THEORETICAL RETHINKING OF THE FUNCTIONING OF THE INSURANCE MARKET IN THE CONTEXT OF DIGITALISATION

Abstract

The paper considers the transformation of theoretical approaches to the functioning of the insurance services market due to digitalisation which is the purpose of the study. Digitalisation is not a mere technological upgrade, but a fundamental economic transformation that requires new approaches to understanding basic concepts. The study focuses on the economic theories that describe the functioning of the insurance market, in particular, the concepts of risk aversion, risk pooling, adverse selection, and the Law of Large Numbers. The author outlines the transformation of the main economic theories of insurance under the influence of digitalisation, which will lead to increased personalisation and rethinking of individual responsibility, ‘unbundling’ of risks through hyper-personalisation, which will reduce the level of development of collective insurance but will allow the creation of new risk pools. In addition, IoT, telematics, and Big Data will allow for more accurate risk assessment and lead to new forms of market segmentation. Moral hazard will take on new forms. The author examines the impact of digital technologies on consumer behaviour, the formation of digital goods and their value, the creation of new business models, and the need to move to a proactive model of risk management and prevention. The main advantages of the digital economy development and its impact on the insurance services market, in particular, the promotion of improving the quality of services, ease of purchase, and reducing the cost of obtaining them, are investigated. In particular, the author highlights the insignificant impact on productivity growth: the impact of digitalisation on productivity growth depends on the sector of the economy, the level of market development and the company. The key problematic issues that are becoming relevant with the development of digitalisation are highlighted. The main challenges include: market readiness for transformation, addressing information asymmetry and the high cost of searching for information about services in the market, changes in the methods of regulating the insurance market as the market is undergoing a complex reconfiguration under the influence of digitalisation, consumer confidence and data privacy, cybersecurity risks, and the need for specialists in the new digital age.