Market Insight-USA Insurance IT Spending Market Overview 2024
USA Insurance IT Spending Market Was Valued at USD 31,620 Million in 2023 and is Expected to Reach USD 69,236 Million by the End of 2032, Growing at a CAGR of 9.32% Between 2024 and 2032.– Bossonresearch.com
IT spending in the US insurance market is showing a clear upward trend, with insurance companies increasingly focusing on using technology to enhance competitiveness, ensure compliance, and provide innovative solutions to customers. IT spending in the US insurance industry is evolving with its digital transformation, with increasing investments in technologies such as artificial intelligence (AI), big data analytics, blockchain, and the Internet of Things (IoT) to optimize operations and improve customer experience. These investments are primarily driven by the growing demand for insurance technology solutions that streamline claims processing, underwriting, and customer service, as well as the need for strong cybersecurity measures to address the growing risks in the digital space. Artificial intelligence has received particular attention, and many insurance companies have already implemented generative AI in key business functions such as claims processing and customer interaction, further increasing IT spending.
Request for more information
Click to view the full report TOC, figure and tables: https://bossonresearch.com/productinfo/3370853.html?templateId=494129
The USA Insurance IT Spending market was valued at USD 31,620 million in 2023 and is expected to reach USD 69,236 million by the end of 2032, growing at a CAGR of 9.32% between 2024 and 2032. The main drivers of IT spending in the insurance industry include the growing maturity of technologies such as cloud computing, big data, artificial intelligence, and blockchain, which are reshaping the entire insurance value chain from product development to claims processing, improving efficiency, accuracy, and customer satisfaction. As more people shift to online platforms, changing consumer habits are driving insurance companies to expand their digital business and marketing efforts. The industry has also witnessed multi-stage cooperation within the value chain, where technology integration enhances customer acquisition, underwriting, and claims processing, reducing costs and improving customer experience. Regulatory improvements, such as the introduction of insurance technology sandboxes, have further driven IT investments while ensuring compliance and encouraging innovation.
Figure USA Insurance IT Spending Market Size (M USD)
Source: Bossonresearch.com, 2024
Driving Factors
The Increasing Maturity of Key Technologies
In recent years, the rapidly developing insurtech has been continuously integrating with various aspects of the insurance process, effectively alleviating various pain points in claims processing. The resulting insurance IT solutions, including software products and services, have effectively integrated the applications of insurtech technologies such as cloud computing, big data, AI, and blockchain across various stages, significantly improving the efficiency and accuracy of the entire insurance process, from product development to subsequent claims.
The increasing maturity of key technologies, including cloud computing, big data, artificial intelligence, and blockchain, is creating opportunities for the restructuring and transformation of the value chain in various stages of the insurance industry. For a long time, there have been numerous challenges in areas such as product development, marketing, underwriting, and claims in the insurance industry. Issues such as unsuitable products, misaligned marketing, inefficient underwriting, and delayed claims have always been concerns for both the insurance industry and consumers. Recently, insurtech has been increasingly integrated with different stages of insurance, effectively addressing the pain points in claims processing. Insurance IT solutions and software products have integrated the applications of technologies like cloud computing, big data, AI, and blockchain, significantly improving the efficiency and accuracy of the entire process from product development to claims.
In practical applications, insurtech in product development mainly assists actuaries in risk pricing and the development of customized products based on big data analysis.
Changing User Habits
Over the past two decades, the number of internet users in the United States has steadily increased, driving the shift of consumer spending towards online platforms. The internet usage rate among senior citizens aged 65 and above has notably risen, with the Pew Research Center reporting that the proportion of seniors using the internet increased from 40% in 2009 to 73% in 2019. Additionally, according to a SheerID survey, 55% of individuals aged 65 and above engage in online shopping and access online health resources on a monthly basis.
