We love to think about disruption as simply a modern-day term. Yet four historic industrial revolutions offer ample evidence that disruption occurs far more frequently than we might ever imagine.
Each of the three past industrial revolutions has ushered in seismic change: The original Industrial Revolution was powered by steam, the second was driven by electricity, assembly lines and mass production and a third industrial revolution introduced computers and the internet. Industry 4.0 —where we find ourselves today — is moving exponentially faster than its predecessors. Defined by digital transformation, connectivity and the rise of real-time data, Industry 4.0 has already evolved from on-premises to the cloud and from intricate programming languages to no-code. Now, it is embracing AI and quantum computing.
As Industry 4.0 shifts the world around us, it also creates tremendous opportunity to shape insurtech solutions and the insurance industry in incredible ways for those ready to embrace it.
Insurance through each revolution
Insurance, of course, pre-dates all four industrial revolutions. Historic points that involved or created insurance opportunities include the advent of benevolent societies to aid ancient Greeks with burial costs, the Spanish maritime explorations that led to the discovery of America, the Great Fire of London, the discovery and proliferation of electricity, the introduction of the automobile, the rise of computer hackers and countless other pinnacle moments. At each point, societies have progressed, in part, either because insurance has been interwoven in these efforts or because insurance products developed because of those pivotal developments.
The insurance industry has provided peace of mind the world over with each evolutionary step of humanity and technology. With steam engines and railroads, the telegraph and steel mills, electricity, nuclear energy and the advent of the internet — humanity made gigantic strides, and, in each instance, insurance adapted accordingly.
Why Industry 4.0 is radically different
While insurance historically advanced with societal progress, the actual insurance product — the agreement that obligates an insurer to cover a policyholder’s risks — remained steadfast as a written, physical document.
Arguably, the establishment of the Hartford Steam Boiler Inspection and Insurance Company (circa 1860s) was an astounding leap forward in industrial safety, as these insurers encouraged smart practices related to steam energy. Henry Ford’s assembly line led to a radical shift in how society moved. Computer technology took us to the moon. Again, at each step, that perennial paper insurance policy was a bedrock.
Industry 4.0 has changed that fundamental principle of insurance. As we move forward, the insurance policy itself, while remaining steadfast and reliable, is forever changed. That physical document is digitized, existing now as data, often in the form of a digital PDF and shareable with nearly anyone. This opens an incredible marketplace for insurers in an increasingly digital, connected global community leveraging technology as complex as satellites and as common as the ubiquitous smartphone.
This radical shift in the constitution of insurance creates a challenge: How to increase the appetite for insurance to achieve greater market penetration? This is where insurtech will help to define the future of the industry.
What is possible for insurance
The rise of insurance as a digital product means our industry is inextricably tied to the acceleration of technological advances. Similar to the impact of the sewing machine or advanced robotics on our culture, the digitalization of insurance will drive the industry well beyond what was previously imagined. Solutions already exist that allow carriers, brokers and MGAs to design, rate, underwrite, quote and create products across multiple lines. As these tools grow in sophistication, they deliver higher levels of accuracy, allowing insurers to enter new markets more quickly and confidently.
Where our industry goes next will be defined by how technology transforms other areas of insurance. Consider the possibility for infusing new digital pathways into the claims settlement process. While there will always be a physical component — such as replacing windows shattered by wind or hail — tech giants like Amazon have already opened massive distribution channels for faster delivery of products needed to rebuild or repair as part of a claim. This gives insurers the potential to settle claims faster, so long as the supply chain can keep pace.
The most radical change to come is in another area of insurance that has remained static for nearly a century: the customer experience. As the relationship between technology and humans grows more symbiotic, there exists the potential for insurance to become increasingly entwined in people’s daily lives.
Consider a future state where people wear augmented reality-capable smart goggles or glasses— powered by AI — to receive information in real time. This gives insurers the capability to serve as a concierge, delivering in-the-moment risk management advice to keep customers safe.
Imagine the transformative impact this could have on a family vacationing on Mt. Washington. First, they use their smart goggles to secure a rental car. Then, as they traverse the mountain in their vehicle, an AI-powered concierge notifies them if they are driving through high-risk areas and delivers real-time alerts as the road narrows and guardrails disappear. The family arrives safely at the top of Mt. Washington, they enjoy a one-of-a-kind experience and their safety is prioritized across every mile. Just as GPS changed how people travel, augmented reality and AI will reshape our relationships with all that surrounds us.
This future is closer than you might think. Industry 4.0 has created a paradigm shift in insurtech. The rigid legacy systems of the past have been replaced by more flexible, accessible and rapidly integrated solutions that have accelerated the delivery of new products. These best-in-class tools will give insurers the capabilities needed to combine the digital and physical worlds. From telematics to wearables, predictive modeling and virtual reality, insurance has the potential to continue its long history of being connected into the ways we live, the ways we do business, the ways we travel and transport goods, as well as the future we build.
How will insurance careers evolve?
One of the unfortunate corollaries of the explosive growth in technology — and in AI specifically — has been the growing fear of massive job losses. Yet if there is one thing we have learned from past industrial revolutions, it is that, on a macroeconomic level, each job displaced by innovation gets replaced by one or more jobs in emerging industries.
A great example can be found in both the times of the steam and combustion engines. Yes, wagoneers and barge captains fell out of favor as technology advanced. But the new technologies provided opportunities for retraining and creating entirely new industries. Long-haul trucking, much in the news of late, might never have come to be if society had looked on the combustion engine as a job killer for the horse and buggy business. In much the same way, we cannot be afraid to embrace these new and sophisticated technologies.
I am tremendously optimistic that as insurance grows more technologically sophisticated in the next few decades, the labor market will shift. While some roles may disappear, such as those in data entry, new and potentially better ones will emerge. What those roles might be is still largely speculative, but insurance professionals who commit themselves to upskilling will be rewarded for their ability to adapt and evolve.
Embrace a spirit of adventure
The golden thread through each industrial revolution has been the spirit of adventure. Johannes Gutenberg did not know exactly how his printing press would advance the speed of knowledge. Henry Ford had no guarantees his assembly line would revolutionize manufacturing. Yet they were unafraid to explore the unknown by employing the technology they believed would usher in a better future.
Now, in Industry 4.0, it is time for insurers to embrace their own adventurous spirit. Those that answer the call and seize these digital opportunities will lead insurance to amazing new heights.