Digital Advances Prompt Insurance Sector Evolution
The insurance realm is undergoing a transformative phase, spurred by digital advancements. These digital shifts not only pave the way for innovative growth and efficiencies but also introduce new risk dimensions.
A notable outcome of this digital evolution is the surge in companies’ intangible assets, particularly digital data. However, this digital reliance also exposes these assets to threats like cyberattacks and business disruptions.
Swiss Re Institute‘s recent sigma study, titled “The economics of digitalisation in insurance,” underscores that the potential advantages of digitalization across the insurance spectrum remain largely untapped.
The study introduces the Insurance Digitalisation Index, evaluating the digital progression of 29 countries’ insurance sectors. South Korea leads the index, with Sweden, Finland, and the US trailing closely.
While developed nations with robust infrastructure and widespread internet access have made significant strides in digital adoption, emerging markets like China, Slovenia, and India are rapidly bridging the gap.
China’s remarkable leap of ten positions in a decade exemplifies the potential of emerging markets to directly embrace modern digital solutions, bypassing older systems.
Swiss Re’s Group Chief Economist, Jerome Haegeli, emphasized the study’s revelation of a direct link between resilience and digital adoption. He noted that digitalization is instrumental in expanding insurance accessibility, thereby bridging protection voids. For insurance providers, digitalization enhances underwriting precision, risk management, and risk evaluation, refining their operational quality and efficiency.
The broader economic digitalization is also carving out new risk arenas, presenting insurers with fresh opportunities. The rise of sharing-economy models, epitomized by platforms like Uber and Airbnb, necessitates innovative insurance risk solutions.
The transition from tangible goods production to service and information delivery has amplified the global intangible assets value, reaching a staggering USD 76 trillion in 2021. Astonishingly, nearly 80% of this remains uninsured.
The escalating demand for cyber insurance, projected to hit USD 16 billion in 2023 and USD 25 billion by 2026, mirrors the global concern for cybersecurity.
Modern digital tools empower insurers to amass and analyze vast data volumes, enabling comprehensive risk evaluations and precise risk pricing. Such digital interventions can streamline routine tasks, like underwriting data collection and analysis, reducing costs and potentially leading to more competitive premiums. The industry’s digital overhaul aims for a 3-8% enhancement in loss ratios and a 10-20% cost-saving across the value chain.
Pravina Ladva, Swiss Re’s Group Chief Digital & Technology Officer, highlighted the untapped potential in the insurance sector’s digital transformation. She urged the industry to perceive this as a motivation to persistently invest in pioneering solutions and adapt to evolving risks.
For consumers, digital platforms offer unparalleled price clarity, showcasing a plethora of insurance products and providers. These platforms simplify the onboarding process, rendering insurance more attainable and cost-effective. The focus of tech investments in insurance has gradually shifted towards amplifying efficiency and refining underwriting and claims processes.