However, despite the growing trend of online consumer behavior, the degree of digitalization in the insurance industry still has room for improvement. According to EverQuote data, around 70% of consumers are accustomed to browsing insurance products online, yet only 20% of policies are ultimately purchased through online channels. To align with the growing trend of online consumer habits, insurance companies have begun to actively expand their online channels. For instance, in terms of marketing expenditures, digital marketing accounted for only 19% of insurance industry advertising spending in 2016, significantly lower than other industries. By 2019, this proportion had risen to approximately 36% (with $5.6 billion spent on digital advertising out of $15.6 billion in total marketing expenditures).
Multi-link Cooperation in the Industry Chain
From product pricing, marketing, underwriting, claims to operational management, technology is reconstructing each link of the insurance value chain, improving customer experience, and achieving cost reduction and efficiency improvement. For example, in the marketing and customer acquisition link, GoHealth uses big data to achieve precise advertising and multivariate testing based on potential customer leads. Data-driven omni-channel marketing helps to efficiently match potential customers and improve marketing conversion rates; in the claims link, Lemonade uses artificial intelligence robots to replace manual services, which can achieve claims within 90 seconds and effectively improve customer satisfaction. Through the deep integration and development of technology and various links of insurance, it can achieve wider customer coverage, more accurate customer matching, more robust underwriting decisions, more convenient claims processes, lower operating costs and better customer experience, while promoting all links in the industry chain to actively embrace the wave of insurance technology.
Positive Effects in Application
The application of technologies such as image recognition and artificial intelligence enables intelligent claims processing based on customer profiles, significantly shortening claims timelines, reducing labor costs, and providing convenience to customers. For instance, Lemonade employs AI not only at the policy issuance stage with its bot "AI.MAYA" but also at the claims stage with its claims bot "AI.JIM," achieving claims resolution in as little as three minutes. AI.JIM once set a world record for claims processing at the time, completing a claim in just three seconds. This process included reviewing the claim request, verifying the policy, running 18 anti-fraud algorithms, approving the claim, and transferring funds to the customer via bank transfer. As of the end of March 2020, 96% of Lemonade’s first notice of loss (FNOL) claims were handled by AI.JIM, with approximately one-third requiring no human intervention at all.
Additionally, insurers can leverage big data-driven intelligent anti-fraud technologies to verify the authenticity of customer-submitted materials, reducing the likelihood of fraudulent claims. Lemonade integrates 18 anti-fraud algorithms within its claims bot to scrutinize claims. Drawing on principles of behavioral economics, the company has effectively built trust with its customers. This mechanism fosters a psychological perception among users that those insured through the platform are inherently honest and unlikely to engage in fraudulent behavior, which to some extent deters attempts at insurance fraud. Furthermore, Lemonade enhances this trust through its user interface and processes: the clean, bright design of its PC and mobile app pages, the requirement to sign a "Pledge of Honesty" as the first step in purchasing a policy, and the mandate to record a video explaining the claim event. These measures collectively utilize behavioral economics to mitigate moral hazard.
Improvement in the Regulatory Environment
In recent years, the stringent regulatory environment in the U.S. insurance sector has shown marginal improvement, with regulators increasingly encouraging innovation in insurance technology (insurtech). The overall regulatory landscape for the U.S. insurtech industry remains relatively strict. Key restrictive regulations currently faced by the sector include:
Licensing Requirements: Some insurtech companies are prohibited from operating in states where they lack proper licenses.Anti-Rebating Laws: Insurers are barred from offering free value-added services as part of marketing efforts.Anti-Discriminatory Pricing Laws: Different pricing standards cannot be applied to the same product for different consumers.Solvency Oversight: Strict regulations govern the financial health and operational metrics of insurtech firms.Privacy Protection: The California Consumer Privacy Act (CCPA), one of the toughest privacy laws in the U.S., directly impacts insurtech companies’ data collection and business expansion in California.
