In or out? With the technology to establish the reality of events, as a society, are we ready to examine the consequences of these capabilities?

Someone has finally done it--what has been technically possible for some time has been commercialized by a device called Hawkeye. Over the past several years, inventor Jeff Hawkins from the United Kingdom has put together the requisite components to develop software that allows for the accurate determination of the location, striking angle, reflection angle and trajectory of a ball in motion. This is interesting to some as an exercise in Newtonian physics and to others as an integration of sensor and information technology. For the larger audience of sports fans, there are greater portents from this accomplishment. For example, the International Tennis Federation approved its use for competitions such as Wimbledon and likely will allow its use in World Cup competition.

The continued encroachment of technology into sports mirrors the same trend in other aspects of our lives. Whether it's the use of instant replay to resolve disputed calls in college or professional football, DNA evidence in the courtroom, or the use of video cameras at traffic intersections, we're increasingly being confronted with the reality of events versus our perceptions or version of what happened.

This trend also has found an audience in other forms of entertainment as evidenced by the popularity of crime dramas that focus on forensic pathology. These advances herald an improvement over previous ways of judging contests or events, and are generally accepted as being a good thing. We now have to determine if, as a society, we are ready to examine the consequences of these capabilities, especially as they relate to insurance.

One of these consequences involves a persistent challenge that confronts the insurance industry. It seems to be a maxim of human nature that people will try to "get away with something,' or, rendered in slightly more eloquent verbiage, to "capitalize on the opportunities that present themselves" In the spirit of this discussion and full disclosure, we in the insurance industry often refer to such activity as fraud. To date, lapses of memory and a lack of precision when providing detail for the purposes of underwriting or filing claims have been compounded by a lack of systemic data hygiene within many insurance companies. So, in addition to the challenge of maintaining process efficiency, insurers have to deal with more than 20% of the U.S. population who are purported to feel that it's OK to pad an insurance claim.

These affronts amount to billions of dollars of fraud that impact everyone who pays an insurance premium. It's hard to calculate the amount of money required to cover all the variables involved in retroactive fraud detection and reactive claim service. However, at some point, these equations could become more balanced. Instead of working against the "getting away with something" aspect of human nature, and the idea of chasing claims processing efficiency with technology, perhaps it's time to engage the insurance marketplace with a new model of personal risk management.

In the new model, the insurance consumer, whether an individual or a business, would be much more integrated into the activities of mitigating and controlling the risk they present to the insurer and its investors. The concepts of insurance policies and specific contracts gradually give way to the idea of overall risk mitigation contracts--a kind of "risk protection dial tone" This foretells of the need for partnerships between providers of risk mitigation (carriers, service providers and distribution channels) and the consumers and businesses In need of protection products or services.

Today, forerunners of the "active risk" concept Include prototypes and pilots of real-time premium pricing mechanism for auto insurance. Participants agree to exchange a little public anonymity for the reward of premiums based much more closely to the risk they actually represent. Extending this concept toward that of active risk management will require the Integration of emerging high-speed data communications and ubiquitous sensor networks.

Data networks are steadily progressing with third generation cellular data networks currently being deployed that deliver between one and two megabits/second, and fourth generation networks that are being discussed that will deriver upward of 100 megabits/second. Sensor technology and software needed to Integrate data from multiple devices also is might so that it will be possible to capture almost any relevant aspect of reality from wherever risk needs to be controlled.

The future of insurance is trending toward a higher level of customization In both products and services. Instead of worrying about hiding or misrepresenting events, active risk customers will agree to participate In the process by exposing what might have been considered to be private information in today's culture. In exchange, these consumers will have more control over the cost, services and quality of risk protection as they go about their lives in a complex world. So, the question remains, are you in or are you out?

Best's Review contributor Jamie Bisker is a global insurance industry leader with IBM Institute for Business Value. He can be reached at [e-mail].