Seven megatrends to shape two decades
The Commonwealth Scientific and Industrial Research Organisation (CSIRO) has released a major new report outlining seven megatrends that will shape our society over the next 20 years.
Our Future World revisits the groundbreaking 2012 report of the same name, exploring geopolitical, economic, social, technological and environmental forces unfolding around the world, and predicting their likely impact on Australia’s people, businesses and governments.
The megatrends identified each have links to, or implications for, insurance.
Adapting to climate change
With natural disasters expected to cost the Australian economy almost three times more in 2050 than in 2017, CSIRO says we can expect to be living in a more volatile climate, characterised by unprecedented weather events.
“CSIRO and the Bureau of Meteorology predict that Australia is likely to experience more heat extremes and fewer cold extremes, longer and more severe droughts and fire seasons, continued sea level rises and ocean warming and acidification, prolonged marine heatwaves, and fewer, but more intense, cyclones in the coming decades.”
This has clear implications for health, infrastructure, migration – and insurance.
“More frequent and severe weather conditions are reducing the profitability of northern Australia for insurers and more households are choosing to forego insurance,” the report says.
But we know the problem isn’t confined to northern Australia, with the cost of insurance soaring in many locations as natural catastrophe risks rise.
Leaner, cleaner and greener
CSIRO says there’s increasing focus on potential solutions to resource constraints through synthetic biology, alternative proteins, advanced recycling and the net-zero energy transition.
By 2025, renewables are expected to surpass coal as the primary energy source.
Increasingly, insurance is playing a role in the transition through underwriting guidelines and investment strategies.
And the renewables industry will need insurance protection as it grows rapidly in the years to come.
The escalating health imperative
The pandemic has exacerbated existing health challenges posed by an ageing population and growing burden of chronic disease.
One in five Australians report high or very high levels of psychological distress and there is heightened risk of infectious diseases and pathogens resistant to modern antibiotics.
“There is now a burning platform to also respond to our health risks and improve health outcomes,” CSIRO says.
With clear implications for life and health insurers, outbreaks of disease can have a massive impact on the general insurance industry too, as has been seen with Covid-19.
Geopolitical shifts
We face an uncertain future, characterised by disrupted patterns of global trade, geopolitical tensions and growing investment in defence.
“While the global economy shrunk by 3.2% in 2020, global military spend reached an all-time high of $2.9 trillion,” the report says.
Despite war exclusions, Russia’s invasion of Ukraine has shown how the insurance industry can be hurt by conflict and associated issues including supply chain disruption, and an increased threat of cyber attacks.
Diving into digital
The pandemic fuelled a boom in digitisation, with teleworking, telehealth, online shopping and digital currencies becoming mainstream.
Some 40% of Australians now work remotely on a regular basis and the future demand for digital workers is expected to increase by 79% from 2020 to 2025.
This trend has revolutionised the insurance industry’s working practices, but also created huge opportunity to modernise the way products are sold and customers serviced. Then there’s the potential for the likes of blockchain and big data to transform insurance as we know it.
Increasingly autonomous
CSIRO observes an explosion in artificial intelligence (AI) discoveries and applications across “practically all industry sectors” over recent years.
The report flags Canberra-based company Seeing Machines, which uses computer vision to detect and alert fatigued truck drivers, as one of many examples that “only scratch the surface around what is possible for AI applications in the future”.
If our home, work and travel is transformed by AI, then insurance products will need to follow suit.
Unlocking the human dimension
CSIRO says there’s a strong consumer and citizen push for decision-makers to consider trust, transparency, fairness and environmental and social governance.
“While Australia saw a record level increase in public trust in institutions during the pandemic, this ‘trust bubble’ has since burst, with societal trust in business dropping by 7.9% and trust in government declining by 14.8% from 2020-21.”
Aware and empowered consumers have high expectations these days, and insurance businesses are going to need to earn and keep their trust.
Workplace culture is changing too, in regards to diversity, work–life balance, technology, job security and stability.
Click here to read the full report.
