Life insurance’s transformation imperative: What investors and strategists need to know
Posted by | Fuld & Company
New research reveals that traditional life insurers are losing relevance—and only a small group are successfully adapting.
Despite a temporary financial boost from rising interest rates, the long-term viability of the life insurance industry is in question. According to the World Life Insurance Report 2025, published by Capgemini in collaboration with Phronesis Partners, policyholders are disengaged, customer experiences are lagging, and legacy systems are hampering innovation. Alarmingly, only 5% of global insurers qualify as “best-in-class” for customer experience (CX) and transformation execution.
For private equity investors, investment bankers, and financial advisors evaluating insurance-linked opportunities, the findings offer both a warning and a roadmap.
The CX divide is real—and costly
- Life insurance penetration in mature markets fell from 5.4% in 2007 to 3.6% in 2023.
- Life insurance’s share of household assets dropped from 7.5% to 5.8%, while equities grew from 15.9% to 23.4%.
- 59% of policyholders report dissatisfaction with pricing—citing lack of transparency, not affordability.
- Roughly half report poor experiences across product selection, onboarding, service, and claims.
Insurers must urgently modernize or risk losing even more wallet share to faster-moving wealth and asset management players.
Legacy tech is the drag anchor
- 52% of insurers say legacy systems are the #1 roadblock to improving customer experience.
- Just 41% achieved the goals of their most recent transformation initiatives.
- Under 10% have achieved ecosystem-level redesign of onboarding, servicing, or claims.
Legacy platforms continue to limit integration, speed, and personalization. This increases execution risk in M&A and slows value creation.
Best-in-class insurers show what’s possible
Capgemini identify a top 5% of “best-in-class” insurers that consistently outperform their peers:
- 38% higher Net Promoter Scores (NPS)
- 11% lower expense ratios
- 6% faster revenue growth than industry averages
These firms succeed by using AI to enhance onboarding, claims, and service—while backing it with clean, unified data and modern infrastructure.
Gen AI: A lever for growth—if you’re ready
- 67% of best-in-class insurers are ready to scale Gen AI vs. only 25% of mainstream firms.
- Gen AI early adopters grew profits by 15% year-over-year in 2022–2023 while reducing headcount.
Use cases include intelligent underwriting, virtual assistants, real-time personalization, and customer service copilots. However, Gen AI success depends on data readiness, governance, and skilled talent—areas where many firms still fall short.
What this means for investors and advisors
For private equity and strategic buyers:
Lagging insurers are vulnerable—but they also represent potential turnarounds. Value can be unlocked through targeted investments in customer journey modernization, data infrastructure, and operating model redesign.
For bankers and advisors:
Prioritize insurance and insurtech targets with cloud-based architecture, embedded AI, and strong execution capabilities. These factors now correlate directly with profitability and customer retention.
For financial services leaders:
Insurers with advanced digital capabilities are poised to take market share as products become commoditized and experience becomes the differentiator.
Where to focus for transformation value
- Onboarding – Simplify and personalize with data-driven tools and Gen AI
- Self-service – Use AI-powered portals and agent platforms to cut costs and improve satisfaction
- Claims – Blend automation with empathy to deliver fast, humanized resolution
- Tech stack – Prioritize cloud migration, API integration, and data unification
- Talent – Invest in AI-literate teams and strategic partnerships to scale transformation
For a deeper dive into the research and recommendations from Capgemini download the full report: World Life Insurance Report 2025
Tags: Artificial Intelligence (AI), Data analytics, Innovation, Market Analysis
