Spending on artificial intelligence (AI) platforms in insurance will grow by almost a quarter every year out to 2024 as the industry exhibits a general willingness to innovate, analytics firm GlobalData predicts.

Incumbent insurers are at threat from insurtechs using technology to personalise the insurance experience, and the shift towards digital insurance has been hastened by the COVID-19 pandemic which has necessitated innovation within the insurance industry, GlobalData says.

It forecasts that AI platform sales in the insurance sector will reach $US3.4 billion ($4.39 billion) in 2024 from $US1.2 billion ($1.55 billion) in 2019 – a compound annual growth rate of 23%.

Revenue growth is set to nearly double between 2019 and 2024, which GlobalData says is a clear sign insurers are keen to innovate.

GlobalData analyst Sophia Patel says AI demand in insurance is no longer limited to basic conversational platforms for customer queries.

“Applications for AI in insurance now span the sector’s value chain – from product development and risk profiling to claims handling,” she said. “As more legacy insurers inevitably move to the cloud, AI platforms, which are more compatible with these operating systems, are certain to see greater traction.”

Insurtechs draw on technologies ranging from AI to the internet of things (IoT) to offer cheaper premiums and customisable policy coverage, disrupting the wider market.

Existing insurance firms need to adapt and invest in newer technologies to remain competitive, Ms Patel says.

“We have seen some bigger insurance companies leading the way with AI tools, but the emergence of specialist tech vendors over the last few years means these platforms are increasingly accessible to ordinary insurers,” she said.

AI technology will help mitigate against the impact of COVID-19 on businesses, alleviating the pressure on insurers to improve their digital capabilities. A GlobalData survey found 80% of insurance executives felt that AI would play a role in helping their companies weather the pandemic.

Insurance sector sentiments toward AI is largely positive and a greater understanding of the benefits on offer will drive spending on AI platforms, it says.

Vendor partnerships are expected to be the preferred mode of AI adoption rather than development of in-house expertise.