Until the early 2000s, energy consumption in the advanced OECD economies and in the non-OECD developing and emerging market economies rose at a similar rate, with the OECD economies accounting for the majority of demand. In the wake of the strong growth in the 2000s, this position has been reversed with the non-OECD now the dominant contributor to world energy demand. For example, China’s share of global oil consumption has risen from 6% to 11% in the past decade alone.4  4  6  International Monetary Fund (2011)  BIS central bankers’ speeches  Chart 6 – Global primary energy consumption Million tonnes oil equivalent 6500 OECD  6000  Non-OECD 5500 5000 4500 4000 3500 3000 2500 2000 1980  1983  1986  1989  1992  1995  1998  2001  2004  2007  Source: BP Statistical Review 2010 This pattern of upward pressure on energy and commodity prices has been particularly noticeable since the mid-2000s and it has had a significant influence on inflation in many countries – particularly affecting the prices of goods. The so-called “China effect”, through which the shift of production to low cost countries held down the prices of global manufactures and traded goods in the late 1990s and the first half of the 2000s, has given way to a period of higher global inflation, driven by rising energy and commodity prices.
This will have an impact on all parts of the insurance value chain – product design, underwriting and distribution. •  Product design – While there is tremendous scope for enhancements in product design, the advent of new technologies and innovation could even render some existing offerings obsolete. For example, autonomous cars and their safety elements could leave some motor insurance products out-dated, if not irrelevant, over the next couple of decades. •  Underwriting – With big data and smart analytics, underwriting models will likely evolve to become more predictive and personalised, such as through the use of telematics to price motor premiums according to driving behaviour, or the use of wearables for a customised health protection plan. Data analytics is not new to the insurance sector, which has had decades of experience working with and analysing large amounts of internal data such as loss histories. This will now be boosted through the insurers’ ability to incorporate external third-party data sources, such as government statistics on health, worker-safety, and energy data, in their underwriting and pricing of risks. •  Distribution – Mobile technologies are influencing financial buying decisions, including the way consumers purchase insurance. This will have a predominantly big impact on Generation Z, a “mobile first” and “mobile only” generation. 4  BIS central bankers’ speeches  Technology and innovation will be a differentiator for the insurance industry, and a key enabler for insurers to access previously untapped risks and businesses.