The fourth industrial revolution, also known as 4IR, will transform insurance and other industries, but most executives have at best a basic understanding of what the concept is about.

A KPMG Digital Delta survey of “senior business leaders” in Australia, including insurance managers, has found that only 44% of respondents have an excellent or good understanding of 4IR, with 9% never having heard of it at all.

Financial services is the worst sector for awareness, with only 35% of leaders having more than a basic understanding. The sector is also the least prepared – which is concerning because KPMG says financial services faces the greatest impact.

The first industrial revolution was brought about by steam enabling mechanical production, the second by electricity enabling mass production, and the third by computers and digital systems.

The fourth industrial revolution deals with the convergence of the physical, digital and biological worlds enabled by advanced and disruptive technologies such as artificial intelligence (AI), the Internet of Things, blockchain, robotics, 3D printing, 5G and autonomous vehicles.

KPMG says 4IR represents “a fundamental change” with business productivity, ethics, jobs and skills all facing disruption. And it says there is “a concerning lack of readiness”.

On a scale of one to five, with one being “not at all prepared” and five being “very prepared”, 51% of respondents ranked three or lower. In financial services this figure rose to 63%.

Yet the report says financial services firms must expect a higher impact from 4IR than any other sector, with the biggest change to be felt in customer experience.

“These steep expectations could be driven by the customer-focused value propositions that fintech organisations have been using to disrupt the industry,” the report says.

KPMG says it is vital that understanding of 4IR is improved.

“The rapid acceleration in the capabilities, usage and effects of AI, robotics, automation and machine learning represents a fundamental change in the way we live, work and relate to one another,” KPMG Digital Delta partner Piers Hogarth-Scott said.

“The lack of readiness among Australian organisations is concerning. Change is already taking place, and it’s critical that business leaders understand these technologies and how to harness them to remain locally and globally competitive.”

Click here for the full report.