Before the Common Era (BCE) and since, including the Agriculture Era, the Industrial Era, the Information Era (pre-Internet), the Internet Era, and the Mobility Era.

Each of the two factors on its own can be considered the origin of risk. But without the presence of Humans to recognize the existence of risk, the risk doesn’t exist. (If a tree falls in the forest …)

For me, it was the initial interactions between Human and Nature that created the original risks. And it is this continual interaction between Human and Nature that generates the stream of risks that alters the risk landscape in a never-ending manner.

I submit that as Nature and Human interact with more frequency, the area shown in the intersection of two in the visual below, will grow increasingly larger.

Daring Designers & Constant Combiners

Why are Nature and Human the ‘Adam and Eve’ of the first risk and every risk the world has experienced? Both Nature and Human continue to explore, interact, and synthesize new creations: Nature as a ‘daring designer’ and Humans as ‘constant combiners.’

The essence of Nature is evolution

Nature uses its eons of ‘experience’ with evolution as an optimization engine to create organisms that are adaptable and fit for a myriad of environments at any given time. If the organism (whether a member of flora, fauna, or fungi) is not adaptable to nor fit for its environment, evolution will select against it and the organism will disappear from the planet.

Humans are ‘Constant Combiners’

Humans constantly combine elements from Nature as well as interaction with other Humans to create physical artifacts and more recently digital artifacts.

Moreover, Humans constantly combine:

• selected physical artifacts with other selected physical artifacts
• selected physical artifacts with elements from Nature
• selected digital artifacts with other selected digital artifacts
• selected digital artifacts with selected physical artifacts
• selected digital artifacts with elements from Nature
• selected digital artifacts with selected physical artifacts with elements from Nature

Humans can’t stop experimenting, inventing, or otherwise thinking of ways to combine selected elements of our world together. It is not in the Human ‘nature’ to stop being a constant combiner.

Final Thoughts (for now)

Each of the various interactions – triggered by Nature’s evolution engine or by Human activity or the interaction between Nature and Human – does and will continue to generate a never-ending panoply of risks. These risks will include, at a minimum, an expanding palette of mortality risks, morbidity risks, liability risks, and casualty risks.

Insurers must be ever-vigilant to the parade of risks where-ever, whenever, or however the risks emerge in our world. Insurers will need to decide whether to (in compliance with insurance regulations, of course):

• create new products
• consider whether they should market any products to mitigate any of the new or altered risks on the risk landscape
• change their underwriting procedures for existing risks.

What do you think?

What are your thoughts about the forces that led to the origin of risk and to the continual emergence of new risks?