DESIGN CHALLENGE
How might we design the future of home insurance?
Introduction
Why Insurance?
Insurance is the naming, prediction and sale of risk between the party who would otherwise bear the risk (think homeowner/insured), and a second party (think insurance company) who for a price (insurance premium) agrees to hold a portion of the first party’s risk. The complexities of modern life have given rise to multiple risks impacting a single family: property/casualty, health, disability, life/death, unemployment, vehicle, liability, etc. Insurance for each risk is available, sold separately and bears inconsistent conditions, exclusions and claim processes.
Insurance is an essential piece of financial health and wellness, and often ignored by people and communities where it is most needed until too late. Perhaps people don’t buy insurance because it is designed to not pay them? We want to fix that!
Why Home?
By “Home” we mean the holistic concept of “having and enjoying a place to live and thrive,” beyond the physical structure of the building. Think about all the utilities (energy, telecommunications/internet, road access, water & water treatment), neighbors and neighborhood (food, schools, shops) and proximity to jobs, cultural events and other amenities.
Why Home Insurance?
Insurance is a huge industry. We focus on Home Insurance, as a part of the Property & Casualty (P&C) segment, which accounts for 48% of all insurance premiums paid in the US = a huge part of a huge industry!
By Home Insurance, we mean both people who are homeowners and renters. Homeowners typically must buy insurance as a condition of their home mortgage. Less often do landlords require renters to maintain insurance. With the rise of renters and the unaffordability of home ownership in major metropolitan regions or for specific demographic groups, getting renters insured can be a component of economic ballast and justice.
STUDENT DESIGN WORK
Four student teams embarked on the design challenge in the Spring of 2022. 45 individuals collaborated regularly with our Redesigning Finance students to focus on real-world systemic issues or improving the contributions that BHID&URs can make as the innovation assets and creative people they and their firms represent.
The objective was not to deliver something finished, but rather insights for where to start. Below you will find their work and we welcome you to build on their insight and/or follow up with the students and teaching team directly.
TEAM 1
Relationship Builder
Look at the device on which you are reading this summary. Is it a laptop? Desktop? Phone? Desk? Do you remember when you bought this device? How much did it cost? In what condition is this object now, compared to when you purchased it? Do you still have the receipts? Write all of this information down. Now, imagine having to do this for all of the…
‘Home’ is where we feel safe, supported and trusting even when things get tough. We want to build communities which make us feel at home - even amid the aftermath of natural disasters in vulnerable places. Our interviews with residents of Paradise, CA helped us identify THREE major gaps within the community…
Community as our Ultimate Asset
TEAM 2
TEAM 3
Ensuring the Future. Insuring People.
The world that we live in today is more unpredictable than ever. An increase in the number of natural disasters, such as the wildfires that have devastated California in recent years, has made it evident that a new approach to insurance is needed. The COVID-19 pandemic has also shown us that there are risks unknown or unimaginable to us…
TEAM 4
Ai.ia
Natural disasters are becoming an increasingly frequent phenomenon. The human impact of these disasters is substantial, but the rebuilding process is not catered to supporting homeowners. Through our conversations with residents impacted by the Paradise wildfires, we learned about the challenges residents faced in rebuilding their homes and lives after the…
TEAM 5
Ledgers for Reliability
On Thursday, November 8, 2018, a fire ravaged the small town of Paradise, California, making 2018 the second (only to 2020) most active fire year on record on the West Coast. As global temperatures rise, resulting climate change is expected to increase the frequency of these natural disasters and exacerbate their intensity and damage…
TEAM 6
Project EMPATH
(Estimating and Managing Possessions by Addressing Trauma for Homeowners)
After disasters, customers are expected to itemize every single item they have lost to claim their payout from insurance. When the average American household has 300,000 items, this process can take months or years. Customers often argue with insurance companies because how can you place a monetary value on an item of sentimental…
PRINCIPAL PARTNERS
MunichRe
Reinsurers, like MunichRe and SwissRe, insure the primary insurers and issue other special policies, such as pandemic risk, NatCat and other coverages. When the base of reinsurance expands, the premiums charged by primary insurers can be reduced and the coverage (types and amounts of risks) can expand, because the reinsurers are broadening the investors willing to buy portions of the risks. Like other areas of the financial system, insurance and reinsurance fractionalizes risk into chunks to fit into specific investors’ appetites, some who bet that the insured risk will materialize (say a primary insurer) and others betting it won’t materialize (say the buyer of ILS: Insurance Linked Securities).
We invited MunichRe to be our Redesigning Finance 2021 class partner because they are a leader in quantifying and reinsuring NatCat, pandemic and similar risks.
As we are all seeing through the COVID Pandemic, Climate-triggered NatCat events and movements for racial justice, few people or families can self-insure against risks largely outside their responsibility or control.
We are partnering with MunichRe using design principles to brainstorm Expanding who gets insured, Expanding the risks that insurance actually covers and reducing the “exclusions, defenses and carve-outs” to those coverages, Assuring that insurance claims are resolved quickly, equitably and fairly, Incentivizing rebuilding more resiliently in vulnerable areas like Paradise CA, and Assuring that primary insurers (net of reinsurance) can afford to stay in business and charge an affordable premium in areas of vulnerability like Paradise CA.
