Analysts at Accenture have reported that rising demand for digital insurance premiums and their online distribution could displace $280 billion of current insurance revenues by 2025, challenging current customer retention levels.
In a new report, Accenture analysed how the insurance industry’s revenues will be affected by new customer, demographic and technology trends.
The research shows that, despite the global recession of 2020, the global insurance industry is projected to grow from $6.1 trillion in early 2020 to $7.5 trillion by the end of 2025, representing a compound annual growth rate of 3.5%.
This includes $800 billion in US-focused healthcare payer premiums, which have not traditionally been counted as part of the insurance sector, but have become increasingly relevant due to global demand for convergence of digital health products and services, Accenture notes.
As customers renew their policies with data-driven offerings, analysts estimate that $140 billion of current insurance revenues may likely shift from traditional to technology-enabled insurance products.
Concurrently, another $140 billion of current revenues in traditional insurance distribution could be displaced by insurers offering digital distribution experiences, as customers purchase insurance on digital channels and third-party platforms.
“The recent acceleration to digital channels threatens the renewal of some traditional premiums and alters the future revenue landscape for insurers,” said Kenneth Saldanha, who leads Accenture’s Insurance industry group globally.
“While the industry will remain resilient and grow, the pace of technology and societal change is coming faster than expected. Insurers that reimagine how they run their business and engage their customers with digital experiences will be positioned for success,” Saldanha continued.
“Insurers who move from traditional to technology-led offerings that are better integrated with customer data are better positioned to lead; others risk losing revenues to digital-first competitors and new entrants.”
The report estimates that the convergence of the life insurance, health and wealth industries will generate $120 billion in new revenues, comprising $60 billion from smart health products, $30 billion from products and services for the aging population, and $30 billion from direct life and wealth management products.
Meanwhile, risks related to climate change are expected to make up $50 billion of new insurance revenues, and coverage and risk-mitigation services related to cyber threats are expected to generate another $25 billion.
“A fast-changing world, filled with environmental risks, cyber threats and more people feeling physically and financially vulnerable, is causing insurers to reimagine their role in the economy and position themselves as risk preventors, not only compensators,” said Ravi Malhotra, who leads Accenture Strategy’s Insurance industry group in North America.
“In health, consumers are increasingly comfortable sharing data for products that help them maintain healthy habits, giving insurers an opportunity to provide a more holistic risk-management service that changes their role from financial safety net to an active partner in preventing and mitigating injury and loss. Working with reinsurers can also help to cover climate change risks – especially in emerging markets where there is currently a massive gap in coverage.”