As many as 67% of insurance firms have expedited their digital transformation efforts, signaling that the sector is trending away from legacy practices and moving toward streamlined processes powered by technology. [19]
This transformation represents an important shift towards modernizing customer experiences, boosting operational efficiency, and maintaining relevance amidst a changing digital environment.
In this article, we’ll take a look at the latest statistics on how digitization intends to revolutionize the insurance industry across various areas while outlining its advantages for all stakeholders involved.
What to Expect From The Insurance Digitalization Market in 2025
The digitalization of insurance processes is causing a fast-paced overhaul in the industry, resulting in better efficiency, customer satisfaction and risk management. The size of the digital insurance platform market is expected to reach $229 billion by 2029. [11]
This includes more than just online options; it also incorporates data analytics, artificial intelligence, and automation to completely transform how people purchase insurance products or services while managing them efficiently.
Life Insurance
- 74% of life insurance companies are investing in digital transformation to enhance their customer experience and operational efficiency. [6]
- Approximately 81% of life insurance companies intend to adopt digital channels to improve customer engagement. [13]
- Four of 10 life insurers do not use artificial intelligence to automate claims processing and underwriting. [14]
- Of all life insurance customers, 62% favor communicating with their providers via digital channels such as mobile apps instead of conventional means. [15]
- Digital insurance platforms can shorten policy issuance times by as much as 30% in six sessions. [16]
- Of the life insurance companies surveyed, 69% have invested in blockchain technology for enhanced data security and transparency. [17]
- Digital platforms have resulted in a 25% decrease in fraud for life insurance companies. [18]
Health Insurance
- Healthcare expenses have surged, resulting in elevated premiums, deductibles, and out-of-pocket costs for workers and employers. Alarming figures indicate that 48% of insured adults are apprehensive about their capacity to manage insurance payments, demonstrating how rising costs affect all individuals with coverage. [10]
- Well-being programs and preventive care are becoming increasingly important to employers and insurance companies. Wellable Labs reports that businesses are allocating more resources towards initiatives promoting employee wellness:
- 90% of mental health.
- 76% of individuals were found to have good stress management and resilience skills.
- 71% of participants reported practising mindfulness or meditation. [10]
Over the next three years, 58% of insurers expect a notable increase in medical expenses. [10]
- According to the Majesco Future Trends report, insurers are still most concerned about persistent inflation as a top risk. Additionally, due to economic deceleration, total global premiums (including non-life and life) are predicted to increase below-average rates of 1.1% in 2023 and 1.7% in real terms by the end of 2024. [1]
What Consumers Expect To Drive Consumer Engagement
Cyber Insurance
- The cyber insurance market globally has experienced significant development, with an increase of around 60% observed in the last two years. Projections predict this sector will expand by more than 50% over the next five years. [4]
- Digitalization is particularly appropriate for fraud cases that involve the classification of massive data and detecting anomalies, like identifying instances of photo reuse. According to a recent study, 44 insurance claims submitted contained identical photographs. [7]
What is blockchain technology, and how will it contribute to insurance digitalization?
Blockchain is a decentralized digital ledger that securely and transparently records transactions across many computers. Its implementation in the insurance industry will improve transparency, trustworthiness, fraud prevention, claims automation through smart contracts, smoother customer experiences, and better risk assessment and underwriting practices while optimizing reinsurance processes.
