Digital squeeze could cost traditional insurers $280B: Report
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Increasing demand for digital insurance products and online distribution is expected to displace $280 billion of existing insurance revenue by 2025, according to a report released Thursday by Accenture PLC.
The shift could “challenge current customer retention levels,” Accenture said.
Total global insurance industry gross written premium is forecast to grow from $6.1 trillion in early 2020 to $7.5 trillion by the end of 2025 — a compound annual growth rate of 3.5%.
Of the $1.4 trillion in expected industry growth over the next five years, approximately 15%, or $200 billion, will come from new risks, products and services, the report said.
To compete for this $200 billion, insurers need to develop new products in areas such as technology-enabled health and wellness, auto and home; new services such as financial advisory services aligned to life and health; and new revenue streams from areas such as data monetization, Accenture said.
As customers replace policies with data-driven offerings, $140 billion of insurance revenue could shift from traditional coverage to technology-enabled insurance products such as behavior-based insurance for connected vehicles and smart homes, the report said.
At the same time, $140 billion of revenue in traditional insurance distribution could be displaced by insurers offering digital distribution experiences, as customers purchase insurance on digital channels and third-party platforms, according to the report.
“The recent acceleration to digital channels threatens the renewal of some traditional premiums and alters the future revenue landscape for insurers,” Kenneth Saldanha, who leads Accenture’s insurance industry group globally, said in a statement.
“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,” he said.
