Re-inventing Insurance

I've been studying the insurance business for a while. It is quite intriguing – the whole business model is to allow someone to pay a small fee, and alleviate them of their financial burden when undesirable event happens.

There are all kinds of insurance contracts in terms of length, subject, coverage and payment methods. For subject, you can hedge almost on anything, from death, most kinds of accident, cancer, your favorite pet, your ears and nose… but does it make sense to insure on events such as a fight with your best friend, or missing an important appointment?

My guess is probably not. First of all, it won’t make too much sense to provide financial compensation in such event. It might be better if there’s other way of pay back… (emotionally, like a hug from a beautiful girl?) Second, it’s (probably) hard to estimate the occurrence frequency. Third, it needs some groundbreaking ideas and model to avoid adverse selection and moral hazard problem. Forth, a wild guess would be that the fee collection and claim payout would be a lengthy, messy process that doesn’t make any business sense whatsoever. Although there might be a strong demand from customers, but the current model definitely won’t work.

I’d like to think of finance as a tool to deal with difficult problems in life. I’ve successfully IPO myself to lose 3 kg in 3 weeks. I’ve also seen micro-finance doing its magic in developing countries. I hope there’s a way to re-invent the business model of insurance company, and instead of passive compensation, perhaps take on a more active role to bring us happier lives.