Artificial intelligence: Challenges and opportunities for insurers 24 October 2019
Artificial Intelligence has gained momentum over the last years and is becoming omnipresent in the insurance landscape. New pilots and proofs of concept are being tested and implemented throughout the entire value chain, with tangible improvements on operational efficiency, customer experience, innovative product/service offering and better performing distribution.
Insurance has been and is expected to remain one of the industries that will be the most impacted by AI in the coming years. Hence, with exponential development of uses cases and pilots, there is increasing need to have a clear view on where and how AI is creating value in insurance and how insurers can take advantage from the opportunities it creates.
In this research, Roland Berger provide a comprehensive view and structuring of the main current AI use cases which provide tangible value in this industry. Hence, it is also forward looking and highlights (i) main expected developments in the next 3-5 years; (ii) key hurdles for insurers when deploying AI solutions and related levers to overcome them and (iii) strategic implications for the industry.
Based on ground research of over 150 tangible AI use cases and interviews with 30 European insurance players, we performed a detailed analysis and categorization of the main fields of application currently being deployed in the insurance industry:
1. business model & product innovation,
2. revenue enhancement,
3. underwriting & pricing assessment,
4. risk modelling,
5. risk prevention,
6. claims assessment,
7. fraud prevention,
8. customer service,
9. general operational efficiency.
Looking at main expected developments in the next 3-5 years, our study shows that use cases related to claims assessment, customer service and general operational efficiency will remain the fields of application with highest adoption in the industry. Moreover, strong increase in adoption will also take place regarding revenue enhancement related use cases, among others regarding ways to increase cross and up-selling across distribution channels as well as new ways to perform client acquisition.
Looking at key dimensions that insurers need to master to fully reap the benefits of AI, our study highlights: change management, management of skills & competencies, data quality & availability, digitized workflows, managing AI cost/benefit analysis, customer engagement, distribution partners engagement.
Taking action will be key for insurers to avoid losing ground to competitors. Having a clear strategy on how to (further) leverage AI should therefore be top priority for insurers. Turning AI into a true source of competitive advantage will require that insurers:
1. Build an AI vision
2. Develop key capabilities across three main areas (HR, technology, engagement).
3. Scale up and industrialize the AI approach.