Disruptive technologies and their impact on
Risks Management and insurance
Head of Emerging Trends / Michael Bruch /
Insurance Institute of Gauteng (IIG)
Broker Leadership Forum
Johannesburg 17 May 2018
FUTURE AND
LONGTERM RISKS
Allianz Global Corporate & Specialty SE
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CONTENT
TOPICS01 INDUSTRY 4.0
02 DISRUPTIVE TECHNOLOGIES ON THE RISE
03 TOP BUSINESS AND FUTURE LONG TERM RISKS
04 IMPACTS ON THE INSURANCE VALUE CHAIN
05 SUMMARY
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Photos: Shutterstock
01INDUSTRY 4.0
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INTRODUCTION
Introduction
Source: https://www.youtube.com/watch?v=MZkY9HNCiM0
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WHERE IS THE VALUE POTENTIAL OF THE INTERNET
OF THINGS?
New value potential for our clients
Vehicles
Autonomous vehicles and condition-based maintenance
$210Bn–740Bn
Cities
Public health and transportation
$930Bn–1.7Tn
Outside
Logistics and navigation
$560Bn–850Bn
Human
Health and fitness
$170Bn–1.6Tn
Offices
Security and energy
$70Bn–150Bn
Factories
Operations and equipment optimization
$1.2Tn–3.7Tn
Retail environments
Automated checkout
$410Bn–1.2Tn
Worksites
Operations optimization/health and safety
$160Bn–930Bn
Home
Chore automation and security
$200Bn–350Bn
9 settingsGave us a cross-sector view
of a total potential impact of
$3.9Tn–11.1Tn per year in 2025
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BUSINESS OPPORTUNITIES ARE EXPLOITED ALREADY
TODAY
New value potential for our clients
Eliminating inefficiencies and product defects
At Siemens' Amberg Electronics Plant, where IT systems control and optimize processes, production quality is 15 defects per million, which are
detected, enjoys a 99.99885 % reliability rate and 100% traceability.
Reduction of machine downtime – Predictive Maintenance
Volkswagen realized an improvement of 15% in machine downtime in factories. Predictive analytics foresaw the failure of certain components
that caused outages.
Automation of work
The BMW i3 plant in Leipzig can be considered an early example of the smart automated plant archetype, as it is an integrated and highly
automated plant. Robots are used at each stage of production, including the body shop.
Forecasting accuracy
Big Data analytics involves vast data volumes from new data sources for more precise outcome. For example, Hadoop Platform provides a way
to start using the vast amount of unstructured and semi-structured data that organizations have.
Lower emissions and waste and more sustainable use of resources
Parker Water & Sanitation, US, has optimized a much more sustainable use of water by monitoring water flows, water pressure and leaks in the
system. The customers can allow their irrigation activities to be automatically managed by sensors, which also record the amount of rainfall.
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Societal impact
The value of improved health of chronic disease patients through remote monitoring could be as much as $1.1Tn
per year in 2025
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POTENTIAL “WINNER AND LOSER” INDUSTRIES
What drives Industry 4.0?
▪ IT and Electronics
▪ Automotive
▪ Transportation and
Logistics
▪ Healthcare
▪ Energy
▪ Retail
▪ Telecommunications
and Media
▪ Finance
▪ Construction
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Photos: Shutterstock
02DISRUPTIVE TECHNOLOGIES
AND PLATFORMS
ON THE RISE
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FROM “WEAK” TO “STRONG” AIAI IS A SOFTWARE THAT EXHIBITS ANALYTICAL, DECISION-MAKING AND LEARNING ABILITIES
SIMILAR TO THOSE OF HUMANS.
What is Artificial Intelligence?
Photos: Shutterstock
“Strong” AI
agents are
expected on
the market
around 2040
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ol
Autonomous vehicles are expected to be
the most influential AI application in
future
The penetration rate for autonomous
vehicles is expected to reach 5% by
2030
AUTONOMOUS
VEHICLES
Photos: Shutterstock
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Mobility ProviderClaimant
CASE STUDY: AUTONOMOUS VEHICLESHOW IT LOOKS AT PRESENT
Top risks in Focus
Photos: Shutterstock
Driver Car Owner
Car Insurer
Products Liability
Insurer
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Mobility ProviderClaimant
CASE STUDY: AUTONOMOUS VEHICLESWITH AUTOMATED DRIVING ON THE RISE, WE HAVE SIGNIFICANT INCREASE OF PLAYERS!
