Tech to drive risk prevention trend

Technology will help shift risk management emphasis onto prevention rather than transfer, Fujitsu’s chief technology officer for the Europe, Middle East, India and Africa (EMEIA) region told CRE ahead of the launch of the Fujitsu Tech Hub at the Airmic conference in Harrogate.

During the event, the Tech Hub will showcase a range of technologies with risk and insurance applications, including artificial intelligence (AI), internet of things (IoT) devices and data analytics. As these technologies are rolled out they will have big implications for risk management and insurance, according to Manan Sagar, chief technology officer at Fujitsu in EMEIA.

Managing risk has historically focused on its transfer to insurers. Insurance will continue to play an important role in risk, but technology will help foster a broader risk-managed approach, according to Mr Sagar. Ultimately this could lower the cost of insurance, he added.

“As companies and risk managers start to use technology, managing risk will become more about prediction and prevention, not just the transfer of risk. Technology will help companies prevent losses from happening, which should in turn reduce insurance premiums,” said Mr Sagar, whose company is Airmic’s technology partner.

For example, one of the technologies being showcased in Harrogate is Fujitsu’s GlobeRanger. This is an IoT solution that helps organisations collect and analyse risk data internally and within the supply chain. Engineering firm Meggitt is using GlobeRanger to track high-value carbon fibre aircraft components in the manufacturing process, reducing wastage by 95% while improving quality control and productivity by 30%.

The number of IoT devices is set to grow with Gartner predicting there will be 20 billion internet-connected objects by 2020. As a result, the volume and breadth of data available to manage risk will increase dramatically, according to Mr Sagar. At the same time, with developments in computing and artificial intelligence, companies will be better able to analyse data and make predictions, he said.

“The cost of implementing technology is being lowered and the number of data points is increasing. This will result in a change in the insurance model, with implications for the commercial insurance space,” noted Mr Sagar.

For example, automating technologies, such as driverless cars, are expected to reduce the frequency of losses. IoT devices, coupled with analytics, will be able to predict when machines need maintenance. Meanwhile, tracking devices and sensors can monitor the location and condition of goods as they move through a supply chain.

Another technology demonstrated at the Tech Hub uses image scanning and data analytics to spot defects in products during the manufacturing process. In the case of offshore windfarm turbines, such technology has been used to reduce inspection times from seven hours to just one-and-a-half hours, explained Mr Sagar.

With data and analytics, companies will be able to make more informed decisions around the risks they want to accept, prevent or transfer, he said. “I believe that the role of the risk manager will transform as businesses use more technology. They are currently seen as largely in-house risk transfer practitioners, but they will increasingly move to actively helping their organisations manage primary business risks,” he added.

Technology will eventually make real-time risk management a reality, believes Mr Sagar.

“This will require a significant expansion of technology and huge amounts of data but real-time risk management is a possibility. In Japan, we already see smart cities where traffic flows are optimised, making for more efficient journeys and fewer accidents. In banking, we see real-time adjustments and exposure using financial risk portfolio optimisation,” he said.

“If you have a significant property casualty exposure it is possible to assess the risk in real time and decide what to retain and what to transfer. This gives you more control and will allow for dynamic insurance purchasing, as we already see with telematics devices in motor insurance,” Mr Sagar added.

In hosting the Tech Hub, Airmic recognises that technology is likely to play a significant risk management role going forward and innovation in other sectors is likely to extend to insurance, according to Mr Sagar. “The idea of the Tech Hub is to raise awareness and give risk managers an idea of how insurance might look in the future. Today the model is one of repair or replace, but the Tech Hub shows we will move to a model of predict and prevent,” he said.