The insurance industry is undergoing a digital revolution, opening doors to innovation while simultaneously introducing new risks, according to the latest sigma study, “The economics of digitalization in insurance,” by Swiss Re Institute.
Digitalisation has allowed insurers to monitor, mitigate, and price risks more efficiently, leading to tailored insurance solutions that bridge protection gaps.
Insurers aim to achieve a 3–8 percentage point improvement in loss ratios and 10–20% cost savings across the value chain through digital transformation.
As businesses increasingly rely on digital infrastructure, the flip side reveals growing risks, including business interruption and cyber threats.
Swiss Re’s new Digital Insurance Index assesses 29 countries’ progress in digitalising their insurance markets, with South Korea, Sweden, Finland, and the US leading the way.
Emerging markets like China, Slovenia, and India are quickly catching up due to their ability to adopt newer digital technologies.
Jerome Haegeli, Group Chief Economist at Swiss Re, emphasises the positive correlation between resilience and digitalisation, noting that digitalisation benefits society by providing more accessible insurance and closing protection gaps. For insurers, it improves underwriting, risk mitigation, and risk measurement, enhancing work quality and efficiency.
The broader economy’s digitalisation also creates new risk pools, offering insurers opportunities to provide innovative risk transfer solutions.
Sharing-economy models, such as Uber and Airbnb, require a shift from personal to commercial insurance lines based on usage, opening doors for insurers to offer digital risk transfer solutions.
The study highlights the fivefold increase in the global value of intangible assets, including digital assets, over the past 20 years, with nearly 80% of this value remaining uninsured. The rise of digital risks, like business interruption and cyber threats, and emerging liability risks related to AI, further underline the need for insurance.
With the demand for cyber insurance rapidly growing, Swiss Re Institute predicts global cyber premiums will reach $16 billion in 2023, up 60% from 2021, and $25 billion by 2026.
Digital technology empowers insurers to collect and process extensive data sets through connected devices, data analytics, and machine learning, leading to more accurate risk assessments and pricing. Furthermore, automation of standardised tasks reduces costs, ultimately lowering premiums.
Pravina Ladva, Group Chief Digital & Technology Officer at Swiss Re, emphasises that despite the significant digital transformation in the insurance industry, there is still potential to make insurance more accessible and affordable. She encourages the industry to continue investing in innovative solutions and adapting to emerging risks.
For consumers, the digital transformation brings greater price transparency and accessibility to multiple insurance products and providers in one place.
Online marketplaces streamline the onboarding process, making insurance more accessible and affordable. Investments in insurance technology have shifted towards efficiency gains, underwriting, and claims improvement.