However, the regulatory environment for insurtech has been gradually improving since milestones like the Affordable Care Act (Obamacare), which significantly accelerated the growth of health insurance. A notable advancement came in 2019 with the introduction of the insurtech sandbox mechanism. Under this framework, insurtech companies previously unable to obtain insurance licenses due to regulatory constraints can now apply to test new technologies. This sandbox approach has granted insurtech startups greater room to innovate and grow, fostering a more supportive environment for technological advancement within the industry.
Key Development Trends
Digital Transformation of the Insurance Industry
The global insurance industry is moving towards digital transformation, adopting more technological solutions to improve efficiency, reduce costs and improve customer experience. These technological solutions include artificial intelligence, big data analysis, blockchain, the Internet of Things, etc.
At the same time, the number of insurance technology companies is growing rapidly. The United States, the United Kingdom and Singapore have all nurtured a large number of insurance technology companies and attracted a lot of investment. These companies are changing the traditional insurance industry through innovative technologies and business models, driving the development and transformation of the industry.
The Wave of Artificial Intelligence Technology
A crucial aspect of the transformation in the insurance industry is the effective integration of advanced technological capabilities into its business models. For years, insurance companies have been utilizing artificial intelligence (AI) tools. However, in recent years, many insurance company executives have increasingly recognized the critical importance of strategically deploying AI across the entire organization.
In fact, according to a survey conducted by Deloitte’s Center for Financial Services in June 2024, which included 200 U.S. insurance industry executives, 76% of respondents indicated that their companies had already implemented generative AI technologies in one or more business functions. In the Asia-Pacific region, many insurance companies are also aggressively advancing their AI and generative AI implementation plans, largely due to the region’s abundant technical talent pool and a cultural openness to adopting new technologies.
Although many insurers’ use of generative AI remains in the proof-of-concept stage, some have begun applying it to key areas such as claims processing and customer service. From both a regulatory perspective and the internal acceptance of new technologies within insurance companies, these use cases are poised to deliver improved risk-reward profiles and expansion opportunities in the short term.
Business Model and Channel Innovation
Some traditional insurance companies and insurtech firms view industry newcomers as opportunities for business growth, thereby driving innovation in business models. Many insurtech companies worldwide are tailoring value propositions (i.e., B2B2B propositions) for non-insurance companies seeking to enter the insurance market, aiming to become their preferred suppliers. Leaders in this model provide enterprises with a comprehensive solution that includes diverse sales channels, sales platforms, robust services, and customer service portals. The product development for these solutions is often fast and efficient, producing white-label products that partners can brand and sell under their own names. Insurers, in turn, leverage their established underwriting capabilities and automated claims processes to support these offerings.
Technology is Reshaping Every Link in the Value Chain
From product pricing, marketing, underwriting, claims processing, to operational management, technology is reshaping every segment of the insurance value chain, enhancing customer experience while achieving cost reduction and efficiency gains. For instance, in the marketing and customer acquisition phase, GoHealth leverages big data for precise ad targeting and conducts multivariate testing based on potential customer leads. This data-driven, omnichannel marketing approach efficiently matches prospects, boosting conversion rates. In the claims processing phase, Lemonade employs AI-powered bots to replace human agents, enabling claims resolution within 90 seconds, significantly improving customer satisfaction.
Through the deep integration of technology with each stage of insurance operations, companies can achieve broader customer reach, more accurate customer matching, more robust underwriting decisions, streamlined claims processes, lower operational costs, and an enhanced customer experience. Simultaneously, this drives all components of the industry chain to actively embrace the wave of insurtech innovation.
Leveraging Generative AI Tools to Assist in Insurance Selection
Deloitte’s financial services industry forecast highlights that companies across various sectors are actively investing in and deploying AI technologies. However, the use and development of AI could pose significant liability risks for non-life insurance companies. It is projected that by 2032, insurers could generate approximately $4.7 billion in global premiums from AI-related insurance, achieving a robust compound annual growth rate (CAGR) of around 80%.
