Insurance is a market just like any other good or financial product — firms compete to provide the best “product” and offer the lowest price to attract consumers.
Innovation plays the same role for insurance as it does for any other market. Restrictions on insurers’use of data will hinder risk-assessment ability and lead to artificially high premiums.
The market inefficiency created by restrictions on insurers’ ability to analyze risk data reduces the incentive for policyholders to engage in lower-risk behavior and leads to higher premiums.
Earlier in the summer, the Future of American Risk & Insurance (FAIR) campaign released a five-part video series educating stakeholders on the importance of risk-based pricing.
In this latest segment, Dr. Charles Nyce, Associate Professor of Risk Management and Insurance at Florida State University, discusses the importance of innovation in insurance markets, and how advances in data analytics for insurers will benefit society overall.