Insurtech market closes 2023 centred in innovation, digital, connected and generative AI-driven insurances
Cluj-Napoca and Madrid, April 11, 2024. – NTT DATA, a global leader in digital business and IT services releases the report Insurtech Global Outlook 2024. This year’s report delves into 3 waves of innovation that are currently reshaping the insurance sector, offering recommendations derived from their key findings and global approach within the dynamic Insurtech landscape.
The insurance industry is changing at a rapid pace, and this is particularly due to the uncertain and unpredictable contexts plus the rise of emerging deep technologies provoking large scale changes on a global scale, such as technological advances and digital transformation at a global level.
After reaching record investment figures in previous years, the sector has experienced a significant adjustment in 2023, from its peak in 2021, looming a bubble bust. But also, a strategic adaptation of these companies to the new global economic and political reality. In addition to this adjustment, the bursting of innovative technologies as Generative AI has boosted the industry's ability to combat emerging risks such as climate change, cybersecurity, or mental health, evidencing the maturity of the sector, which seeks long-term sustainability and profitability.
Consequently, between 2021 and 2023, integrated insurance, employee benefits and cyber risks led the Insurtech sector's funding, while healthcare emerged as the business line with the fastest growth compared to 2018 and 2020.
The 3 waves of innovation: Digital Insurance, Connected Insurance and Generative Insurance
In this edition, the report highlights the 3 waves of innovation (Digital Insurance, Connected Insurance and Generative Insurance):
- Digital insurance: the insurance industry, driven by digitalization, has seen Insurtech companies not only entering the market but also transitioning towards profitability and sustainability in their businesses.
- Connected insurance: the second wave, led by real-time data, is witnessing a shift from traditional protection-based models to proactive prevention strategies and personalized customer approaches.
- Generative insurance: the latest wave, emerged by the Generative Artificial intelligence, is assisting insurance companies to generate high impact models in society, all while complying with regulation and ethics.
Cybersecurity and AI: key pillars for the industry
The confluence of emerging technologies with evolving market dynamics brings both challenges and opportunities for insurers, urging them to embrace innovative models, products, and talent to maintain a competitive edge in the age of AI.
Within these waves, the growing importance of cybersecurity, the rise of artificial intelligence (AI) and the consolidation of innovative business models stand out as fundamental pillars for transformation and evolution of the industry. In this context, Insurtechs have evolved as a major force, from disruptors to enablers and catalysts.
Cybersecurity is positioned as a fundamental pillar for the Insurtech market. Specifically, the report notes an investment of $640 million in the cybersecurity area with a growth in the number of transactions, emphasizing the growing focus on protection against cyber risks and the adoption of innovative technologies. Thus, Insurtechs focused on cybersecurity received a threefold increase in funding between 2021 and 2023, compared to the years from 2018 to 2020.
At the same time, artificial intelligence is emerging as a disruptive driver, leading the way to revolutionary solutions and business models for the industry. With investments of more than $50 billion in machine learning solutions, natural language processing and generative AI applications, business leaders recognize its transformative impact. Ninety-eight percent of respondents admit that new skills are needed to work effectively with these tools.
"We recognize the crucial task of assessing both risks and opportunities in highly regulated environments, characterized by increasing complexity, for our clients in the insurance sector.’’ says Bruno Abril Head of Insurance at NTT DATA EMEAL.
NTT DATA's analysis, contrary to alarmism, reflects a re-calibration rather than a collapse, with the industry poised for a renaissance driven by waves of innovation.
In addition, as a trend, the study emphasizes the triumph of AI, with a marked increase in GenAI investment trends driving the industry toward a new wave of innovation. The transformation in high-risk insurance, particularly in response to emerging risks and opportunities associated with Climate Change, Health and Wellness, and Cyber Risk, is reshaping the evolution of the industry during the present AI era.
Report
Insurtech Global Outlook 2024
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