Insurance will need to be “reimagined” as the changing risk landscape brings traditional insurance concepts into question, according to a report from DAC Beachcroft.
Liability, regulation and insurance are likely to undergo a period of accelerated change in the coming years, with advances in technology and globalisation, concludes a report by the law firm. Emerging technologies like artificial intelligence (AI), automation and the internet of things will bring about new liabilities and exposures. In some cases, these technologies will require changes to regulation, liability regimes and ultimately insurance, the report states.
According to the law firm, the very nature of insurance, its role and relationship with society are undergoing a “profound and irreversible” transformation. “This is not just about managing change and disruption. It is about reimagining what insurance is. The industry has to take a step back and challenge a wide range of assumptions that have underpinned it for generations,” it says.
“The combination of these powerful forces is doing more than just reshaping the insurance industry. It is demanding that we reimagine what insurance is for, what society expects from it and how it can deliver the promises that lie at its heart. It also means reimagining the skills insurers and brokers need in order to flourish in the future,” DAC Beachcroft notes.
The biggest drivers of change are technology, globalisation and a revolution in communication. The very nature of risk is changing, says the law firm, from the evolving threat of terrorism to the potential for major cyberattacks and impact of climate change on natural catastrophes.
“We can foresee the potential for new insurance products and significant changes to existing products, which will require careful consideration of new, often untested, policy wordings,” Mathew Rutter, insurance advisory partner at DAC Beachcroft, told CRE.
New technologies like automation and AI will mean changes in liability and insurance. For example, driverless cars, crewless ships and pilotless planes will see risk arising from human error overtaken by risks of product safety defects, software failures and cyber interventions, DAC Beachcroft says. There will be new regulations and standards that need to be followed, according to Mr Rutter.
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