Martin McLachlan says some insurance solutions have led to spin-off opportunities.
The law of unintended consequences is one of the most intriguing principles in all of social science. One economics website defines it as the fact that the actions of people always have effects that are unanticipated.
Often such effects are less than desirable. For example, at one time the US applied tariffs to imported steel. This was fine for American steel manufacturers and their employees because prices could be set higher since competition had been, at least partly, stifled. However, the higher-priced steel immediately hit US car manufacturers which found their finished product at a disadvantage to imported vehicles. Not quite what was intended.
Similarly, when the US supplied the Shah of Persia with sophisticated currency printing machinery, it was probably not thought likely that the equipment would be used, allegedly, to flood the US with fake $100 bills when the complexion of the Iranian government changed.
Security is an area notorious for ‘whoops a daisy’ moments reflecting the fact that the bad guys are often as bright as the goodies. In Russia, car theft was a problem. The simple solution was to fit car alarms. The criminals did not let such a simple response foil them. They simply shot the driver and took the keys. Again not quite what was planned.
There are also examples of the beneficial application of the law of unintended consequences. Aspirin was intended for pain relief, but as a side effect it thins the blood and so has gained a place in the treatment and prevention of heart disease.
Technology has many examples of the impact of this law. Web technology was developed to allow physicists to exchange research papers – it is now used in hundreds of ways not envisaged by its original designer. It is likely that the deployment of networks in the insurance industry will result in applications not currently envisaged.
When pioneering insurers and brokers were setting up internet-based quote services, they did not appreciate that the aggregator model would ramp up competition significantly in the personal motor market. Every indication is that the same will occur in the market for tradesmen insurances.
The imarket portal was established to allow brokers to access insurers’ extranet services. From inception, the conventional wisdom was that trading services – that is, quotes, new business, mid term adjustments and renewals – would be the most popular services and this has proven, to date, to be accurate. But other unanticipated uses have arisen.
A good example is account reconciliation. CGI, a major technology company, has implemented such a service on imarket and hundreds of brokers and insurers use it to cut out the paper chase involved in the traditional ways of handling this function. Brokers and insurers can see each other’s view of the accounts situation and use software tools to remove the Dickensian grind of ticking items off one by one.
The electronic cover notes service is another instance of how new uses can be found for tools designed for another purpose. In this case, the broker requests a cover note via imarket and receives it from a system on the network within seconds. No cover note books are required at the brokers’ offices. Although originally designed to link brokers and insurers, imarket has proved useful for motor vehicle repair shops and loss adjusters to access insurers’ systems. Links to claim suppliers are being investigated.
The law of unintended consequences often permits the bystander to quietly chuckle at the discomfort of others. However, sometimes it does produce positive serendipity. No doubt many examples of both will occur as brokers and insurers become more interlinked by electronic networks.