FUTURE AND LONGTERM RISKS

Transcription

1 Allianz Global Corporate & Specialty SE FUTURE AND LONGTERM RISKS 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

2 CONTENT TOPICS 01 INDUSTRY 02 DISRUPTIVE 03 TOP 4.0 TECHNOLOGIES ON THE RISE BUSINESS AND FUTURE LONG TERM RISKS 04 IMPACTS ON THE INSURANCE VALUE CHAIN 05 SUMMARY 2

3 ol 01 INDUSTRY 4.0 Photos: Shutterstock 3

4 Introduction INTRODUCTION Source: 4

5 New value potential for our clients WHERE IS THE VALUE POTENTIAL OF THE INTERNET OF THINGS? Vehicles Autonomous vehicles and condition-based maintenance $210Bn 740Bn Offices Security and energy $70Bn 150Bn Cities Public health and transportation $930Bn 1.7Tn Outside Logistics and navigation $560Bn 850Bn 9 settings Gave us a cross-sector view of a total potential impact of $3.9Tn 11.1Tn per year in 2025 Factories Operations and equipment optimization $1.2Tn 3.7Tn Retail environments Automated checkout $410Bn 1.2Tn Human Health and fitness $170Bn 1.6Tn Worksites Operations optimization/health and safety $160Bn 930Bn Home Chore automation and security $200Bn 350Bn 5

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7 New value potential for our clients BUSINESS OPPORTUNITIES ARE EXPLOITED ALREADY TODAY 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 % 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. 7

8 Societal impact The value of improved health of chronic disease patients through remote monitoring could be as much as $1.1Tn per year in

9 What drives Industry 4.0? POTENTIAL WINNER AND LOSER INDUSTRIES IT and Electronics Automotive Transportation and Logistics Healthcare Energy Retail Telecommunications and Media Finance Construction 9

10 ol 02 DISRUPTIVE TECHNOLOGIES AND PLATFORMS ON THE RISE Photos: Shutterstock 10

11 What is Artificial Intelligence? FROM WEAK TO STRONG AI AI IS A SOFTWARE THAT EXHIBITS ANALYTICAL, DECISION-MAKING AND LEARNING ABILITIES SIMILAR TO THOSE OF HUMANS. Strong AI agents are expected on the market around 2040 Photos: Shutterstock 11

12 ol AUTONOMOUS VEHICLES 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 Photos: Shutterstock 12

13 Top risks in Focus CASE STUDY: AUTONOMOUS VEHICLES HOW IT LOOKS AT PRESENT Products Liability Insurer Driver Car Owner Mobility Claimant Provider Car Insurer Photos: Shutterstock 13

14 Top risks in Focus CASE STUDY: AUTONOMOUS VEHICLES WITH AUTOMATED DRIVING ON THE RISE, WE HAVE SIGNIFICANT INCREASE OF PLAYERS! Network Provider Data Centre Accredited certifier OEM Driver Car Owner Car Insurer 1st tier Supplier Supplier Hardware Supplier Software Mobility Claimant Provider Liability Insurer (OEM) Assistance Provider Claims Service Provider Photos: Shutterstock 14

15 Case Study CASE STUDY: AUTONOMOUS VEHICLES Benefits Complications Implications Reduction of road accidents by 90% Monetary benefits between $2,000 to $4,000 per year, per vehicle 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 Photos: Shutterstock 15

16 PLATFORM BUSINESS GETS MORE IMPORTANT COMING NOW: SMART INDUSTRIAL PLATFORMS Advanced analytics & Machine Learning Big data platform Adaptive security Factories Cities Things & Agents (Industrial) Gateways Mobility Agriculture Health Homes Retail 16

17 03 TOP BUSINESS FUTURE LONG-TERM RISKS Photos: Shutterstock 17

18 Top Business Risks TOP 10 GLOBAL BUSINESS RISKS FOR % Business interruption (incl. supply chain interruption) = 2017: 37% (1) 6 20% Fire, explosion 2017: 16% (7) 2 40% Cyber incidents (e.g., cyber crime, IT failure, data breaches) 2017: 30% (3) 7 15% New technologies (e.g., impact of increasing interconnectivity, nano-technology, artificial intelligence, 3D printing, drone) 2017: 12% (10) 3 30% Natural catastrophes (e.g., storm, flood, earthquake) 2017: 24% (4) 8 13% Loss of reputation or brand value 2017: 13% (9) 4 22% Market developments (e.g., volatility, intensified competition/new entrants, M&A, market stagnation, market fluctuation) 2017: 31% (2) 9 11% Political risks and violence (e.g., war, terrorism, civil commotion) 2017: 14% (8) 5 21% = Changes in legislation and regulation (e.g., government change, economic sanctions, protectionism, Brexit, Euro-zone disintegration) 2017: 24% (5) 10 10% Climate change/increasing volatility of weather NEW 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 18

19 Top risks in Focus 4 THESES THE SMART FACTORY AND ITS IMPLICATIONS FOR BUSINESS INTERRUPTION Machinery Breakdown and BI frequency losses will be reduced due to flexible production processes and automated maintenance Non-damage BI losses will increase significantly Some Cyber events will be as severe as major CAT events Most Cyber BI losses will be caused by human error or technical failure and not by Cyber attacks 19

