Insurance Industry Trends and Challenges Through 2040

The global insurance industry is undergoing rapid transformation, influenced by evolving risks, technological advancements, and shifting market dynamics. To gain insights into how industry leaders perceive these changes, Economist Impact, sponsored by SAS, conducted a survey of over 500 insurance executives across 17 countries in September and October 2024. The respondents represented various insurance subsectors, including life, property and casualty, accident and health, and insurtech.

The survey identified AI and digital transformation as the most significant opportunities for insurers in the coming decade. Executives see AI as a game-changer for risk assessment, claims processing, and cost efficiency, with generative AI and digital process automation topping the list of critical technologies to adopt. However, the industry faces substantial internal barriers to technological integration, including legacy systems, departmental silos, and slow innovation cycles—challenges that are particularly pronounced among smaller insurers.

At the same time, executives highlighted climate risks, geopolitical instability, and cybersecurity threats as the most pressing risks. Climate-related concerns were particularly high in North and Latin America, regions that have experienced severe weather-related losses. Additionally, geopolitical uncertainty—amplified by major global elections and ongoing conflicts—has raised concerns about regulatory shifts and market volatility. Cybersecurity threats continue to escalate, particularly in Latin America and North America, where past high-profile cyberattacks have driven increased awareness.

The Growing Protection Gap:
The survey also underscored the growing protection gap, which represents the difference between insured and uninsured losses. Estimated at $1.8 trillion globally, this gap is expanding, especially in emerging markets where insurance penetration remains low. Most executives (79%) believe closing the protection gap is an ethical responsibility, while 76% see it as a business opportunity. However, insurers face two major obstacles in addressing this issue: lack of consumer trust and affordability concerns. Many people, particularly in developing markets, have limited understanding of insurance products, while high premium costs deter low-income households from purchasing coverage.

To address these challenges, insurers are exploring technology-driven affordability solutions, such as AI-powered risk assessments, telematics-based auto insurance, and microinsurance tailored to underserved populations. Engaging with regulators to create a more flexible regulatory environment is also seen as a potential strategy, but the survey revealed that very few insurers are actively implementing these approaches.

The Road to 2040:
While the insurance industry remains optimistic about AI and digital innovation, its ability to adapt to change will determine how well it navigates the challenges ahead. The survey highlights a disconnect between recognizing opportunities and executing solutions, particularly in areas such as regulatory collaboration, trust-building, and affordability. Moving forward, insurers will need to break down internal barriers, embrace digital transformation, and find innovative ways to close the protection gap, ensuring long-term resilience in an uncertain world.