13 September 2017 Insurance

Fourth industrial revolution will transform insurance value chain

The advent of artificial intelligence (AI), the Internet of Things, robotics and big data is transforming global economic systems and, in turn, revolutionising risk assessment and underwriting through the use of machine learning algorithms, Tim Yeates, managing director of Axco, told Monte Carlo Today.

“We’re no longer talking about digital strategy, we’re talking about strategy in a digital world,” Yeates said.

“The fourth industrial revolution is an increasingly digital world. It is connecting machines, but it is fundamentally moving knowledge, data and information from anywhere in the world.”

Axco provides market intelligence to the re/insurance market, and has released a white paper on the impact of the ‘fourth industrial revolution’ on insurance.

Yeates believes the digitisation of insurance will increase efficiencies and the affordability of the product for smaller firms, as well as insurance penetration in emerging markets.

Advanced imaging technology, for example remote sensing satellites orbiting the Earth, have increased in resolution exponentially, which in turn has become an integrated part of risk assessment. This can be seen with Munich Re’s NATHAN (Natural Hazards Assessment Network).

Real-time data and machine learning can now facilitate live premium readjustments of claims forecasts based on the outcomes of different scenarios, the white paper stated.

Furthermore, the report claims the digitisation of insurance underwriting may reduce back office costs and contribute to a lower combined ratio, and the claims ratio may be improved by the reduction of costs.

In the longer term, Yeates sees AI, machine learning and predictive analytics enabling underwriters to quick capture patterns in large sets of unstructured data.

He believes this revolution is already happening.

“There are very substantial insurtech insurers already in play, being heavily financed to grow fast,” Yeates said.

“There are very large traditional insurers who have advanced strategies surrounding insurtech, predictive analytics and big data. These are becoming increasingly commonplace in the market.”

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