Another analyst has cast doubt on AI-driven insurance apps’ ability to fully degrade brokers’ value to clients.

“Brokers match business risks and needs to policy coverage and costs, and clients see value in sticking with the same broker that has experience in managing their specific business risks,” Morningstar analyst Nathan Zaia said.

“We don’t think AI breaks this down. Brokers are also there to support customers to solve problems when they arise, and that value is very important, and difficult for AI to replicate.”

Mr Zaia says the recent stock sell-off hitting Steadfast and AUB “overstates” the earnings risk for business insurance brokers.

Panic gripped investors when ChatGPT-approved apps were launched early this month. Steadfast and AUB share prices fell sharply in a rout that also affected global brokers.

“The other unknown is how comfortable businesses are in adopting any new AI solutions without a long record of delivering positive outcomes for clients, or rather, not causing headaches,” Mr Zaia said.

“This leaves incumbents best placed to integrate AI and improve their offerings.”

He says Steadfast and AUB, the largest and second-largest general insurance broking groups, continue to invest in technology that will strengthen their operations.

For Steadfast, the “key value proposition … is its superior technology over smaller brokers, which helps facilitate greater analytical and processing capabilities”.

And AUB’s commercial insurance platform, BizCover, is a “good example of AUB using its scale to bring in technology which will benefit the entire network.

“There is potential for AI to make it cheaper and easier for the BizCover business to be replicated. But existing customers are unlikely to switch if they already have a good experience.”

AI apps could gain traction if insurers offer lower premiums to customers using them, as they save on commissions typically paid to brokers, Mr Zaia says.

“This is possible, but unless the insurance industry moves in tandem, the insurer risks losing business as unhappy brokers responsible for a large share of the market push more volume to competitors.

“An AI-enabled app could be feasible on lower commission margins to brokers, but there will still be technology costs and marketing spend required to integrate with insurers and attract customers, and it will take time to build a network of customers and insurers.”