Top risks in Focus
Photos: Shutterstock
Driver Car Owner
Accredited certifier
OEM
Supplier Software
Supplier Hardware
1st tier Supplier
Claims Service Provider
Assistance Provider
Liability Insurer (OEM)
Car Insurer
Network Provider Data Centre
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Benefits Complications Implications
• Reduction of road accidents
by 90%
• Monetary benefits between
$2,000 to $4,000 per year, per
vehicle
CASE STUDY: AUTONOMOUS VEHICLES
Case Study
Photos: Shutterstock
• Sophisticated combinations of
sensors and AI software
• But for certain decisions there
are no established universal rules
• Make roads safer
• Risks may require new types of
coverage
• New product liability coverages
will be needed
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PLATFORM BUSINESS GETS MORE IMPORTANTCOMING NOW: SMART INDUSTRIAL PLATFORMS
Advanced analytics &
Machine LearningBig data platform Adaptive security
Factories
Cities
Mobility
Agriculture
Health
Homes
Retail
Things &
Agents
(Industrial)
Gateways
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03TOP BUSINESS FUTURE
LONG-TERM RISKS
Photos: Shutterstock
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TOP 10 GLOBAL BUSINESS RISKS FOR 2018
Top Business Risks
Source: Allianz Global Corporate & Specialty. Figures represent the number of risks selected as a percentage of all survey responses (2,376). The 1,911 respondents could provide answers for up to two industries and up to three risks per industry.
Photos: Adobe
Cyber incidents(e.g., cyber crime, IT failure, data breaches)
240%
2017: 30% (3)
Natural catastrophes(e.g., storm, flood, earthquake)
330%
2017: 24% (4)
142%
Business interruption(incl. supply chain interruption)
2017: 37% (1)=
Market developments(e.g., volatility, intensified competition/new
entrants, M&A, market stagnation, market
fluctuation)
422%
2017: 31% (2)
Changes in legislation and regulation(e.g., government change, economic sanctions,
protectionism, Brexit, Euro-zone disintegration)
521%
2017: 24% (5)=
Fire, explosion
620%
2017: 16% (7)
New technologies
(e.g., impact of increasing interconnectivity,
nano-technology, artificial intelligence, 3D
printing, drone)
715%
2017: 12% (10)
Loss of reputation or brand value
813%
2017: 13% (9)
Political risks and violence
(e.g., war, terrorism, civil commotion)
911%
2017: 14% (8)
Climate change/increasing
volatility of weather
1010%
NEW
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4 THESESTHE SMART FACTORY AND ITS IMPLICATIONS FOR BUSINESS INTERRUPTION
Top risks in Focus
Machinery Breakdown and BI frequency losses will be reduced due to flexible production processes
and automated maintenance
Some Cyber events will be as severe as major CAT events
Non-damage BI losses will increase significantly
Most Cyber BI losses will be caused by human error or technical failure and not by Cyber attacks
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WHICH JOBS ARE SUSCEPTIBLE TO COMPUTERISATION?
Societal impact
The top 10 most likely jobs to be automated include
telemarketers, insurance underwriters, claims adjusters,
watch repairers and accountants’ clerks
“Growth in field services, asset management, robotic
maintenance, remote diagnostics and analytics
expertise will off-set job losses due to the proliferation of
IoT”.
Oxford University, the future of employment
Source: http://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_Employment.pdf
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Photos: Shutterstock
04IMPACTS ON RISK
MANAGEMENT AND THE
INSURANCE VALUE CHAIN
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RISK LANDSCAPE WILL CHANGE – INSURERS AND THEIR CLIENTS
HAVE TO REVIEW INSURANCE AND RISK MITIGATION NEEDS
Impact and new opportunities for Risk Management
Topic Impacted Insurance cover Impact for segment Why?
Predictive Maintenance • Machinery Breakdown
• Business Interruption
• Property Damage
• Product Liability
• Environmental Liability
Predictive maintenance improves productivity and equipment
lifetime by avoiding breakdowns. The reduced claims payments
will be outbalanced by the lower premium income.
Operations optimization • Product liability
• Business Interruption
• Crop Insurance
• D&O
By getting a full overview of the production process and making
real-time adjustments, production downtime and product
defects can be avoided.
