The #Insurance2040 Study: Four possible futures for the industry

The #Insurance2040 study, sponsored by SAS and conducted by Economist Impact, explores four potential future scenarios for the global insurance industry by 2040. The study emphasizes how technological innovation, global politics, and climate change will shape the sector’s future.

#Insurance2040

Four Possible Scenarios for the Future of Insurance:

1. Scenario 1: Isolationism and Unregulated Technological Growth

• Outcome: Missed climate targets and increasing regional disparities in insurance.

• Key Points:

• Global cooperation falters, and technological growth is unregulated.

• Wealthier nations advance in green technologies while poorer regions suffer.

• Hyper-regionalized insurance leads to inequitable pricing and coverage.

• The protection gap widens as insurers withdraw from high-risk markets.

2. Scenario 2: Customer Centricity Drives Prevention-Focused Approaches

• Outcome: Technological innovation promotes prevention and personalized insurance offerings.

Key Points: Tech advancement

• Global cooperation and regulatory efforts enable secure digital identities and data privacy.

• Insurers shift from indemnification to prevention across health, home, and auto policies.

• Advances in technology allow for highly personalized insurance products tailored to individual risk profiles.

3. Scenario 3: Climate Change Spurs Climate Resilience – For Some

• Outcome: Unequal climate resilience based on economic development.

• Key Points:

• Major economies adopt sustainability reporting and climate-responsive insurance.

• Insurers offer lower premiums for climate-resilient properties and encourage retrofitting.

• Higher-income economies benefit from proactive climate measures, while lower-income nations focus on survival.

• New regulations on building codes and infrastructure prevent development in high-risk areas.

4. Scenario 4: Insufficient Innovation and No Cooperation – Insurers Buckle

• Outcome: Industry collapse due to lack of innovation and cooperation.

Key Points: Climate Measures

• Global conflict and failure to cooperate on technology or climate change exacerbate risks.

• AI and other innovations fail to materialize, leaving insurers unprepared for catastrophic events.

• The protection gap deepens, particularly in emerging markets, leaving many uninsured.

• Local, community-based risk pooling gains traction as insurers struggle.

Key Themes and Expert Insights

• AI as a Vital Tool: Artificial Intelligence will be crucial for insurers to adapt and respond to emerging risks, provided it is guided responsibly.

• Urgency for Resilience: Insurers must recognize the increasing unpredictability of risk events and innovate to build resilience, especially in the face of climate change.

• Industry Call to Action: Insurance leaders are urged to prepare for these potential futures by investing in responsible innovation, enhancing data analytics, and collaborating on global challenges like climate resilience.

Next Steps

The study’s second report, due in early 2025, will explore these scenarios in further detail. The first report is available for download at sas.com/insurance2040.

The future of the insurance industry depends on how it navigates these uncertainties, balancing innovation with responsibility to protect people and the planet.

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