This piece is by Andrew Pollard, Insurance Specialist at SAS UK & Ireland.
The insurance industry stands at a historic inflection point. In an era increasingly defined by climate volatility, socioeconomic inequities and rapid technological advancement, insurers are being called upon to do more than manage risk – they must reimagine how they create value in an unpredictable world.
As we look ahead, the convergence of artificial intelligence (AI) and data innovation offers both daunting challenges and unprecedented opportunities. The path forward will depend on bold collaboration and a willingness to embrace transformative change.
A shifting risk landscape
The fundamental purpose of insurance has always been to provide a buffer against uncertainty. But today, the scale and complexity of global risks is pushing traditional models to their limits.
Climate change is exacerbating extreme weather events and natural disasters with increasing frequency. Globally, in 2024 alone, fires, floods, storms and earthquakes resulted in £289 billion in economic losses – 60% of which were uninsured. As a result, premiums are rising faster than disposable income, even in mature markets like the US, UK, Australia and Japan.
Aging infrastructure, heightened exposure to climate risks and increasing health vulnerabilities – especially among children, the elderly and low-income communities – are reshaping the insurance equation. Longstanding risk models are becoming obsolete and the pace of change is outstripping insurers who are unable to adapt.
The global protection gap
At the heart of the challenge lies a widening protection gap – the difference between insured and uninsured losses. In 2023, this worldwide gap reached an estimated £1.4 trillion across life, health, natural catastrophe and crop insurance.
Our recent global study, conducted in partnership with Economist Impact, surveyed over 500 insurance executives from 17 countries. The findings were clear: 79% of insurance leaders believe the industry has a moral responsibility to close the protection gap.
Moreover, 76% see doing so as a significant business opportunity – one that can simultaneously drive growth, build resilience and restore trust.
The catalyst for change
To fulfil this dual mandate, the insurance sector must harness AI, machine learning and real-time data analytics. Generative AI (GenAI) in particular is unlocking new frontiers in personalisation, fraud detection, claims processing and risk modelling.
Connected devices and IoT sensors enable real-time monitoring, allowing for predictive maintenance and dynamic pricing models. AI-powered platforms can tailor policies to individual behaviour, transforming insurance from a reactive safety net to a proactive tool for risk prevention.
These innovations aren’t just making insurance smarter – they’re making it more inclusive. Our research revealed that three of the top four strategies insurers are pursuing to close the protection gap are grounded in the use of technology. Nearly half reported that they are using technological solutions to make insurance products more affordable, thereby increasing accessibility for underserved populations.
Overcoming barriers to innovation
Despite the transformative potential of technology, insurers continue to face significant hurdles on the path to innovation. Most prominent among these is a limited understanding of consumer needs, cited by 76% of insurance leaders, followed closely by a lack of insight into the broader external environment.
Perhaps most striking is the trust deficit that persists across the industry with 77% believing that a lack of trust is a significant barrier to closing the protection gap. High-profile data privacy breaches, the retreat of insurers from disaster-prone regions and limited transparency have undermined public confidence – posing reputational risks and complicating regulatory relationships.
To overcome these obstacles, insurers must prioritise responsible AI practices and commit to transparent, trustworthy data usage. Only by addressing these foundational issues can the industry fully realise the benefits of innovation and better serve a rapidly evolving global population.
Striking the right balance
As the pace of global change accelerates, the future belongs to insurers who can not only cover risks but also empower communities and bridge divides. The protection gap is not simply a matter of missing coverage, it reflects broader inequalities and systemic vulnerabilities that demand thoughtful, forward-looking solutions.
Insurers who embrace this dual mandate – risk management and social impact – will be the ones who shape the future of the industry. To meet this moment, insurers must focus on building partnerships across sectors and geographies – including working with governments, NGOs, technology companies and grassroots organisations.
At the same time, designing inclusive products that serve the needs of underserved markets – such as women, migrants, informal workers and climate-vulnerable communities – will be essential for broadening access and relevance. Meanwhile, investing in scenario planning and foresight capabilities will enable insurers to remain resilient amid systemic shocks, such as pandemics, geopolitical conflict and climate disruptions.
Embarking on the path to 2040
As financial first responders, insurers have a unique role to play in the transition to a more equitable and sustainable future. The decisions made in the next five years will shape the industry’s relevance and impact for decades to come. It’s not just about business continuity – it’s about redefining the social contract between insurers and the communities they serve.
The path to 2040 will not be linear, and the future is far from certain for the insurance industry. But the direction of travel is clear. Insurers must rise to the moment, reimagining their value proposition with a bold mix of technology and empathy. This will enable them to close the protection gap, build trust and deliver on their promise – not just to policyholders, but to society at large.
The stakes have never been higher, but neither has the potential for positive change.
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