A research report by Accenture found that in the banking and insurance sectors, 70% of consumers are willing to rely on AI-powered customer service to provide recommendations for their purchasing decisions. However, in certain complex scenarios, consumers still prefer assistance from human agents. This underscores the need for insurance companies and financial firms to strike a balance between AI-driven and human customer service to deliver the best possible consumer experience.
Rising Demand for Savings-Oriented Products
In the life insurance and annuity sector, persistently high interest rates have fueled strong demand for savings-oriented products. Data shows that in 2023, total U.S. annuity sales grew by 23% year-over-year, reaching $385 billion. Fixed annuities saw particularly notable growth, surging 36% to $286.2 billion. In the first half of 2024, U.S. annuity sales increased by 19% to $215.2 billion, with registered index-linked annuities and fixed-income annuities both setting new sales records. Despite signals from the Federal Reserve hinting at potential rate cuts, annuity buyers seeking higher guaranteed returns continue to drive sales even higher. Rising interest rates have delivered more substantial investment returns for life insurers, which is expected to further enhance their profitability through 2026.
Looking ahead, the expanding middle class in emerging markets, coupled with reductions in government and corporate pension expenditures, is anticipated to sustain the growing demand for savings-oriented products in the coming years.
Embedded Insurance
A customer-centric service experience has sparked a surge in embedded insurance, where policies can be issued directly at the point of sale. Insurance companies are forming partnerships with industries such as automotive, retail, and real estate through embedded insurance, launching product bundles and offering integrated solutions. For example, insurers collaborate with real estate firms to provide homeowners insurance directly to property owners via real estate sales platforms, thereby expanding their customer base. This approach not only offers customers a quick and convenient way to obtain insurance but also broadens distribution channels for insurers. Compared to building or acquiring distribution networks independently, such partnerships typically require significantly less capital and time investment.
International Cybersecurity
Insurance is evolving with several key trends. First, the occurrence of catastrophic losses, where a single cyberattack results in economic and insurance losses comparable to a major natural disaster. Second, the polarization of losses, with large enterprises experiencing significantly higher losses than the industry average, with these losses predominantly concentrated among larger companies. Third, the increasing proportion of profit losses (BI), making coverage for profit losses a mainstream purchase. Fourth, ransomware attacks becoming the primary source of losses. Fifth, policies are increasingly clarifying cybersecurity liabilities and regulating silent cyber risk coverage—correcting the inadequacies or limitations in property and liability insurance policy terms that did not explicitly exclude cybersecurity risks. Sixth, exclusions for cyberwarfare risks are becoming more clearly defined, with markets introducing specific clauses that define cyberattacks, computer systems, and warfare, providing clearer and more actionable tools for the market.
The Rise of Usage-Based Insurance (UBI)
Customers are increasingly demanding personalized and data-driven solutions across all industries, including insurance. This shift has paved the way for innovative approaches such as usage-based insurance (UBI), which is revolutionizing the auto insurance industry. UBI policies are powered by telematics and wearables, which can calculate premiums based on actual usage or behavior.
Advanced UBI systems can incorporate features such as fraud detection, accident reconstruction, and even theft recovery. Some insurers are exploring the use of blockchain technology and smart contracts to enhance the security and transparency of UBI systems. These innovations can help build trust between insurers and policyholders while streamlining the claims process. In addition to personal auto insurance, UBI is also being explored in commercial fleet management. By implementing a UBI system, fleet operators can monitor driver behavior, optimize routes, and potentially reduce insurance costs.
The development of UBI has also spawned new insurance products. For example, some insurers now offer pay-per-mile insurance, where premiums are based primarily on distance driven. This type of insurance is particularly attractive to low-mileage drivers or those who use their vehicles infrequently. Despite the potential benefits of UBI, there are still some challenges to its adoption. Privacy concerns remain a significant concern, as some drivers may not be comfortable with the level of data collection involved.
