The future of the insurance industry: the three stages of the post-digital transformation era

By Andrew Pollard, Insurance Specialist at SAS UK & Ireland

The future of the insurance industry is already here. As the era of permanent upheavals and humanitarian crises impacts the volume of claims, the type of claims and the cost of these to insurers, along with a surge in investments in insurtechs[1], an industry built for decades around a fundamental model is facing not just one, but layers of distinct shifts.

And insurers are already way down the path of reshaping their traditional business models, enabling personalised interactions, and abandoning standardised coverage in favour of innovative revenue models like pay-per-use and dynamic pricing. But is this only the beginning? 

Earlier this year SAS sponsored a whitepaper led by IDC entitled ‘Welcome to the Era of Digital Business for Insurance: A Path to a Future Beyond Digital Transformation’. The report, which draws on proprietary IDC data and insights from conversations with C-level executives at insurers, gives us a real idea of what the future of property and casualty (P&C) insurance might look like and how it will unfold through three stages of post-digital transformation.

These stages have been defined as digitally adept insurance, ecosystem-enabled insurance, and AI-native insurance. Each phase represents an incremental advance across the three dimensions of digital maturity – business, organisational, and operational. It will enable insurers to thrive and drive revenue creation through the adoption of several digital monetisation models.

Here, I go into how each stage will play out in the coming years and how they will transform the way insurers harness and navigate digitalisation to support their future success.

Andrew Pollard

Stage 1: Digitally Adept Insurance

We’re currently in a phase of ‘digitally-adept insurance’ – the first stage.

Most customers believe that getting insurance is a time-consuming and bureaucratic process. But digitally-adept insurance allows P&C insurance providers to proactively advance their digital capabilities across the entire value chain. These insurers gain a level of agility that not only allows them to recover from digital disruptions but also capitalise on changing business conditions.

IDC predicts that 60 per cent of commercial P&C line insurers will launch products that cater to the rising gig economy by the end of 2024. These insurers will invest in AI to handle the complexity, diversity, and unpredictability of gig worker risks.

In the era of digitally-adept insurance, insurers will reshape their traditional business models

to prioritise seamless digital experiences and value-oriented, personalised interactions as well as deliver new digital applications and move their structure away from traditional hierarchies to more flat and agile organisation setups.

Stage 2: Ecosystem-Enabled Insurance

The report leads us to believe that from next year, the insurance sector will enter the ‘ecosystem-enabled insurance’ stage.

Insurers will mostly focus on the co-creation of hybrid services (i.e. the bundling of offers in partnership with traditional stakeholders, like home insurance providers, and non-traditional stakeholders, like smart home technology companies providing security solutions). Some glimpses of this shift have been observed in recent years. However, a slew of roadblocks – including a lack of agreement on how to securely share data among ecosystem participants, the underlying cost and incentive structures, and the inherent complexity of risk assessments – have hampered industry acceptance.

Nonetheless, the report predicts that by 2025, 50 per cent of global insurers will provide real-time risk prevention as a service to retail customers in the life and non-life sectors via digital ecosystems[2].

Stage 3: AI-Native Insurance

From 2028 is when the industry will be defined by the groundbreaking era of ‘AI-native insurance’. Insurance will become an integral component of virtually every facet of life and AI, which will stand at the forefront of this transformation, will enable insurance companies to seamlessly comprehend the coverage needs of customers and effortlessly translate them into transparent and integrated products or experiences.

AI will emerge as the linchpin of insurers’ revenue growth strategies and will bridge the insurance penetration gap. IDC predicts that by 2028, more than 20 per cent of the existing global insurance business will transition toward embedded distribution models.

This transition promises to usher in more profitable and efficient customer acquisition approaches, marking a significant evolution in the insurance industry. It will see insurance as a service, crowdsourcing and ecosystem-led innovation and extended risk governance with AI and ethics, a core part of insurers’ focuses through this time. 

What will come after?

Insurers continue to be challenged with radical change. New regulations on data privacy and ever-changing actuarial and financial compliance technologies are each playing a part.

Insurers will have to be hyperintelligent, AI-driven organisations that can provide personalised and trusted customer experiences while meeting risk and compliance mandates.

To do this, insurance companies will need to develop digital business road maps based on near and long-term forecasts and evaluations of their industry’s future – so that they can be well prepared for the stages of the post-digital transformation era to come and what’s to take place beyond 2028.


[1] https://www.insurancetimes.co.uk/news/global-insurtech-funding-surges-in-q2-2024-gallagher-re/1452616.article#:~:text=Global%20insurtech%20funding%20saw%20a,a%20reverse%20of%20previous%20declines.

[2] https://www.idc.com/getdoc.jsp?containerId=EUR148299821&pageType=PRINTFRIENDLY

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