Inventory optimization • Marine Cargo
• Property Damage
• Business interruption
Automated replenishment of stocks helps to reduce inventories.
Shipments and supply chain risks (more large and complex
claims) will increase.
Health and Safety • Workers Compensation
• General Liability
Autonomous machines, sensors and tags for workers can
prevent accidents and limit exposure to dangerous materials.
Cyber Risks • Cyber Risk coverage
• Business Interruption
• Intellectual Property
Increased cybersecurity risks as each device is a potential entry
point for data breaches and interconnectivity can spread the
damage significantly. This will create high accumulation
potential but will also fuel the demand for specific e.g., cyber
insurance solutions.
10–40% cost savings
5–12.5% cost reduction
20–50% cost reduction
10–25% savings
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CYBER ARTIFICIAL INTELLIGENCE
Cyber AI
Impact on insurance Targeted use for UW
• Better detecting attacks, but also increased risk if
malicious hackers are able to take control
• More serious incidents to occur by lowering the cost of
devising cyber-attacks
• While demand for insurance cover is increasing, cyber
BI/CBI is a relatively untested area
Our cooperation partner Cyence assesses both cyber
exposures and a company’s cyber resilience
The platform enables AGCS’ Cyber UW:
• to quickly produce individual cyber risks profiles to improve
the underwriting of each customer
• to manage the risk accumulation
• to enhance the cyber underwriting expertise
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IMPACT OF AI ON THE INSURANCE VALUE CHAIN
Impact on the insurance value chain
• Individualized
campaign
generation
• Market analysis and
forecasting
Customer/Market
Management
Customer
Advisory
• Needs discovery
• Product
recommendation
Policy
Purchasing
• Streamlined order
processing
• Credit analysis and
fraud detection
Policy
Serving
• Bot-based
customer servicing
• Automated portfolio
management
Underwriting
and Claims
• Smart claims
processing
• Big-data-driven risk
management
“Weak” AI applications with direct impact on the insurance value chain
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DIGITAL AGENDA: SELECTED PROJECTS FROM AGCSTECHNOLOGIES TO ENHANCE EFFICIENCY AND CUSTOMER SERVICES
Blockchain
ART solution for the existing captive insurance program and transacting a natural
catastrophe swap1) see video „Allianz pioneers blockchain prototype for the captive insurance market”
Robotic Process Automation
AGCS robotic process automation bots perform repeatable rules based tasks (data entry
and extraction or policy administration) and cut normal processing time by around 90%
compared to manual entry with a zero error rate.
Claims technology
Current AGCS claims handling pilots include live stream loss adjusting app, drones
services and aerial information platform, a digital defense lawyer toolkit, a
thermographic imaging initiative as well as a chat bot project.
1) https://www.youtube.com/watch?v=K4aCtX2NuWY&feature=youtu.be
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760 bn US$ Market Capital
197 bn US$ Total Assets
Market Value of 10 top Brands ($Bn)
0
100
200
300
400 Intangible Value Tangible Value
(NEW) RISKS THAT MATTER: WHY PROTECTING
INTANGIBLE ASSETS?