As cars become increasingly connected and automated, the amount of data available for analysis will grow exponentially, potentially leading to more sophisticated and personalized insurance products. This trend, coupled with continued advances in data analytics and artificial intelligence, suggests that UBI will play an increasingly important role in shaping the future of the insurance industry.
Tightening ESG Regulations
In the United States, ESG (Environmental, Social, and Governance) issues are gaining increased attention, driven by escalating extreme weather events and social equity concerns. While the U.S. market has largely developed on a voluntary, non-mandatory basis, ESG regulatory constraints are steadily intensifying. The U.S. Securities and Exchange Commission (SEC) has proposed new regulatory reforms requiring companies to enhance their management and disclosure of climate change and social issues. Additionally, insurance regulators in 15 states have announced the adoption of climate risk disclosure standards aligned with Europe, marking the first significant update by the National Association of Insurance Commissioners (NAIC) since 2010.
Insurers are facing mounting pressure from regulators, shareholders, and the public to disclose more about their climate change and environmental policies. For instance, companies like Travelers and Chubb have outlined plans to achieve carbon neutrality by 2030 and have restricted coverage for new coal-fired power plant construction. Chubb has also committed to publishing reports on assessing and reducing greenhouse gas emissions, though a shareholder proposal to limit underwriting for fossil fuels did not pass.
While ESG policies currently have a limited impact on the energy insurance market, in the medium to long term, insurers are expected to place greater emphasis on ESG factors. Businesses that fail to align with ESG standards may find it increasingly difficult to secure insurance support in the future. However, there is still no unified consensus among insurers on how to integrate ESG considerations into energy insurance underwriting processes, particularly as many industries continue to rely heavily on fossil fuels.
USA Insurance IT Spending Market: Companies Profile
By company, Allstate and Travelers lead all 31 companies in the statistics, with IT spending of USD 1,355 million and USD 1,003 million respectively in 2023, accounting for 4.29% and 3.17% of revenue respectively. Overall, IT spending in the US insurance sector shows an upward trend in both absolute value and as a proportion of revenue. Insurance companies are allocating a greater share of their budgets to technology, driven by the need for innovation, regulatory compliance, improved risk management, and evolving customer service models. IT investment has become an indispensable part of the strategy for mid- to large-sized insurance companies.
Key players in the Insurance IT Spending Market include:
Allstate
Travelers
The Hartford
American Family Insurance
Markel Corporation
CNA Insurance
W.R. Berkley Corporation
Lincoln National Corporation
Assurant
Cincinnati Insurance
American Financial Group, Inc.
Genworth Financial
Western and Southern Financial Group
Protective Life
Hanover Insurance Group
Allied World Assurance Company
Globe Life
CUNA Mutual Group
Penn Mutual
Kemper Corporation
Hiscox
Mutual of Omaha
Selective
Erie Insurance
Shelter Insurance
Amica Mutual Insurance
PURE Insurance
RLI Corp
Horace Mann
Kinsale Insurance
UFG Insurance
Request for more information
Click to view the full report TOC, figure and tables: https://bossonresearch.com/productinfo/3370853.html?templateId=494129
About US:
Bosson Research (BSR) is a leading market research and consulting company, provides market intelligence, advisory service and market research reports for the automobile, electronics and semiconductor, and consumer good industry. The company assists its clients to strategize business policies and achieve sustainable growth in their respective market domain.
Bosson Research provides one-stop solution right from data collection to investment advice. The analysts at Bosson Research (BSR) dig out factors that help clients understand the significance and impact of market dynamics. Bosson Research (BSR) bring together the deepest intelligence across the widest set of capital-intensive industries and markets. By connecting data across variables, our analysts and industry specialists present our customers with a richer, highly integrated view of their world.
Contact US:
Tel: +86 400-166-9288
E-mail: sales@bossonresearch.com
