Terror insurance - Are you covered by any chance?
I came across this interesting article on 'terror insurance' here. I share with you my thoughts on the same.
Terror insurance currently seems to be a very nascent area with a lot of unexplored (with a few exceptions though) territories. But looking at the frequency and magnitude of terror attacks the world is witnessing today, this surely will take prominence in times to come.
Insurance industry works a lot on using the actuarial data to come up with innovative products and policies to be offered to its customers. The underwriters of an insurance company use this actuarial data to evaluate an application and set suitable premiums for the same. Even though the technology has advanced so much, the insurance industry still has a lot of processes carried out offline. It definitely is time for the industry to the make the most out of the technology they have access to. It's time for the insurers to offer unheard-of products and streamline their policies to address issues that have surfaced of late (like the terror attacks) and have actually begun to affect the lives of the common man more than ever before!!
Keeping this in mind, what challenges do the insurers face while coming up with innovative products that cover people against terror attacks?
- The biggest challenge as I see it, would definitely be the lack of actuarial data with the insurers themselves on the number and nature of claims made under this category. Since the claims for losses incurred on grounds of terror attacks in specific, hasn't been so profuse, the insurance companies for sure don't have a lot actuarial data that might help them specialize themselves to offer customer centric products.
- What makes things even more challenging is the fact that terror strikes are an awfully impossible phenomenon to predict. Almost all the companies in the insurance domain make use of predictive analytics (a prediction based on results that are carried out periodically to study the market trends) to help them come out with policies that address the gap in any segment of the insurance market that they feel can give them an edge over others. The success and accuracy of any predictive analytic model depends on the accuracy with which data (the more accurate data you have, the better it is for you) is interpreted and correlated. If you don't have accurate data in the first place, then your analysis is bound to be unreliable. Given the above fact, it is extremely challenging to devise a predictive model that can accurately predict the frequency of occurrence of a terror attck and the magnitude of the losses incurred due to a terror strike!!
- If there is one thing that has been haunting the insurance domain for a long time, it undoubtedly is addressing the issue of fraudulent claims. These frauds you see are everywhere. Since this area in insurance is yet to be explored, they would be always people out there 'trying to make the most of this opportunity'. The insurers need to ramp up to fight against any kind of frauds.
Although it is the human life and/ or property that are always subjected to a loss in any terror strike, it would be interesting to see how the insurance industry gears itself up to address the needs of customers, by offering them specific products in this area.
Any thoughts on this from the readers would be highly appreciated.