64%of the total value of UK
firms is in intangibles
50%of companies cite brand
risk as their top risk
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FROM INSURANCE 2.0 TO INSURANCE 3.0
1st Industrial Revolution
New Manufacturing processes and
the rise of the factory system
2nd Industrial Revolution
The technological revolution and
rapid industrialization
3rd Industrial Revolution
The Digital Revolution and the
Introduction of digital electronics
4th Industrial Revolution
The Smart Factory and
Cyber Physical Systems
End of 18th century
Beginning of 20th century
Mid of 20th century
21st century
Indu
str
yIn
su
ran
ce
Insurance 1.0
BI named perils
Insurance 3.0
Non-Damage BI
Insurance 2.0
BI All Risk
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DATA DRIVEN CUSTOMER JOURNEY OF THE FUTURE
Risk Management Trends
Ris
k e
vo
lution
Cyber risks/Cross-Line of Business
Physical damages/Line of Business risks
Intangible Assets/No Line of Business
Insu
ran
ce in
du
str
y
Te
ch
in
du
str
y
Maturity level to assess and quantify the risk and price
Applicability/usage of Big Data analytics, predictiveanalytics, data mining, Artificial Intelligence (AI)
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Photos: Shutterstock
05SUMMARY
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SUMMARY
Impact on the insurance value chain
• Insurance market will move towards firms that
are able to best harness AI to improve the
customer on-boarding and claim management
process
• Refining existing and developing new risk
services beyond traditional insurance is needed
• Change is happening. We can ignore it and
become obsolete or embrace it and remain
relevant
• We as AGCS want to engage with our brokers
and clients to benefit from and shape that
(r)evolution jointly
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THANK YOU
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THANK YOU
Backup
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BUSINESS INTERRUPTION AND CYBER INCIDENTS
DOMINATE RISK LANDSCAPE
Top Business Risks
Evolving nature of
risk, and rise in cyber-
related incidents,
means business
interruption ranks as
top threat for
companies globally
Record-breaking losses
push natural
catastrophes and
climate change up
risk agenda
Potential “cyber
hurricane” events
and tougher data
protection rules shape
cyber risk environment
for year-ahead. Crisis
response crucial for
mitigation
Businesses worry about
emerging risks and
liabilities arising from
new technologies
Photos: Adobe
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“CYBER HURRICANES”, REPUTATIONAL RISK AND
DATA RULES
Cyber Incidents
• Cyber ranks as the most underestimated
risk and the major long-term peril
• Recent cyber events demonstrate the
interconnectedness of risks and shared
reliance on common internet infrastructure and
service providers
• The potential for so-called “cyber hurricane”
events, will continue to grow in 2018
Which business risks are currently
most underestimated?
What are the main cause of economic
loss after a cyber incident?
Privacy risk is back in the spotlight following huge data
breaches in the US. New regulation The introduction of new
regulation will intensify scrutiny further, bringing the prospect
of more, and larger, fines for businesses who do not comply.
52%Reputational
loss
45%
Liability claims
after a data
breach
67%
Business
interruption,
impact on supply
chains
25%New
technologies
36%Business
interruption
54%Cyber incidents
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DIGITAL AGENDA: SELECTED PROJECTS FROM AGCSONLINE PORTALS – EASY ACCESS TO AGCS’ SERVICES FOR CUSTOMERS AND BROKERS
AllianzGo
Launched in September 2017, AllianzGo is our new distribution
platform for SME business in North America. AllianzGo offers
Brokers online access for three products – Business Owners Policy
(package product for small business), Commercial Auto and
Workers’ Compensation, from quote to issue to payments to claims
– all online in just a few clicks. More
myAGCS.com
Our core platform for major clients and brokers continues to grow as
we take on board regular client feedback. Aside from global
insurance program data for Allianz Multinational clients, Allianz Risk
Consulting and Global Catastrophe Risk data, most recent
enhancements include the AXCO Knowledge Pool highlighting
insurance regulatory changes in key markets, a client dashboard, a
claims page and a page for Alternative Risk Transfer program
reporting. More
CT2Go: Clinical Trials
Clinical Trials require liability cover as a mandatory requirement,
often at short notice, and must be able to deliver policy
certificates locally as and when needed. AGCS’ new online portal
offers clients the ability to insure standalone trials online and
issue certificates immediately, thereby reducing uncertainty and
administration at a critical time in medical research programs.
Contact
MySmartGate
In collaboration with Insurtech mgm technology partners,
MySmartGate is an online self-service portal aimed at all
distribution partners serving small and medium-sized companies.
Currently being rolled out in selected markets, this easy-to-access
service offers Financial Lines products including Cyber to more
than 500 distribution partners, giving them the ability to quote, bind
and renew business online in a few clicks. More
Flock Cover: Drone Insurance
AGCS is partnering with InsurTech Flock to launch Europe’s first
ever real- time drone insurance product. Flock Cover is a mobile app
that aggregates and analyses big data relating to a drone flight,
assesses the risk on the spot, and enables the operator to purchase
‘pay-as-you-fly’ drone insurance at the touch of a button covering
both liability (up to £10Mn) and equipment cover. More
CUBE General Aviation
CUBE General Aviation is our new online platform for General
Aviation (GA) business in Germany. Launched in September 2017,
this platform provides policy quotation and placement services for
GA underwriters and connected Allianz agents, with a fully
automated process from quote to certificate. CUBE will enable us to
deliver faster and better services to our GA clients. Contact
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