Airmic CEO challenges insurance industry over 'fourth industrial revolution' digital age
Airmic chief executive John Hurrell has challenged the insurance industry to meet the needs of companies operating in the new digital economy, sometimes described as the ‘fourth industrial revolution’.
Speaking at a conference organised by the Economist Intelligence Unit, he said most insurance products were designed for the era of tangible assets. “Over the last 40 years the percentage of the market value of top 500 S&P rated companies represented by tangible assets has dropped from 80% to around 20% today,” he told the audience.
The most recent survey of Airmic members, he said, showed three risks at the top of the ‘Keep Awake’ lists: reputation, cyber (both first party and third party) and contract risks.
"These risks were top of the top-10 worry list and bottom of the insurability list. For example, only 7% of respondents had any sort of cover for reputation damage and the level of penetration by the insurance market of specific cyber-policies is way below 10% of the potential market,” he said.
"Pulling those two facts together, by the way, Talk Talk had a data breach in October 2015 which affected 4% of their customers. Their share price subsequently dropped 32% representing over £600ml of shareholder value erosion. This consequential loss would not have been insurable.
"Looking ahead, we’re seeing a pattern of very significant disruption of traditional businesses by smaller more innovative companies using disruptive technology but having very little by way of tangible assets …. Traditional insurance products will not meet the needs of these new economy fast growing organisations."
"I would challenge the insurance industry to set up business units resourced and funded to provide products which do meet the needs of these businesses, possibly using the same disruptive technologies and business models employed by these would-be clients.”
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