Technological innovation driven by customer centricity could pave the way to greater climate resilience and more personalised offerings by the insurance industry. Alternatively, insurance could become a luxury afforded only to the wealthiest few. These are potential paths for the insurance industry, according to a new future of insurance study by Economist Impact and data and AI leader SAS.

Informed by in-depth desk research and expert interviews, four prospective futures for the sector emerge in Revealing the paths to 2040: four possible scenarios for insurance. The report is the first in a two-part study examining the key factors that will shape the future state of the industry and the role technology could play in helping insurers navigate change.

“Our scenarios are not intended to predict the future,” said Edwin Saliba, Senior Analyst at Economist Impact. “Instead, they explore possible futures for the insurance industry, helping insurers better position themselves to respond effectively to emerging challenges and seize new opportunities.”

Per the report, the level of global cooperation and the pace of technological change will help determine how effectively and equitably the insurance sector, governments and societies at large address policy challenges like the climate crisis. Each path forward includes expert recommendations for industry leaders to build resilience and foster agility.

“There is a non-zero chance the insurance industry will collapse by 2040 – and that should prompt all insurers to take stock of growing risks and their overall resilience,” said Franklin Manchester, Principal Global Insurance Advisor at SAS. “Insurers can’t price customers out of coverage in flood zones to remain profitable in the climate crisis, certainly not in perpetuity, and perhaps not for much longer.

“As the digital revolution plays out in parallel, insurers can and should invest in responsible innovation for a more climate-resilient and prosperous future – or they risk failing the fundamental value proposition of insurance, which is to protect people.”

Scenario 1: Isolationism and unregulated technological growth lead to missed climate targets.

Isolationist global politics leads to accelerating technological evolution, unrestrained by regulatory guardrails or broader global coordination. The international community falls short of climate targets due to poor global cooperation. Only countries with the most developed economies can invest in and deploy green technologies (e.g., renewable energy, electric vehicles), while developing economies and regions suffer.

Private, hyper-regionalised insurance creates large disparities in product offerings and pricing, and the vast insurance protection gap widens as insurers withdraw from high-risk markets.

Scenario 2: Customer centricity drives prevention-focused approaches and climate transformation.

If regulatory efforts and global cooperation succeed in protecting digital identities and data privacy, new open lines of communication between countries and regions inspire collective advancement in emerging technologies. Insurers shift from an indemnification to a preventative approach across health, home and auto policies.

The democratisation of technology enables insurers to offer highly personalised products to new and existing customers, tailored to their specific risk profiles and preferences.

Scenario 3: The effects of climate change spur climate resilience – for some.

Major economies introduce corporate sustainability reporting and overhaul their national disaster response and recovery policies, with insurers playing a starring role in compliance by employing risk modeling approaches. Lower- and middle-income economies focus on saving lives and livelihoods, while in further-developed economies, banks adopt climate risk-adjusted mortgages, and insurers introduce lower home insurance premiums by encouraging homeowners to retrofit their properties.

Where insurers stop providing coverage, safety regulations and climate-shock-resistant building codes are introduced to prohibit the development of infrastructure in high-risk zones. Insurers leverage historic data and enhance accuracy and data availability, bringing real-time environmental monitoring and advanced predictive analytics to the fore.

Scenario 4: Insufficient innovation and no cooperation? Insurers buckle.

Refusal of governments and businesses to collaborate on technology development and regulation exacerbates global conflict and undermines efforts to mitigate climate change. The full potential of AI fails to materialise, and the insurance industry falls behind in adapting to a world beset by increasingly catastrophic natural disasters. The protection gap reaches historic levels, disproportionately affecting emerging markets, where many are left without coverage and facing significant public resources constraints.

As the insurance industry eventually falters, collective risk pools in local communities gain momentum to cope with regionally specific concerns.

Preparing for 2040

“Even the boldest actuaries, in their most ambitious risk models, could hardly have imagined the skyrocketing frequency and severity of loss events we've experienced in recent years,” said Thorsten Hein, Insurance Lead in Risk, Fraud and Compliance Solutions at SAS. “The industry is on an alarming trajectory.

“Insurers are facing increasingly complex unknowns much faster than they’ve ever had to in the past, and it’s pushing their actuarial limits. AI will become an indispensable tool in helping insurers survive and thrive on the path to 2040 – AI guided by human intelligence that knows how to use its capabilities optimally and responsibly for the benefit of the company and the protection of its customers.”

SAS will deliver the second instalment of this two-part #Insurance2040 study in early 2025. In the meantime, download the first report now at sas.com/insurance2040 – and learn more about how data and AI is helping shape the sector’s future today at sas.com/insurance.

About Economist Impact

Economist Impact combines the rigor of a think-tank with the creativity of a media brand to engage a globally influential audience. We partner with corporations, foundations, NGOs and governments across big themes including sustainability, health and the changing shape of globalization to catalyze change and enable progress. 

We bring a 75-year track record of evidence-based policy research across 205 countries. Our global team sheds light on policy choices through benchmarks, economic and social impact analysis, white papers, forecasting and scenario modeling.

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