Lloyd’s and the London market has a long and well- earned reputation for product innovation.  It created the first ever marine insurance product back in Edward Lloyd’s famous coffee shop over 325 years and has remained at the forefront of product, if not technology, innovation ever since.

Its continuing ability to remain at the forefront of product innovation will define its future.  In a rapidly changing world, the demand for greater certainty increases and that’s what insurance is designed for.  But it follows that the increased speed of change requires from the insurance industry a commensurate evolution in insurance product and that requires understanding what the future holds and the role that insurance can play within it.

Right now the industry has nascent opportunities in Cyber and Product Liability around Automation. Our ability as humans to communicate and transact safely as our world moves online and to incorporate machines into our lives are two of the biggest drivers of this change creating big issues for society at large and the insurance industry has a major role to play in smoothing the path ahead.

It’s hardly going to end there.  Among the many future risks that the insurance industry is going to have to grapple with in this century will be digital assets, space travel, brain and AI hybrids and asteroid mining.  In each case we’ll have to understand what’s involved and define the nature, extent and price of the insurance coverage we’ll offer to protect against the consequent risks.

As Cyber insurance is revealing, using the rear view mirror to price risk (working out what to do based on historical experience) doesn’t work if you have no past experience to rely on!  So, the key to being able to lead innovation of product in insurance will lie in our ability to create “reliable predictability” through prodigious computational power running numerous data sources through a succession of very advanced algorithms in near real-time on self-learning technology – in other words Artificial Intelligence.

As this Accenture piece on the use of AI in the Boardroom observes, the AI technology that enables this type of insight and decision-making exists, just not at an enterprise level in insurance.  As the London market starts to invest in technology innovation, it could do a lot worse than embrace AI and it’s predictive analytic capability.

Technology innovation and product innovation now go hand in hand.  It might be a difficult to get our heads around it now, but the mantra that this is a relationship business which has been used as justification for holding back technologically driven change, might end up being true after all. The current key relationship is that between brokers and underwriters, but the relationship that might well define the future of the London market could be that between human underwriters and their machines.