Insurance is set for a fresh wave of innovation
The insurance industry is stabilizing following the insurtech boom of the last ten years, but the investment vintage that will follow is well positioned to secure superior returns.
We are entering a new wave of innovation driven by climate change, AI and geopolitical uncertainty. Opportunities exist in emerging markets, embedded insurance and advanced technologies. Insurers, brokers, and policyholders can benefit from improved risk management, automation and tailored coverage to enhance growth and resilience.
The macro context.
Climate change is no longer a distant threat but a current reality, with increasingly frequent and severe weather events such as heatwaves, droughts, and hurricanes. These events carry immense economic costs, and insurers face challenges in assessing risk and setting prices. Insurers are exploring advanced modeling techniques and parametric products to better adapt, though understanding evolving risks remains critical to maintaining coverage affordability.
Artificial intelligence, which mimics human intelligence, is transforming industries by enhancing automation, reducing costs, and improving decision-making. In insurance, AI’s potential includes predictive maintenance, self-driving cars, and advanced risk analysis. However, AI also poses ethical concerns, such as bias and job displacement, which the insurance industry will help manage through new risk-transfer mechanisms.
Geopolitical volatility and uncertainty continue to affect financial markets, trade, and supply chains, impacting insurers’ balance sheets and increasing claims. Insurers are innovating by offering products tailored to political risk, supply chain disruption, and cyber risks, helping businesses mitigate these challenges.
Who wins? We all do.
Policyholders
The insurance industry has been slow to innovate in customer experience compared to others. Best-in-class insurers see higher growth and profitability through personalized services. Technology like IoT, telematics, and AI can enhance risk mitigation and claims handling. Tailored coverage and usage-based pricing can improve policyholder trust and outcomes.
Brokers and advisors
Despite predictions of their demise, insurance brokers remain essential in connecting buyers with insurers. Technology can streamline brokers’ operations, automating tasks and improving efficiency. With digital tools, brokers can access data, offer better client advice, expand market reach and stay compliant.
Insurers and reinsurers
In a competitive insurance market, operational efficiency is crucial. Efficient insurers offer better premiums and customer service, attracting desirable policyholders and investment capital, which they can reinvest to further enhance operations. Automation reduces errors and manual work, while advanced risk management technology improves visibility, enabling insurers to mitigate financial and compliance risks effectively.