AI offers insurance industry $1 trillion a year value: McKinsey
Artificial Intelligence (AI) could add up to $US1.1 trillion ($1.63 trillion) in annual value for the global insurance industry from service and operational gains, McKinsey estimates.
Around $US400 billion ($592 billion) could come from pricing, underwriting and promotion, and $US300 billion ($444 billion) from AI-powered customer service and personalised offerings, it says.
The potential for competitive advantage with the use of AI remains largely unrealised in the insurance industry in Asia, McKinsey’s Insurer of the Future report says, recommending investment be made across the value chain.
"The industry remains at an early stage of transformational AI adoption,” it said. "Cross-functional investment in AI can be game-changing – and it will increasingly become a source of competitive advantage.”
The report says AI adoption has more than doubled in the past five years across industries.
"The global companies setting the benchmarks for AI maturity and capacity – such as Google, Netflix, Tencent, and Uber – illustrate the potential gains that could be realised by insurers that integrate AI holistically across their organisations,” the report said.
AI can aid engagement, for example each Netflix user has a customised view of available content that reflects their interests and becomes more targeted over time.
AI and advanced data-and-analytics capabilities can augment complex decision making and create predictive models, for example Uber Technologies uses historical ride data and key metrics to ensure app users access a ride within their expected timeframe.
Modernised core tech helps advanced decision making, for example China’s Tencent has been using its advanced-API platform in its WeChat app to integrate data and decisions, providing context-specific offers across payments, retail, and its social networking and chat functions.
The report also says Google’s “relatively flat and cross-functional" organisational structure allows small, agile teams in which "talent and skill is valued over seniority – vital to Google’s reputation as an AI-driven organisation and its continued product innovation and growth”.
In underwriting, AI risk scoring can enable continuous insights from engagement, microsegmentation, and personalisation to develop customised products and packages.
In insurer pricing, models that use machine learning for risk selection and governance can monitor emerging loss, pricing trends and shifts in the portfolio risk mix.
In claims, AI can help identify fraud, waste, and abuse and lower claims spend.
AI can also help reduce the number of repeat complaint calls, McKinsey says.