Disruption and the growing influence of technology on the insurance industry have been major discussion points in recent years, and that continues to be the case at the Airmic’s 2018 conference currently taking place in Liverpool.
The issues were again raised in a new report published by Airmic and prepared by the Cass Business School, with the study also finding that boards need to reappraise their approaches to risk management in order to take full advantage of the opportunities presented by the so-called fourth industrial revolution.
Building on this theme, the report which advises that the risks associated with digital transformation can be addressed effectively given the right approach, there are new recommendations on a way forward based on adapting and adding to principles of resilience that have proved effective in the past.
The report, titled ‘Roads to Revolution’, asks how organisations are going to transform their business models to ensure resilience, value and growth in the digital age?
Disruption has been repeatedly raised as an issue during the conference, with many discussing changes in clients’ expectations, a shift in the type of assets being insured as well as the sort of tangible to intangible threats they are facing.
From factories and solid assets of bricks and mortar that were previously the biggest risks to a company in terms of fire, theft, terrorism and vandalism – issues such as reputation, brand and business interruption are increasingly the key concerns for large commercial insureds.
This is part of the new world where the movement form tangible to intangible is key, and the head-scratching that is occurring as insurers work out what products they can offer to customers– and what they will actually need.
The best examples for this tangible/intangible idea is Airbnb and Uber: Airbnb is the biggest accommodation provider in the world but owns no hotels. Uber is the largest taxi company, but owns no cars.
As the report highlights, it is therefore critical for insurers to progress and change their mindset on what they previously knew about assets and customer expectations.
Digital technology has become much more than just an efficient way of doing things, but is now at the very core of how firms operate.
Whilst acknowledging the far-reaching benefits of the disruptive effects, the report warns that 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,” it added.
Digital developments within insurers have also added to the importance of strong cyber-governance, whilst national regulatory guidelines have not kept pace with the changes: “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.”