Fourth Industrial Revolution (4IR) — Africa, Botswana.
About 2 years ago I spoke about digitalization and innovation in the finance industry through Fintech Insight Botswana because I had realized that we are standing on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before.
The First Industrial Revolution used water and steam power to mechanize production. The Second used electric power to create mass production. The Third used electronics and information technology to automate production. Now a Fourth Industrial Revolution is building on the Third and it is characterized by a fusion of technologies that are blurring the lines between the physical, digital, and biological spheres.
There are three reasons why today’s transformations represent not merely a prolongation of the Third Industrial Revolution but rather the arrival of a Fourth and distinct one: velocity, scope, and systems impact. The speed of current breakthroughs has no historical precedent. When compared with previous industrial revolutions, the Fourth is evolving at an exponential pace rather than a linear pace. Moreover, it is disrupting almost every industry, my favorite being the fintech space. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance.
The possibilities of billions of people connected by mobile devices, with unprecedented processing power, storage capacity, and access to knowledge, are unlimited. And these possibilities will be multiplied by emerging technology breakthroughs in fields such as artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3-D printing, Augmented/Virtual reality, wearable technologies, smart devices (particularly those with voice recognition/command or bio-security), self-driving cars, and cognitive computing.
The Insurance value-chain is amongst the disrupted industries after many decades of operating with it’s traditional model, and will continue to be significantly impacted by the 4IR, with both positive and negative impacts. 4IR certainly represents an explosion of data, as well as a revolution in the tools for analysing that data and making decisions based on it. This will change the behaviour and expectations of customers and insurers in many areas, and if Insurers do not take a bigger step ahead into the 4IR, they might become non-existent in years to come. Take for instance how the motorcar is a wonderful invention. But, it comes with the unintended consequence of being a danger in the wrong hands. Human hands. However, the rapid evolution of the autonomous vehicle is about to redefine the risk profile for the motorcar. And this is going to have a profound impact on auto insurance especially when it comes to advances in vehicle safety technology which is beyond human ability. This includes; blind spot monitoring, lane control, emergency braking, traction control, and drowsiness detection et al are now entering the global car pool. Tesla is producing underground vehicles thus reducing the risk of car accidents. Over time, these features will all make a significant impact to reducing the 1.25 million car accidents which happen annually, net premiums amounting $1.2 trillion, consumers will make less insurance claims, and car insurance will either become irrelevant or made cheaper as motor cars transform into highly intelligent moving computers.
In conclusion, it’s clear that we are indeed living in revolutionary times, companies need to awaken the spirit of innovation or they are bound to be irrelevant with their legacy systems. We have moved past the digital economy. The arrival of the 4IR assumes everyone is technologically savvy and ready to experience robotics giving a human experience and touch, and the changes across industries, and in the insurance industry, my favorite, will be wide ranging and profound. If the exact outcomes are still uncertain, the direction of travel is already clear.
