Rising demand for digital services could cost insurers £8.3 billion in displaced premiums by 2025, according to a new report from Accenture.

The report, which examined the impact of digital services on customer retention and revenues for UK life and general insurers, found that up to £3.5 billion of market share is up for grabs through new technology products.

As UK consumers and businesses seek greater value from their cover, £3.5 billion of today’s insurance revenues will be renewed not with traditional products but rather with technology-enabled and digital offerings, such as pay-as-you-drive and connected health, the report states.

The report estimates that the convergence of the life insurance, health and wealth industries will generate a £4.5 billion revenue opportunity by 2025. This comprises £700 million from smart health products; £1.9 billion from products and services for the aging population; and £1.9 billion from direct life and wealth management products.

Insurers will also compete for brand new revenues from covering emerging and newly developing risks.

As extreme weather events become more commonplace, risks related to climate change are expected to contribute £1.5 billion to insurer revenues. And as cyber criminals threaten businesses and consumers, coverages and risk-mitigation services related to cyber threats are expected to generate a further £800 million.

Insurers that improve pre- and post-incident handling, with digital technologies, such as artificial intelligence and analytics, will enable more sophisticated risk modelling and incident response, Accenture claimed.

Another £4.8 billion of revenues currently transacted via traditional channels will be captured by insurers offering digital distribution experiences, as customers choose to purchase insurance through online platforms.

The research also shows that, despite a global recession, the UK insurance industry will grow from £274 billion overall in early 2020 to approximately £298 billion by the end of 2025 — a compound annual growth rate of around 1.4 per cent.

Globally, the insurance industry will grow from £4.9 trillion in early 2020 to £6 trillion by the end of 2025—a compound annual growth rate of 3.5 per cent.

This includes £575 billion in US-centric healthcare payer premiums, which have not traditionally been counted as part of the insurance sector, but have become material due to global demand for convergence of digital health products and services, such as wellness offerings.

Jamie Althorp, insurance lead for Accenture UK & Ireland, said: “Recently, resilience has been a key strength for UK insurers.However, with consumer habits evolving so rapidly, it won’t be enough going forward. The past year has placed even greater emphasis on digital touchpoints, not just for digitally established lines like motor and home but in newer areas like term life and small commercial."

He added: "To keep up with these changes, insurers must deliver seamless digital experiences whilst tapping into technology-led revenue streams, all whilst focusing on customer retention in a post-dual-pricing world.”

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