Insurance product creation historically has been based on historical data — the rearview mirror view. It always has been, and there is value in doing so.
Past trends are likely to be repeated, and coverages and rating need to reflect that. And insurance departments require years of historical data to approve changes. However, there is a fundamental change afoot that cannot be ignored.
The once-in-100-years event is rapidly headed toward becoming a once-in-10-years event. And as COVID-19 has shown, “weve never seen this before” is a veritable constant.
As a society, and thus as insurers, never before have we experienced 9/11, the Fukishima nuclear disaster, Hurricane Sandys impact, the SARS and MERS global reach, and the list can go on.
A stark reality is that the past is no longer the only predictor of future outcomes. And there are tools available to help with this.