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The Insurance Industry as a Complex Social System: Competition, Cycles and Crises

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Insurance is critical to the fabric of modern societies and economies, but the insurance industry continues to suffer deep cycles and periodic crises. These have a great socio-economic cost as insurance cover can become prohibitively expensive or unavailable, damaging livelihoods, property, belongings and employment. These phenomena are poorly understood. A set of socio-anthropological and behavioural hypotheses have recently been posited. We investigate these explanations by means of an agent-based simulation model. The model is parameterized on actual property insurance industry data and is carefully validated. Our main result is that simple behaviour and interaction at the individual level can result in complex cyclical industry-wide behaviour. Heterogeneity and interaction at a micro level must therefore be understood if cycles and crises in the insurance industry are to be managed and prevented.

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  • Iqbal Owadally & Feng Zhou & Douglas Wright, 2018. "The Insurance Industry as a Complex Social System: Competition, Cycles and Crises," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 21(4), pages 1-2.
    • Handle: RePEc:jas:jasssj:2017-27-2
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    Cited by:

    1. Torsten Heinrich & Juan Sabuco & J. Doyne Farmer, 2022. "A simulation of the insurance industry: the problem of risk model homogeneity," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 17(2), pages 535-576, April.
    2. Sedar Olmez & Akhil Ahmed & Keith Kam & Zhe Feng & Alan Tua, 2023. "Exploring the Dynamics of the Specialty Insurance Market Using a Novel Discrete Event Simulation Framework: a Lloyd's of London Case Study," Papers 2307.05581, arXiv.org.

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