July 27th, 2017

Disruptive Forces Redefining the Role of Insurance: Part I

Posted at 1:00 AM ET

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Victoria Carter, Vice Chairman, Global Strategic Advisory

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Fundamental disruptive forces are driving monumental changes in the global economy at an unprecedented rate. These forces compel the (re)insurance industry to adjust to the new reality and capitalize on the opportunities created.

Four major disruptive trends - expanding urbanization; technological advances; increasing connectivity; and ageing population are accelerating change in the foundations of the global economy faster than at any time since the industrial revolution.

Rapid urbanization is occurring in emerging markets tilting the global economy on its axis toward territories in the East and South producing economic ascendancy. The world’s urban population is expected to grow by 50 percent to more than 6 billion by 2050 as the rural population shrinks. By 2025, almost half of the companies with revenues in excess of USD 1 billion will be headquartered in markets such as Mumbai and Shanghai along with rapidly expanding hubs such as Hsinchu in Northern Taiwan and Santa Catarina State in Brazil.

Cities rely on infrastructure and infrastructure relies on investment and each relies on insurance. It is estimated that USD 43 trillion will be invested in urban infrastructure between 2013 and 2030. This presents a huge opportunity for insurers.

The rate of technological change is accelerating in scope, scale and economic impact.  Processing power, connectivity and the vast amounts of data now available are disrupting almost all forms of activity.  The very fast pace of change is reducing life cycles of businesses, products and services and forcing enterprises to act faster. These changes can be unsettling, but as new risks emerge, opportunities to transfer risk follow. As the insurance industry harnesses the data and new technology, its ability to understand, measure, monitor and price risk significantly improves.

Concomitant with technological change is the world’s increasing hyper-connectivity, from trade and capital, to the movement of people and transfer of data. The surge in technology-driven connectivity is spawning a new phase of globalization full of opportunity, with equal exposure to rampant volatility, interruption and malicious attack.

Link to Part II>>

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