20 Societal impact WHICH JOBS ARE SUSCEPTIBLE TO COMPUTERISATION? Oxford University, the future of employment 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. Source: 20

21 04 IMPACTS ON RISK MANAGEMENT AND THE INSURANCE VALUE CHAIN Photos: Shutterstock 21

22 Impact and new opportunities for Risk Management RISK LANDSCAPE WILL CHANGE INSURERS AND THEIR CLIENTS HAVE TO REVIEW INSURANCE AND RISK MITIGATION NEEDS Topic Impacted Insurance cover Impact for segment Why? Predictive Maintenance Machinery Breakdown 10 40% cost savings Business Interruption Property Damage Product Liability Environmental Liability Operations optimization Product liability % cost reduction Business Interruption Crop Insurance D&O Inventory optimization Marine Cargo 20 50% cost reduction Property Damage Business interruption Health and Safety Workers Compensation 10 25% savings General Liability Cyber Risks Cyber Risk coverage Business Interruption Intellectual Property Predictive maintenance improves productivity and equipment lifetime by avoiding breakdowns. The reduced claims payments will be outbalanced by the lower premium income. By getting a full overview of the production process and making real-time adjustments, production downtime and product defects can be avoided. Automated replenishment of stocks helps to reduce inventories. Shipments and supply chain risks (more large and complex claims) will increase. Autonomous machines, sensors and tags for workers can prevent accidents and limit exposure to dangerous materials. 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. 22

23 Cyber AI CYBER ARTIFICIAL INTELLIGENCE Impact on insurance 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 Targeted use for UW 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 23

24 Impact on the insurance value chain IMPACT OF AI ON THE INSURANCE VALUE CHAIN Customer/Market Management Customer Advisory Policy Purchasing Policy Serving Underwriting and Claims Individualized campaign generation Market analysis and forecasting Needs discovery Product recommendation Streamlined order processing Credit analysis and fraud detection Bot-based customer servicing Automated portfolio management Smart claims processing Big-data-driven risk management Weak AI applications with direct impact on the insurance value chain 24

25 DIGITAL AGENDA: SELECTED PROJECTS FROM AGCS TECHNOLOGIES TO ENHANCE EFFICIENCY AND CUSTOMER SERVICES Blockchain ART solution for the existing captive insurance program and transacting a natural catastrophe swap 1) 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) 25

26 (NEW) RISKS THAT MATTER: WHY PROTECTING INTANGIBLE ASSETS? Market Value of 10 top Brands ($Bn) 400 Intangible Value Tangible Value 64% of the total value of UK firms is in intangibles % of companies cite brand risk as their top risk bn US$ Market Capital 197 bn US$ Total Assets 26

27 Insurance Industry FROM INSURANCE 2.0 TO INSURANCE 3.0 End of 18th century 1st Industrial Revolution New Manufacturing processes and the rise of the factory system Beginning of 20th century 2nd Industrial Revolution The technological revolution and rapid industrialization Mid of 20 th century 3rd Industrial Revolution The Digital Revolution and the Introduction of digital electronics 21 st century 4th Industrial Revolution The Smart Factory and Cyber Physical Systems Insurance 3.0 Non-Damage BI Insurance 2.0 BI All Risk Insurance 1.0 BI named perils 27

28 Insurance industry Tech industry Risk evolution Risk Management Trends DATA DRIVEN CUSTOMER JOURNEY OF THE FUTURE Physical damages/ Line of Business risks Cyber risks/ Cross-Line of Business Intangible Assets/ No Line of Business Maturity level to assess and quantify the risk and price Applicability/usage of Big Data analytics, predictive analytics, data mining, Artificial Intelligence (AI) 28

29 05 SUMMARY Photos: Shutterstock 29

30 Impact on the insurance value chain SUMMARY 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 30

31 THANK YOU 31

32 Backup THANK YOU 32

33 Top Business Risks BUSINESS INTERRUPTION AND CYBER INCIDENTS DOMINATE RISK LANDSCAPE Evolving nature of risk, and rise in cyberrelated incidents, means business interruption ranks as top threat for companies globally Potential cyber hurricane events and tougher data protection rules shape cyber risk environment for year-ahead. Crisis response crucial for mitigation Record-breaking losses push natural catastrophes and climate change up risk agenda Businesses worry about emerging risks and liabilities arising from new technologies Photos: Adobe 33

34 Cyber Incidents CYBER HURRICANES, REPUTATIONAL RISK AND DATA RULES 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? Cyber incidents Business interruption New technologies 25% 36% 54% What are the main cause of economic loss after a cyber incident? Business interruption, impact on supply chains Reputational loss Liability claims after a data breach 45% 52% 67% 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. 34

35 DIGITAL AGENDA: SELECTED PROJECTS FROM AGCS ONLINE PORTALS EASY ACCESS TO AGCS SERVICES FOR CUSTOMERS AND BROKERS 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 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 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 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 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 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 35