Asia Insurance Review's special summit on Industrial Revolution 4.0 and its impact on insurance got off to a rousing start in Seoul yesterday, where speakers delivered a balanced perspective of how the industry can capitalise on the technological, economic and social disruptions that are happening as the world enters its fourth major industrial era since the original industrial revolution of the 18th century. With a world being shaped by a fusion of technologies and the blurring of lines between the physical and digital spheres, the message on the first day of the conference was for the industry to keep an open mind and seize on opportunities to enhance its value proposition.
In one of the keynote addresses, the International Insurance Society’s CEO Michael Morrissey said that the fourth industrial revolution is set to be even more transformative as adoption is exponentially faster than previous industrial revolutions. Furthermore, it has the capacity to disrupt almost every industry and territory around the world.
However, he also painted the scenario of the ‘Fourth Insurance Revolution’ – where the basic function and processes of insurance are being disrupted at a rapid pace. Describing the ‘Great Fire of London’ in 1666 as being the start of Insurance 3.0 where insurance became an empirically based enterprise, most of the changes within the industry up till now had been incremental.
But with the help of technology, Insurance 4.0 is set to redefine the way insurance has been thought of and perceived.
“Broadly speaking, Insurance 4.0 means the industry is becoming part of an ecosystem of connected and communicating sectors that are symbiotic, not as ‘B to B’ business to business, or ‘B to C’ business to consumer, but ‘E to E’ which is everything to everybody, where the information exchange benefits all participants but is not necessarily understood by all parties,” said Mr Morrissey.
Elaborating on the new mindset of what insurance can be and do, he said that the industry’s role in loss mitigation could feature more prominently as stakeholders look for ways to reduce risk in society.
“Insurers basically want to sell protection for when losses occur, which they have done for centuries, although customers now want to buy loss prevention and mitigation in the form of broader advisory services.
“If real customer centricity is to be achieved, making this fundamental shift in the business model of how the industry functions would truly mean we have reached Insurance 4.0,” he said.
But if risk is materially reduced, will the size and relevance of the industry then shrink alongside it? To that end, he pointed out the political capital that the insurance industry possess through the size and influence of its investment portfolios- with the industry having over $35 trillion of invested assets.
“Our most promising avenue to high esteem with policymakers is by securing their understanding of the vital role our investment portfolios play in helping them achieve their goals.”
Automation and outsourcing
Meanwhile, senior deputy governor (Insurance & Financial Consumer Protection) of Korea’s Financial Supervisory Service (FSS), Lee Sangche, said the growth of insurtech will eventually alter the look of the insurance industry.
“It might be said that the application of IT has been more or less limited to data management but it may not be too long before advanced technologies like big data and the Internet of Things take hold in the entire insurance process from product development and sales to claims payment,” he said.
This will thus alter not only the business environment for insurers, but also the work environment for insurance professionals.
He added: “In the digital era, we should also see the growth of ‘made-to-order’ insurance policies that are offered according to the customer’s specification using the customer’s individual data.”
Furthermore, the accelerating convergence of insurance and non-financial industries will continue to expand the boundaries of insurance.
“Convergence of the two will then ensue and when that happens, the boundaries of insurance may well extend beyond produce development and sales to new value-added services like personalised healthcare and risk prevention management.
“This will most certainly give a major boost to the growth of the insurance sector,” he said.
But what then of the prospect of redundancies in the industry? While it is a challenging issue, he believes the theory of AI rendering much of the insurance workforce obsolete is too simplistic.
“If insurance is a service that ultimately demands human empathy, understanding, and interaction, then insurance professionals will be able to differentiate their service and value from those of AI.”
Mr Lee also touched on three issues where the regulatory environment can be more supportive of the changes facing the industry in Korea.
Firstly, he said the regulator would need to accelerate its ‘regtech’ endeavours and rely more on automation for compliance work.
To that end, the FSS is working on a pilot project for “machine-readable regulation’, which is an automated process that performs compliance with minimal human intervention.
Secondly, he conceded that the regulator will have to evaluate and fine-tune the assistance it provides to fintech firms in order to help unleash the sector’s full potential.
On a third and final note, he said that the FSS will continue to encourage ‘responsible innovation’ from both traditional providers and fintech firms in the interest of consumer protection.
“What we envision for our consumer protection as it relates to fintech is consumers exercising control over the use of their personal data and financial service providers and fintech firms keeping consumer data secure and respecting consumer privacy.”
The Insurance Summit on Industrial Revolution 4.0, which ends today, is co-organised by Asia Insurance Review and the Korea Life Insurance Association. Sponsors include Kyobo Life, A.M. Best and Darktrace.