Insurance Execs See Gen AI Necessary to Compete; Customers Wary

Insurance industry investments in generative AI are expected to surge by over 300 percent from 2023 to 2025 as organizations move from pilots in one or two areas to implementations in multiple functions across business lines.

But new research identifies a disconnect between how insurers and their customers prioritize the use of generative AI, with industry executives focusing on customer experience while their clients are seeking personalized risk products and insights, according to by IBM’s Institute for Business Value.

Findings from a survey, conducted in cooperation with Oxford Economics, of 1,000 C-level insurance executives in 23 countries in Q3 2024 are outlined in “Generative AI in the Insurance Industry: You Can’t Win if You Don’t Play.”

Insurance CEOs surveyed were almost evenly divided on whether they see generative as more of a risk (49 percent) versus an opportunity (51 percent).

Of the industry leaders who responded, 77% acknowledge that generative AI is necessary to keep pace with competitors.

Only 29% of insurance customers queried said they are comfortable with gen AI virtual agents providing service, with only 26% saying they trust in the reliability and accuracy of advice given by generative AI.

Organizations choosing less-centralized operating models to develop gen AI capabilities can improve business outcomes by up to 14%, the study found.

Recommendations based on the study findings include the following:

• Build more tailored products with flexibility, advice and linkage to risk data.
• Match those products intelligently to customers’ needs.
• Address trust issues with strongly ethical, governed AI.
• Also use AI to connect the underlying risk data and address long-standing insurer and financial service provider technical debt.
• Deploy–and govern–AI across the enterprise with local knowledge experts empowered to connect AI to the insurance value chain.

“The insurance industry has made headway in generative AI with customer experience and chatbot enhancements, but insurers must focus on adopting comprehensive governance frameworks that ensure transparency, privacy, and explainability to ensure they are building trusted AI assistants and reliable processes,” said Mark McLaughlin, director of Global Insurance with IBM Technology. “There are also significant opportunities in connecting customers to the right products. Leveraging AI across the enterprise will be critical to improve both customer risk experiences and to implement the underlying IT tools that power those experiences.”

Download the full report here: www.ibm.com/thought-leadership/institute-business-value/en-us/report/insurance-generative-ai