There is no "diffusion over time" with variable premia and short terms. Insurance companies already know the probability of an event within a risk pool over a term. That's not what this is talking about. They are looking to condition on more and more information so as to slice a risk pool towards a 0-1 risk, which, because they are positive EV, will make their profit more and more certain. They are looking to eliminate the negative tail, the existence of which is the whole point of paying out that positive EV.

In the end, this is going to happen. Insurance companies will be soothsayers and get paid for essentially making advisory predictions, not offloading risk, while society will have to agree to bear the cost of known outcomes over which people generally have no individual agency.