Insurance Australia Group's stock plummeted 5.07% during intraday trading on Wednesday, following a significant analyst downgrade citing heightened vulnerability to technological disruption.

Macquarie analysts downgraded IAG from outperform to neutral, identifying it as the Australian insurer most at risk from tech disruption. The analysts noted that incumbent insurers face disadvantages in AI-related disruption due to their complex technology infrastructure, which could allow underwriting agencies to leverage existing tech platforms to go direct-to-consumer.

"IAG's starting point on technology could be its largest challenge," the analysts wrote in their note, while lowering their target price on the stock by 5.6% to A$8.50. The downgrade reflects growing concerns about how technological advancements, particularly in artificial intelligence, could disrupt traditional insurance business models.