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Digital EditionThe $50 Billion Opportunity: Insurers Pivot from Reaction to Prevention
U.S. property and casualty insurers could see revenue from fee-based risk management services grow to $49.5 billion by 2030 from $21.6 billion in 2023, as part of a shift toward “predict and prevent” models rather than traditional reactive approaches, according to analysis by Deloitte.
The insurance industry stands at a crossroads where technology is enabling a fundamental shift from assessing risk through the “rearview mirror” to preventing losses before they occur, Deloitte says.
Recent wildfires in Los Angeles highlight how proactive risk management—building more resilient homes and monitoring electrical grids in real time—could have minimized devastation. Even for everyday risks, smart home devices and water leak detection systems have proved effective, reducing insurance claims by up to 93% in some cases, according to the report.
This evolution is supported by technological advancements including generative artificial intelligence and Internet of Things devices that enable insurers to capture data and predict potential losses across various business lines. While some insurers already offer risk management services, data-sharing capabilities, and white-label partnerships, few have successfully monetized these offerings, according to Deloitte. Instead, many insurers provide these services at no cost, hoping the investment will be offset by reduced claim costs.
The potential for revenue growth is substantial. Deloitte predicts fee-based revenue for U.S. P&C insurers will grow at a 12.55% compound annual growth rate, reaching nearly $50 billion by 2030—a dramatic increase from traditional business models where most insurers derive less than 3% of total revenue from fee-based services.
Challenges and Opportunities in Revenue Diversification
Transitioning from time-tested business models presents both challenges and opportunities for insurers. While offering simple preventive measures like water leak detectors to homeowners might work at negligible cost, Deloitte says that more complex prevention strategies may require shared investment between insurers and customers. For example, in Florida, some insurance companies offer discounts to policyholders who fortify their homes against hurricane winds by securing roofs and shutters.
Commercial lines currently dominate fee-based service offerings, focusing on helping companies prevent and recover from losses through onsite risk inspections and educational tools. However, this space is competitive, with insurers potentially competing against insurance brokers and specialized risk management consultants, Deloitte noted.
Personal lines are becoming increasingly complex due to evolving technologies and climate risks. This complexity creates challenges for underwriting but also opportunities to assist individuals with loss prevention on a scalable basis. The economics are compelling: investing $3.35 billion to bring U.S. homes up to code could reduce losses by $37 billion by 2030, according to Deloitte’s analysis.
Strategic Approaches for Insurers
To capitalize on this shifting landscape, insurers have several strategic options, Deloitte says. Some may choose to provide stand-alone offerings to non-clients, similar to Arthur J. Gallagher & Co., which reports that approximately 93% of its risk management services revenue comes from non-brokerage clients.
Developing new operating models represents another approach. AXA XL’s construction insurance offering provides contractor clients with a suite of more than 30 tech providers to help reduce risk. Similarly, in 2023, Chubb launched a global climate business offering risk management and resiliency services to those managing climate change impacts, per Deloitte.
Insurance brokers, with their vast amounts of data and expertise in loss prevention services, represent natural competitors. Technology companies building risk management platforms for businesses and consumers could also capture market share if insurers delay action.
However, these potential competitors could become valuable partners under the right circumstances, either through affiliate networks or joint offerings, according to Deloitte.
Read the full report here. &
