The prospect of inevitable tech-driven disruption may sound grim but EY says an “unprecedented growth and profitability spike” is within reach for large insurers.

The global business services company says large commercial insurers will “soon experience the watershed technology disruption that has occurred in media, retail, transportation, and other sectors”.

This revolution will require bold leadership, well-informed investment decisions, cultural change and increased customer-centricity, EY says.

Many things must go right for the industry to realise potential growth, and not all companies will share in it equally or advance at the same pace, EY says in a new “Next Wave Insurance” report.

Still, it says the transformation of insurers may not be as negative as it sounds, provided insurers and reinsurers seeking to win in the next wave take immediate action.

“Perhaps the most important ingredient for success is a sense of urgency.

"In some regions, most notably Asia-Pacific, the most innovative insurers have already embraced many of these NextWave ideas,” EY says, adding that in a hardening market the opportunities are “especially compelling.”

“There is reason to believe that the industry’s best days lie ahead,” the report says. “From our extensive global research into current market conditions and future trends, we conclude that an unprecedented growth and profitability spike is within reach.”

Consolidation may be necessary for some smaller firms to gain the scale they need to realise the full benefits of automation, and “a little luck and good timing” will be useful too.

EY warns that current cost structures are not sustainable, because customers want the streamlined, intuitive experiences that are the norm in other sectors.

Intangible assets such as intellectual property (IP), patents, brands, networks and virtual operations now generate far more business value than tangible assets.

“This profound shift, which has occurred during the past 20 years, requires insurers to offer new products and protections,” the report says.

New types of employment and working relationships, including those in the “gig economy,” require insurers to rethink their approach, EY says.

Younger workers think of insurance as ‘dull and outdated, if they think of it all”.

“As challenging and cost-intensive as the upcoming investments will be in the near term, they are necessary for long-term success,” the report says. “Those firms capable of profound change will be those that enjoy the biggest upside in terms of dramatic growth and sustainable profitability.”