- According to projections, the insurance sector's worldwide blockchain market will reach $1.39 billion by the end of 2024. [2]
- The insurance industry is estimated to achieve $1.16 billion in cost savings from blockchain technology by 2025. [2]
- Within the next two years, 77% of insurers anticipate blockchain technology will be integral to their organizations. [2]
- 77% of insurance companies are investigating blockchain technology to simplify policy issuing and claim settlement. [2]
Job Satisfaction in Insurance
- Despite the enticing prospects of diverse avenues such as underwriting, data and analytics, technology and more that would presumably attract millennial job seekers to insurance industry jobs — 44% of this demographic reported having no interest in pursuing a career path within this field. [1]
Overall in Insurance
- Managing general agents (MGAs) experienced significant growth in the US market in 2022. Their direct premiums written increased by 24% compared to the previous year, reaching a total of $85.5 billion - surpassing overall property and casualty insurance market growth by an impressive margin of 10.5%. [1]
- Furthermore, there was notable expansion within the excess and surplus (E&S) insurance segment, which grew at 17.5% and 28.8%, respectively, for two consecutive years – confirming that MGAs currently have plentiful opportunities in both markets. [1]
- According to the Majesco Future Trends report, reinsurers comprise the majority of innovation Leaders at 9%. On the other hand, a significant proportion (76%) of P&C ratings were either moderate (63%) or minimal (13%). [1]
- According to the Majesco Future Trends report, innovation emerged as a vital corporate objective in 2023 despite worldwide economic instability. 79% of companies placed it within their top three goals. [1]
This is an interesting view on corporate objectives considering each process differs from the last depending on the end goal. In an interview with Feathery’s Co-Founder Zack Khan, Vice President of Operations at AmWINS Group Aaron Udany, Aaron said:
“Every line of business has a slightly different process, and every underwriting and every market has slightly different information they're looking for.”
In several business processes, we see a combination of AI tools, human intervention, or both. The form of each tool depends on the needs of the business or client. Automation has now streamlined workflows much easier and mitigated the risk of error in the workplace, saving the company’s time, money, and resources.
How AI Will Contribute to Insurance Digitalization
In a recent interview between Feathery’s Co-Founder Zack Khan and Vice President of Operations at AmWINS Group Aaron Udany, Aaron shared:
“AI tools are fantastic at aggregating information. They are not great at disseminating what information from that 30-year history is important versus what is not because everything seems important.”
This is interesting, considering how many companies have implemented various AI applications and tools within their organizations to assist with automation processes such as data aggregation.
- 79% of insurance executives anticipate that artificial intelligence will revolutionize their approach to acquiring information from and engaging with their customers. [2]
The Influence of Insurance Digitalization on Consumer Purchases
Despite AI contributing significant growth to the insurance industry, technology is not without its risks or flaws.
- According to a study conducted in 2023, data breaches resulting from a compromise with a business partner accounted for 15%, while those involving cloud-based data contributed to at least 82%. [7]
- In 2022, healthcare, critical manufacturing, government IT, and financial services were the most targeted sectors in America, reflecting a marked escalation of attacks compared to previous years when the main targets included energy and other forms of critical manufacturing. The costliest data breaches occurred within the healthcare sector, with an average breach costing almost $11 million per incident during 2023. [7]
When critical infrastructure is singled out for attack, the risks are heightened. The healthcare industry has become a prime target because it can access sensitive personal medical and non-medical data, such as billing details and a policyholder's diagnosis. Cybercriminals can easily sell this information on the black market or use it to extract a ransom.
The Latest Shifts in Insurance Digitalization
Insurers must prioritize digital investments to keep up with the evolving industry. With 86% of companies intending to do so in the coming year, technology-driven solutions are becoming an essential aspect rather than a choice. [12]
- By the end of 2024, mobile devices will be used for 60% of insurance transactions. [2]
- By 2026, hyper-personalization will be the primary distinguishing factor for 45% of insurance providers. [2]
Advanced technologies like artificial intelligence (AI), data analytics, and machine learning (ML) have paved the way for hyper-personalization in insurance. This trend involves creating individualized products, services, and experiences to meet each customer's unique needs through data-driven insights.
Insurers move away from offering standardized policies by using large amounts of information gathered from various sources on customer behavior patterns, preferences, health status details, and lifestyle choices—all to tailor coverage solutions perfectly aligned with specific risks or circumstances faced by individuals.
This approach, aimed at enhancing customer satisfaction levels while increasing engagement rates, along with more comprehensive offerings presented at accurately priced options, makes it no longer uncertain why interest remains high among insurers and consumers alike.
