Reinsurance and fourth industrial revolution
History of industrial revolutions
First Industrial Revolution 1760-1840
Mechanised production using the ingenuity and technology of the day in the shape of the steam engine revolutionise manufacturing and transportation.
Second Industrial Revolution 1870-1914
This revolution saw the use of electricity allowing manufacturing processes to become even larger scale, and the work and the efficiency of a single person to be magnified.
Third Industrial Revolution 1960-2010
This revolution saw the mass miniaturisation of electronics and the creation of information technology. This revolution transformed the world around us, creating the internet, and the digital world that we live in today.
Fourth Industrial Revolution 2010-?
This revolution will see the use of big information; the internet of things will be used to collect data and to provide services in a way not previously possible. Machine learning and artificial intelligence will provide ways and means of increasing efficiency and magnifying resources. Fractional services and the gig-economy will change the way that companies consume services and the way that people work.
This is the second part of an article about the impact of the fourth industrial revolution on the reinsurance industry.
We are currently in the early stages of a new industrial revolution, that I believe started around 2010. The signs are these for those who know where to look, and for those making or leading the transition there are great opportunities. In part one, I explored how the world is starting to change, and the impact of things like machine learning, and changing working practices (the gig economy) and desire of flexible services.
Changes in services and products
Just as the gig economy has made the concept of buy what you need when you need it, people and the organisations that they employ are starting to want to buy services in a far more flexible way. They want to be able to turn an insurance product on when they need it, not be paying for it all the time. To enable this approach to services takes changes in the organisations providing them, not only in the computer systems and business process, but in the use of smart sensors and devices that are connected to the internet (sometimes known as the internet of thigns), that can, for example, detect that the vehicle is being driven and implement the “Vehicle in motion cover”, or perhaps detect that the vehicle has been parked for the evening and that the cover should be changed accordingly.
Start-up companies and disruption
With the information and communications technology created during IR3, that has now reduced the cost of international and data communications to almost free, companies that start today have no need to consider themselves tied to one location or geography, their market is global from day one. This changes the nature and the outlook of companies, and enables them to think and strategise disruptive services in a way that hasn’t been possible before. A boss of mine back in 2000 said that the biggest potential competition to the large international insurance company that we both worked for could be setting up in a spare bedroom right now — his words have never been more true than they are today.
How to survive an industrial revolution
As with nature it is not always the strongest that survive, it is those that can adapt to their environment. For the insurance industry, this is going to mean innovating and accepting change. It is quite possible that the insurance sector is going to have to adapt and innovate in a way that it hasn’t done since the 1700s. For a sector that has so much history, and people who “have always done it this way”, change isn’t going to be something that will happen quickly, or that will be achieved without the help and guidance from outside the organisation, but it will happen.
There will of course be those organisations who either don’t see the changes coming, or who resist the change — and these organisations are likely to become the earliest casualties of the fourth industrial revolution.
This time offers many, many opportunities for the people and organisations who are willing and able to adapt to their new environment, and equal dangers to those who ignore the changes. The tools of this revolution such as the internet of things (IOT), machine learning and artificial intelligence (AI), have the power to collect more data, process that data to discover new information, and to magnify the capability and efficiency of global resources in a way that has never been possible before.
What will it take to start the transition? Bravery, the ability see and read the signs, and the ability to efficiently innovate and implement change effectively.
How ready are you and your organisation for the fourth industrial revolution?
Darren Wray is the chief executive officer of Fifth Step and has more than 25 years of IT and management experience within the financial services and other sectors. Fifth Step operates globally from its offices in Bermuda, London and New York, providing IT leadership, change management, governance services to executives and senior managers within insurance, investment, legal and banking organisations of all sizes
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