We are experiencing the 4th industrial revolution ‘industry 4.0’ in which technology is becoming more and more entrenched within societies. Technological innovation and emerging assets such as the internet of things have immensely aided in the development of insurance specialities and products. So what do these “new things of value” mean for the future of insurance and risk management?
It is clear that the insurance sector needs to overcome technological hurdles. The interconnection between man and machine can expose cyber risks, business disruption and macro environmental issues; meaning an active approach needs to be taken to avert these eventualities. In a recent study conducted on the challenges of Industry 4.0, PwC estimated that “over the next 5 years, companies will invest almost 3.5% of their annual turnover in to Industry 4.0 solutions.”
Exponential growth in the economy will provide a unique advantage for insurers and re-insurers. Challenges can propose opportunities. Ultimately, we could see the development of insurance moving towards an era of increased monitoring capabilities, prescriptive and predictive analytics, cognitive computing for machine learning and predictive system optimisation. This can provide a means to understand and articulate risks for improved advice to clients on their risk profiles. Gradually moving towards a more value added risk management technique and amalgamate in to a platform of insight delivery.
Image courtesy of Olivia Cho
The opportunities presented by this revolution are incredible. According to McKinsey, the economic impact of smart factories could reach up to $2.3 trillion per year by 2025.