- Following the surge in inflation rates, usage-based insurance is growing in popularity among consumers. Recent findings by TransUnion reveal that many auto insurers have embraced telematics technology to monitor driving behavior — adoption increased by 33% during Q1 2022 alone. This move has been warmly received by motorists hoping to lower their car premiums through this innovative approach. [3]
- Insurance customers value personal interaction significantly despite the widespread shift towards digital channels. According to McKinsey & Co., agents and advisors remain the most highly rated channel for insurance customer satisfaction. Approximately 20% of policyholders claimed they would switch providers if their advisors were no longer affiliated with the company. [3]
The Impact of Digitization on Insurance Providers
Studies show a link between highly digitalized economies and their ability to withstand various threats, even those stemming from major natural disasters. [4] To properly evaluate the patterns and potential hazards arising from natural occurrences, it is vital to understand scientific research, scrutinize large quantities of information through data analytics, and create highly accurate detailed risk models. [5]
- Over the past two decades, the worldwide worth of intangibles listed corporations possess has grown fivefold. Almost 80% of this value is uninsured. [4]
- Global losses due to natural disasters amounted to over $270 billion in 2022. Over 55% of them were uninsured. [5]
- According to the 2021 KPMG CEO Outlook survey, nearly 96% of insurance industry CEOs worldwide noted that COVID-19 has hastened digitization efforts and the development of a modern operating structure. [6]
- CEOs of the insurance industry expressed their intent to increase investment in three specific technologies:
- 68% indicated their emphasis on customer-centered technologies such as chatbots.
- 60% of measures concerning data security.
- 56% of digital communications utilize platforms such as video conferencing and messaging. [6]
According to Ed Chanda, National Sector Lead for Insurance at KPMG LLP:
“Insurers have realized that they need modernized systems to survive. Meeting customer needs and expectations while improving risk assessment requires digital operations capable of efficiently processing information and delivering products. To achieve growth by serving smaller businesses, digitized platforms are essential for cost-effective data collection and underwriter utilization when quickly assessing risks and pricing products." [6]
The insurance industry is quickly progressing towards digitalization, propelled by the adoption of AI and modernized systems. These developments bring opportunities to boost efficiency and enable finer risk management. Insurers integrating these digital tools can anticipate cost savings through streamlined operations while providing tailored services with swifter client response times.
These changes will create a more agile market competition, benefiting insurers and consumers in the end goal.What These Statistics Tell UsTo remain at the forefront of their field, insurance companies must do more than integrate new technologies into their practices. They must prioritize dynamic innovation and customer-focused solutions while remaining adaptable to change.
By embracing digitization, insurers can optimize operational efficiency, elevate consumer satisfaction, and stimulate business growth in a marketplace that's moving forward towards growth. Those who successfully champion digital transformation within this industry will establish forthcoming benchmarks for others to follow as they redefine what it means to be a progressive insurer in today's world.
Frequently Asked Questions
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Integrating digital technologies into all aspects of the insurance sector is called insurance digitalization. This includes incorporating platforms, tools, and data analytics that enhance customer satisfaction, improve operations, and enhance decision-making processes. Insurance companies can offer customized products using this approach while concurrently improving efficiency levels, reducing expenses incurred, and enhancing risk management strategies. This makes it an essential option for businesses in this industry today.
Insurance companies can reap many advantages by embracing artificial intelligence and machine learning. These benefits comprise refined precision when evaluating risks, hastened claim settlement, and increased ability to detect fraudulent activity. Additionally, such advanced technologies empower insurers to customize products and pricing based on specific customer information, resulting in more competitive offerings for their patrons.
The process of digitalization presents various obstacles for insurance companies. Such challenges include the pricy implementation costs of new technologies, ensuring employee proficiency in these systems, and managing the intricacies of incorporating legacy technology alongside modern tools into their workflow. Moreover, safeguarding confidential customer information constitutes a top priority by resolving apprehensions concerning data privacy and cybersecurity defenses to secure necessary precautions against security breaches or thefts.
Digitalization can benefit small insurance companies by enhancing operational efficiency and offering more competitive products. By incorporating digital tools, they can reduce costs, expand their customer base through online channels, and harness data analytics to better understand customers' needs and customize product offerings accordingly.
References
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