Insurance premiums generated by emerging ‘insurtech' services will exceed $400 billion by 2023, according to Juniper Research.
New technologies including AI will help the insurance sector address decreasing margins, the analyst company said, but the sector remains relatively slow on adoption of new technology.
Juniper's report, ‘Insurtech: Cost Savings, Insurer Readiness & Market Forecasts', predicts that insurtech platforms will increase opportunities for insurance companies, with new technology generating $400bn in premiums, up from $187m in 2018. The research found that insurtech platforms will equip insurers to meet the challenges of diminishing margins and increased competition, creating an opportunity insurers cannot ignore in the future.
However, while insurtech enables rapid transformation of traditional insurance business models, the adoption of these platforms by incumbents has been limited due to relatively slow rates of innovation within the industry. Consequently, Juniper forecasts that this new sector will represent under 10% of the global insurance market by 2023, compared to approximately 4% in 2018.
The introduction of AI in the claims process will generate significant cost savings. Juniper forecasts that across property, health, life and motor insurance, the annual cost savings will exceed $1.2 billion by 2023, a five-fold increase over 2018.
Research author Nick Maynard explained: "AI vendors such as Tractable are revolutionising claims, demonstrating the potential of AI in claims management. In a time of stagnating combined ratios, AI has the potential to make a tremendous difference to insurer's margins.