Insurance is critical to modern life, providing financial security for individuals, families, businesses, and entire communities. But the insurance business is in a heightened state of transformation, driven by new and intensifying risks, innovative distribution and service models, wealth and income inequality, and a dynamic technology landscape that features AI technology poised to either wreak havoc or unleash new orders of capabilities. To help industry leaders navigate these tumultuous waters, we’ve analyzed past industry performance and top consumer, regulatory, competitive, and technological trends to outline what to expect in the next decade.

Insurance Has Held Strong Against Market Volatility — But There’s More Turbulence Ahead

Since 2015, the insurance industry has faced obstacles such as shifting competitors and consumer expectations, tech trials and tribulations, climate change, and social tensions. These factors have impacted the industry’s performance, resulting in varied premium growth, led by emerging markets. On average, however, over the last seven years, the combined, loss, and expenditure ratios have maintained a constant trend among the top 25 global insurers (based on market capitalization). The combined ratio remains around 100%, putting pressure on margins and forcing price rises to offset increased underwriting losses. This highlights the industry’s commoditization — and the importance of diversified strategies to maintain a strong balance sheet. External factors such as geopolitical unpredictability, the challenging economy, and the reality of climate change will further pressure profitability, yet there are green shoots brought by technological advancement and the possibility of providing solutions to the “protection gap” market of $2.8 trillion.

Conceptual graphic showing three concentric circles. The outer circle is ‘the future of insurances,’ and within that ring sits a circle composed of six business drivers: unpredictable geopolitics, challenging economy, protection gap, technology advancement, regulatory changes, and climate change. Within the business drivers ring sits a circle composed of business model, product, and process. At the very center of the graphic is the text ‘customer.’

The Business Models, Products, And Processes Of Insurers Must Change

For decades, the insurance industry operated within neat, tightly defined boundaries, with clear expectations about the types of products insurers created, how and which entities sold them to customers, the roles and responsibilities of private and public insurers (as well as the community at large), and even how insurers priced risk and predicted loss. Today, the insurance game is shifting. A new reality is taking shape.

Insurance Business Models: Embedded, Connected, And Immersive

Insurance company models will continue to evolve and innovate to meet evolving client needs and respond to macroeconomic and profitability concerns. Many external and internal developments are on the horizon, including new distribution and service channels, the need for speed, and the availability of insurance-related solutions at the right time and place. Insurance will become more embedded, connected, cooperative, immersive, and co-created with the customer community in the next decade.

Insurance Product Design And Development: Agile, Individualized, And Holistic

Insurers will continue to manufacture the products we have come to rely on — life, house, health, and auto insurance. But they will have more input from inside and beyond the traditional insurance industry. These forces will include AI capabilities, namely generative AI that supplements traditional coverage’s “recommender” duties. This will result in insurance solutions that will be highly individualized, holistic, need-based, anticipatory, and compliant.

Insurance Processes: Touchless, Customer-Centric, And Empathetic

The insurance industry and technology leaders must invest wisely to increase efficiencies and improve customer experience. Insurers will engage in more process automation across marketing, distribution, underwriting, claiming, and policy servicing. Leading insurers will use automation and empathy during the next decade to reach outcomes such as driving revenues and policies in force, optimizing expenses, and minimizing risks.

Forrester Can Help You Navigate This Exciting Future

Overall, the future of the insurance industry looks exciting. As technology advances and the world changes, insurers must adapt. And we at Forrester stand ready to help, with a wide range of research on insurance that can assist you in shaping your future. This ranges from customer obsession and the top emerging technologies impacting insurance to the usage of AI in insurance. We also have yearly predictions for the insurance industry to assist you in planning for the short term, along with the new The Future Of Insurance report for your medium- to long-term planning.

Forrester clients can download The Future Of Insurance to see our take and plan for the future. They can also connect with Ellen and I through an inquiry or guidance session to discuss the future of insurance and any associated topics.