Insurance industry faces 4 possible future scenarios

The insurance industry faces four possible future scenarios. Insurance executives are optimistic about the major trends influencing their industry, but remain aware of critical risks to their organization.

A panel of experts reviewed the findings of The Economist Impact research on the future of the industry during a recent webinar.

Those four possible scenarios are:

1. Fractured resilience.
2. Digital harmony.
3. Adaptive alliance.
4. Stagnant turmoil.

Two main drivers of change impact all of these scenarios: the pace of technological change and the level of global cooperation.

Insurance executives surveyed said market dynamics and artificial intelligence are the most significant trends that could shape the insurance sector in the coming decade, said Edwin Saliba, senior analyst with The Economist Impact. But executives also identified three emerging risks to the industry: climate change, cybersecurity and geopolitics.

Optimism over AI

Many leaders are aware of and optimistic about the use of artificial intelligence in the industry, the study revealed. AI’s cost-saving benefits held special appeal. Other top-ranked areas of focus that executives named as priorities over the next decade include:

• Minimizing underwriting and operating costs.
• Market expansion.
• Improved information sharing.
• Improved claim processing time.
• Improved product deployment time.

Closing the $1.8 trillion global protection gap is viewed as both an ethical responsibility and a business opportunity by the executives surveyed.

The survey found that industry leaders believe technology, innovation and engagement with regulators are effective strategies for addressing the public’s issues with lack of trust and product affordability. But none of these strategies seems to be widely embraced by insurers.

Key survey takeaways, Saliba said, include:

• Adopting emerging technologies requires adaptive behavior in an industry that has been slow to change.
• The rise of the middle class, especially in Asia and the Pacific, will drive demand for insurance as long as living standards improve.

The industry is at an inflection point today, said Andre Belelieu, head of financial services with the World Economic Forum.

“The industry is coping with many megatrends, many of which didn’t exist 20 or 30 years ago and many of which have increased,” he said. “The industry is trying to adapt and remake itself across many areas.

“Insurance is central to the solutions we need to build for the world. The insurance industry is doing a lot of deep thinking around all those areas.”

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].