Veil of ignorance
The shared ignorance of the future on which risk pooling rests, and which behavioral data tends to lift.
John Rawls coined the phrase in 1971, in A Theory of Justice, for citizens choosing the rules without knowing what place they will hold. In insurance, the veil of ignorance refers to the fact that no one knows in advance who in a group will suffer the loss. That is why the lucky pay for the unlucky, each counting on the same solidarity in return. This shared ignorance is what pooling rests on: it makes solidarity both acceptable and necessary. Behavioral data and the predictive power of artificial intelligence lift exactly this veil. They reveal each individual's risk, and the room for pooling shrinks accordingly. Push it to perfect prediction and insurance would dissolve into a personalized savings account, with no solidarity left in it. Keeping a measure of ignorance is the price of collective protection.
As long as the insurer does not know who will have an accident, good and bad drivers contribute together; perfectly individualized pricing would lift this veil and make the solidarity between them disappear.
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