People who have been affected by the “drone chaos” are making claims to their insurance companies, but not all of them will be able to be paid by their insurance companies since some cheaper policies do not cover such incident. This incident can bring more customers to the companies which have the policies which cover such incident because people tend to overestimate small probabilities based on the prospect theory. When people are worrying about the consequences of new and coming technologies, it actually creates more opportunities for the insurance industry.
Providing insurance for unknown threats or risks can be a very profitable business but with substantial risks. Of course, since the insurance industry has much more resources than others and they can hire more experienced and more skilled people to work for them to analyse the possible impacts of new and coming technologies. Therefore, just like other insurance businesses, insurance companies are able to create a system of information asymmetry to gain profits. However, there are risks. First, the predictions about technology innovation and invention cannot be always correct; once it is incorrect, then it will make insurance companies lose money depending on how different the reality is from the prediction. Secondly, how many people demand such insurance is another issue. Hiring very good people in the technology sector is very costly; however, if they cannot sell enough insurance and generate sufficient revenues, they will not be able to afford expensive costs for quality labour forces. Thirdly, there are merely too many technology sectors, even insurance companies do not have the resources to conduct effective research on all possible technology innovation and development.
Overall, designing insurance policies covering the risk caused by technology innovation seems like a fantastic idea; however, given its cost of conducting effective research and the risk of potential demand and prediction, this may not be a profitable business.
No comments:
Post a Comment