Commercial insurers must embrace technology or get left behind: Airmic CEO
The commercial insurance sector must adapt to the fourth industrial revolution if it is to remain relevant in five to ten years' time, said Airmic CEO John Ludlow.
Speaking at Airmic's annual conference in Liverpool - this year titled 'the Future is Now' - Ludlow suggested that rapidly changing business models and the advent of cyber-technology are creating completely new risk landscapes and, at the same time, creating unprecedented opportunities and challenges for both insurers and risk managers.
The fourth industrial revolution is defined by technologies such as robotics, AI, blockchain, Internet of Things, and autonomous vehicles.
“We’ve been talking for years about the need for insurance to cover risks to intangible assets yet, despite our best efforts, we’ve made very little progress. In some areas, like business interruption, there’s a perception that things have actually gone backwards,” said Ludlow.
He also cited a recent statistics that 82 percent of Fortune 500 companies' value now reside in intangible assets.
“We know that the commercial insurance market is very experienced at protecting physical things like property, but that is not where the future lies for most of its customers,” he said. “Threats to reputation, cyber, supply chains and other intangibles are what really worry them and insurance needs to be able to find solutions. Otherwise it will cease to be central to the risk management of most large companies.
“This is a challenge equally for buyers, especially in the way they use and gather data and understand the wider risk picture in order to use insurance strategically and maintain the interest of the C-Suite. If insurers, brokers and buyers can work together to resolve these challenges – and I am sure we can – then the future will look bright.”
Ludlow's warning is supported by a new report for Airmic, prepared by the CASS Business School, which suggests boards need to reappraise their approaches to risk management to take full advantage of the opportunities presented by the so-called fourth industrial revolution.
The report, 'Roads to Revolution', examines the way digital technology has become more than just an efficient way of doing things, but at the core of how firms work.
“Board members need to understand that organisational resilience alone is insufficient in the digital age. Continuous business model reinvention is necessary not just for future success, but for the very survival of the organisation," the report warns.
"The challenges that digital transformation poses to corporate governance are daunting. Legacy corporate governance principles and factors … do not seem adequate to provide effective monitoring, strategy and legitimacy to organisations."
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