The concept of micro-insurance has been around for a long time,and the activity in that area is now increasing rapidly, especiallydue to the InsurTech movement.

Pervasive mobile and digital capabilities alongwith cloud computing have made it much easierto insure a wide range of individual events, activities, or thingsfor a short period of time.

On the other end of the spectrum, the idea of a unified,all-risks coverage for an individual has long been theorized, butunderwriting a person for auto, home, liability, life, disability,and other risks in one bundle has not yet been practical.

I’m going to call this one-policy-covers-all-risk approachmacro-insurance. Now that technology is advancing so rapidly, andcustomer expectations for innovative solutionsare high, could macro-insurance become a reality? Will we face atime in the future when customers must choose between the micro ormacro approaches for insurance coverage?

Single underwriting process

This might seem like an academic question, but there is at leastone new entity that plans to offer a type of macro-insurance.An InsurTech calledSherpa promises to provide customers coverage across allinsurance sectors using a single underwriting process andcapitalizing on a direct business model (no agents or commissions).The company claims to have a process that uses new data sources,artificial intelligence, and deep analytics. This could bedismissed as another hare-brained idea from people that do notreally understand insurance. However, Sherpa is collaboratingwith Gen Re and Guy Carpenter, which adds instant credibility to theventure.

Whether Sherpa will be successful remains to be seen, but itmight be worthwhile to explore the opportunities and challengesrelated to macro-insurance to get a glimpse into how thesedevelopments might affect the insurance industry from differentperspectives.

Customer: From a customer perspective, the idea of anall-risks policy with no agent commission seems quite appealing.Who wouldn’t want to go through an underwriting process once andhave coverage for all the typical risks a person (or business) islikely to face? However, some people might have an issue with“putting all of one’s eggs in the same basket.” That could be adeterrent to the macro approach for some customers.

Agent: At least in the Sherpa example, there are no agents.So this is a non-starter for distribution partners. However, othermodels may arise that offer macro-coverage and rely on the adviceand council from either a fee-based or commissioned agent.

Actuary: Yikes, where to start! The macro approach is anactuary’s nightmare. There are two possible approaches. First, itmay be that a team of actuaries works together to contribute intheir areas of expertise to design new products. The secondpossibility is that actuarial is completely revolutionized, with AIand advanced analytics playing a key role, using a blend oftraditional and new data elements. In either case, pricingprecision will likely take some time to evolve.

Underwriter: Underwriting the person is a differentapproach and will require some blend of human expertise indifferent fields with new data and advanced technologies. Any wayyou look at it, underwriting becomes a completely new game in themacro-insurance world.

Macro-insurance is in its infancy

We could continue to explore other roles and other implicationsof these approaches, especially the complex regulation angle. Butthese initial discussions provide a preview into the kinds ofissues that the industry needs to tackle. At this stage,micro-insurance is off and running, with companies like Trov,Slice, and LenderBot making strides. Macro-insurance is in itsinfancy and may take a long time to develop, but the concept isintriguing, and it appears that the industry is willing to begin toexplore the potential.

So, what’s gonna happen? The most likely scenario is thattraditional insurance lines of business will remain for a longtime, supplemented by rapid growth in micro-insurance that oftenextends into new coverage areas, while macro-insurance begins aperiod of discovery and slow evolution.

Mark Breading is a partner atBoston-based SMA. Emailhim at [email protected].This article first appeared on StrategyMeetsAction.com and is reprintedhere with their permission. Opinions expressed in this article arethe author's own.