How digital transformation is reshaping the UK insurance industry

Insurers that once relied on legacy systems and traditional distribution models are now embracing data, automation, AI and embedded insurance to stay competitive. Whether it is improving underwriting accuracy, empowering customers through self-service tools or reinventing fraud detection, technology is enabling insurers to provide faster, more responsive and more personalised coverage. Below, we explore how the sector has evolved since 2019 and highlight the innovations defining insurance in 2025.

Personalised policies and smarter product development

Modern insurance customers expect the same level of personalisation they experience in retail or banking. Insurers are responding with usage-based, flexible and parametric products that match real-world behaviours.

Advances in analytics and machine learning now allow insurers to:

• track behavioural patterns in real time
• refine risk models using vast data sets
• design micro-coverage that customers can activate only when needed
• roll out new products faster through low-code and no-code platforms

This shift is critical for the circular and sharing economy, where businesses require cover that scales with usage rather than fixed annual policies. Providers offering pay-as-you-go insurance or on-demand product activation options are no longer niche challengers – they are shaping mainstream expectations.

The rise of digital self-service

A landmark shift since 2019 is the now-universal adoption of self-service platforms. While early surveys showed that around 90% of life insurance policyholders preferred digital self-management, today that preference is the default across most demographic groups.

Customers now expect to:

• manage policies through apps or online dashboards
• file and track claims digitally
• adjust cover instantly
• speak to chatbots or virtual assistants for simple queries

Insurers such as BGL were early pioneers in digital transformation, earning industry praise for replacing cumbersome legacy processes with agile, fully digital systems. Today, this approach has become the baseline for competitiveness in insurance distribution.

Mobile “insurance concierge” apps and AI-powered customer experiences

The insurtech ecosystem has grown substantially over the last five years. A new wave of AI-enabled platforms offer customers proactive recommendations, personalised policy curation and simplified claims journeys.

While early innovators such as Brolly set the tone in the UK market, recent entrants are taking AI’s capabilities further. Modern apps can:

• analyse gaps in coverage
• predict risk exposure
• prompt renewal decisions
• search the market for optimised pricing
• automate policy switching

These concierge tools are particularly attractive to younger consumers who expect seamless digital experiences and value transparency, control and ease of use.

AI, IoT and the future of underwriting and claims

The integration of Internet of Things (IoT) devices, connected homes, telematics, wearables and embedded sensors has revolutionised the data available for risk modelling. When combined with advances in AI and machine learning, insurers can provide far more accurate pricing and faster claims decisions.

Key applications include:

• Property insurance: Leak sensors, smart meters and connected smoke alarms reduce claims frequency by alerting customers before damage escalates.
• Motor insurance: Telematics data supports fairer, behaviour-based pricing and reduces fraudulent crash claims.
• Health and life insurance: Wearables provide real-time health indicators that feed into risk assessments, preventative care and personalised premiums.

One of the most cited global examples remains Lemonade, which famously settled a claim in three seconds using a chatbot that validated the claim against policy rules and ran multiple anti-fraud checks automatically. UK insurers are now adopting similar capabilities, particularly in home, motor and travel insurance.

An evolving battle against fraud

Insurance fraud remains one of the largest costs to the sector, with UK insurers detecting over £1.1 billion in fraudulent claims in 2023 (ABI). Organised fraud networks, rising cost-of-living pressures and increasingly sophisticated scams have accelerated the need for industry-wide collaboration.

The Insurance Fraud Intelligence Hub (IFiHUB) continues to expand, with major insurers sharing data in real time to identify suspicious activity and coordinated attacks. Participants now include Ageas, Allianz, AXA, Markerstudy, Mulsanne, RSA and several others.

Ben Fletcher, Director of the Insurance Fraud Bureau (IFB), described IFiHUB as a “game-changer”, closing gaps where fraud information had previously been “shared inconsistently and inefficiently.” Today, the Hub is supported by enhanced AI models that automatically detect anomalies, behavioural patterns and repeat offenders across insurers.

What’s next for UK insurance?

Looking ahead, several trends will define the next phase of innovation:

Embedded insurance becomes mainstream

Cover integrated directly into online purchases, fintech platforms and consumer apps is expected to become one of the fastest-growing distribution channels in the UK.

Climate-related modelling moves to centre stage

With the rise in extreme weather events, insurers are investing heavily in climate analytics, catastrophe modelling and parametric products that pay out automatically when predefined conditions are met.

Generative AI enters underwriting and claims

In 2025, major insurers are using generative AI to draft policy documents, triage claims, analyse loss data and improve customer communication.

Legacy transformation accelerates

Cloud migration, modern core platforms and API-driven ecosystems are helping insurers dismantle decades-old systems that previously blocked innovation.