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The Gradual Transformation of Insurance through AI

In a rapidly evolving landscape, artificial intelligence (AI) is gradually proving its worth within the insurance sector, as noted in a recent report by Economist Impact. Authored in collaboration with SAS, the report highlights a significant shift from the initial hype surrounding AI to a tangible impact that insurance leaders are beginning to experience.

Lasting change appears to be on the horizon, as executives suggest that the insurance firms of tomorrow could feature a collaborative environment where human agents and AI systems work side by side. This hybrid workforce might handle various essential tasks, from underwriting and product development to claims processing. Jodie Wallis, the Global Chief Analytics Officer at Manulife, emphasizes this emerging trend by stating, “Insurers' workforces will become hybrids of human employees and agents collaborating closely.”

Incremental Gains rather than a Revolution

Despite the promise of AI, the report underscores that the transition has primarily led to incremental productivity improvements rather than revolutionary changes. According to insights from global executives garnered through discussions and interviews, there is a cautious optimism about AI’s ability to slightly enhance productivity, improve risk analysis, and help bridge the global protection gap.

The findings also indicate that, while AI has been instrumental in areas like underwriting and fraud detection, its recent advancements—particularly in generative AI—are beginning to capture the attention of executives at all levels. Notably, generative AI is credited with expediting coding tasks by 30% to 50%, enhancing customer service operations, and facilitating real-time analysis of cyber and environmental risks.

However, the application of these technologies is not uniform across the industry. Insurtech startups appear to be leading the charge, particularly in the realm of cyber insurance. Traditional companies relying on legacy systems are slower to adapt, often customizing AI for focused applications instead of scaling solutions across their operations.

Reinvestment Over Job Elimination

An intriguing insight from the report is that productivity gains from AI have not always equated to immediate cost reductions. Rather than replacing jobs, insurance companies find themselves reallocating freed resources to develop new tools or manage increased claims volumes. As companies redirect focus towards training employees for roles that AI cannot fulfill as effectively—like sales—this shift requires time to materialize into tangible benefits.

The implementation of comprehensive agentic AI platforms represents a notable strategy among insurers. By enabling swift adaptation to operational changes without relying on lengthy software projects, insurers manifest a forward-thinking approach in utilizing AI to its fullest.

A Shift in AI Investments

Interestingly, the investments being made in AI are evolving. They appear to transition from a competitive differentiator to a baseline expectation among insurers. This shift indicates a growing recognition that AI capabilities are critical for survival in the competitive landscape.

Moreover, as the regulatory environment surrounding AI continues to shift rapidly, insurers are pressed to adapt their processes and prioritize change management effectively. Yet, the report illustrates that the disparity in regulatory frameworks across countries poses a formidable hurdle, particularly for multinational corporations.

“It's easy to think that AI agents can already handle complex tasks, but we are not quite there yet,” explains Thorsten Hein, Principal Global Insurance Advisor at SAS. He emphasizes that while AI agents excel at repeating data-intensive tasks, sophisticated tasks, like risk modeling, will still rely heavily on specialized solutions and human insight.

The Future of AI in Insurance

Looking to the future, the report paints an optimistic picture of AI’s trajectory within the insurance industry. Insurers are continuously exploring new applications for AI to maintain relevance amidst growing competition. Franklin Manchester, another Principal Global Insurance Advisor at SAS, notes, “We're identifying and piloting a range of AI use cases. Agentic AI, in particular, holds the potential to perform numerous tasks either autonomously or under human supervision.”

This could eventually lead to more efficient service delivery, reduced costs, and employees who can focus on tasks where their human insight adds substantial value.

In conclusion, the future of insurance with AI presence might not yield dramatic changes overnight but is poised for steady progress. Insurers must remain adaptable while proactively overcoming obstacles related to deployment and regulation to truly harness the capabilities of this transformative technology.