Rising demand for digital insurance premiums is expected to displace $280 billion of current revenues, but cyber threat protection revenue expected to rise

Rising demand for digital insurance premiums and their online distribution is expected to displace $280 billion of current insurance revenues by 2025, challenging current customer retention levels, according to a new report from Accenture.

In the report, “Insurance Revenue Landscape 2025: Innovate for Resilience,” Accenture analyzes how the insurance industry’s revenues will be affected by new customer, demographic and technology trends.

The research shows that, despite the global recession of 2020, the global insurance industry will 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%. 

One area expected to grow is protection against cyber threats. As cyber threats rapidly rise, coverage and risk-mitigation services related to cyber threats are expected to generate another $25 billion, according to the study.

The overall growth includes $800 billion in U.S.-centric healthcare payer premiums, which have not traditionally been counted as part of the insurance sector, but have become material due to global demand for convergence of digital health products and services, such as wellness offerings.

As customers renew their policies with data-driven offerings, $140 billion of current insurance revenues may likely shift from traditional to technology-enabled insurance products, including switching to behavior-based insurance for connected vehicles and smart homes. Concurrently, another $140 billion of current revenues in traditional insurance distribution could be displaced by insurers offering digital distribution experiences, as customers purchase insurance on digital channels and third-party platforms.

The report finds that insurers will compete for new revenue growth in customer wellness, particularly as they make new partnerships in a digital ecosystem to improve customer health and personal finances. The report estimates that the convergence of the life insurance, health and wealth industries will generate $120 billion in new revenues — comprising $60 billion from smart health products; $30 billion from products and services for the aging population; and $30 billion from direct life and wealth management products.

Insurers will also compete for new revenues to cover emerging and newly developing risks. As insurers cover exposure to environmental catastrophes, risks related to climate change are expected to make up $50 billion of new insurance revenues. As cyber threats rapidly rise, coverage and risk-mitigation services related to cyber threats are expected to generate another $25 billion. Insurers that improve pre- and post-incident handling with digital technologies, like artificial intelligence and analytics, will enable more sophisticated risk modelling and incident response.

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