There are tectonic shifts under way in the insurance industry. No prizes for guessing what’s fueling them. You got it - technology.

From wearables to Artificial Intelligence (AI) to autonomous driving and the Internet of Things (IoT), digitalization is rapidly changing the insurance landscape, leaving insurers with a Hobson’s choice – innovate or perish.

So what does the next decade hold for the industry? Allianz Research sifts through the developments to identify some potential trends…

With data driving the future, risk prevention rather than risk management will be the keyword going forward.

On the business side, machine-learning and AI-related technologies provide better analytics to predict risks. Customers too are increasingly adopting technologies that focus on the prevention of incidents. For example: a fitness tracker that alerts the wearer of abnormally high heart rate; car software that gives a blind-spot warning to the driver; a smart home that flags the owner of a fire hazard. Such systems will bring down the number of claims. The bad news, however, is that losses per event may rise due to the interconnectedness of such systems. 

Technology is a double-edged sword indeed. On the one hand, it makes existing risks easier to predict and prevent. On the other, it gives rise to new threats such as cyberattacks.

According to the latest Allianz Risk Barometer, cyber risk is now a core concern for businesses in 2019 and beyond. It’s a headache not just for companies. Individual customers also stand to lose a lot from hacks – from money to sensitive data to even their identities. 

This presents an opportunity to insurers to design cyber insurance products for both corporate and retail customers.

Then, there are the so-called usage-based insurance (UBI) products, an example of which is Allianz’s BonusDrive auto insurance. Telematics measures a customer’s driving patterns, making it possible to offer lower premiums for low-risk drivers. Expect newer products in the future as necessity necessitates invention. 

With opportunities come more players and offerings. Competition in the insurance market could rise. In fact, new rivals might even be from outside the industry - from tech giants in China and the U.S. to insurtech startups. Established insurers such as Allianz have already started partnering with newcomers. Any ‘disruption’, however, is likely to be more in the distribution model rather than in the products themselves.

From digital purchase of products to a simplified claims-handling process, customers will seek quicker, easier and uncomplicated experiences. The modern-day customer expects a single-click process with a personalized experience on a platform where you can not only buy insurance, but also avail related services.

The industry will welcome more customers too. Digital platforms offer a chance to widen the customer base, especially in emerging markets. A one percentage point higher penetration rate in emerging markets would have added 250 billion euros in premiums to the 3.655 trillion euros seen in 2018, according to Allianz Research. Imagine the potential!

Now for the numbers. 

Over the next decade, growth in global insurance premiums is expected to rise to around 5 percent from 3.3 percent in 2018, according to Allianz Research. However, it is expected to remain below the estimated global economic output growth of 5.6 percent, indicating that the protection gap may persist, even if it narrows somewhat. 

Life and property and casualty (P&C) premiums are expected to grow by 10.5 percent in emerging markets and by 3.2 percent in developed markets. The highest increase in premiums is expected in Asia, excluding Japan. Over the next decade, premiums are seen growing at around 9.4 percent in the region - life insurance premiums by 9.8 percent and P&C by 8.5 percent - driven by China. 

Due to a temporary setback last year, it may take a little longer for China to become the world’s largest insurance market. The U.S. might keep its lead by 2029, but by a narrower margin. 

But even as China waits, it will drive the global landscape in the next decade, growing at 11 percent annually. In comparison, the U.S. market is estimated to grow at around 2.6 percent.

China’s global market share is set to double by 2029 to more than 20 percent. Moreover, a whopping one-third of all additional premiums will be written in the Middle Kingdom. 

All in all, total global volume of insurance premiums is expected to reach 6.326 trillion euros in 2029.

For more on how the insurance market performed in 2018 and details on regional developments over the next decade, read the Allianz Insurance Report 2018.