The Impact of Generative AI on the Insurance Sector
As new technologies continue to evolve and come online for the business world, so too do their iterations in the insurance sector. Recently many new tools have been developed which are designed to manage risk, minimize uncertainty and generate profits, boosting productivity and efficiency within the sector.
Developments such as the Internet of Things, blockchain and machine learning have all left their imprint on the sector, but few advances are destined to create such a radical paradigm shift as the new generation of generative AI technologies.
Data Analytics for Legacy Carriers – A Radical Transformation
Data is at the core of the businesses that legacy insurers run. While insurers have used advanced analytics for decades to sort through masses of data, the speed of processing from generative AI, matched with the ability to find patterns in that data can now reveal actionable meaning and even recommendations at an unprecedented velocity.
AI can identify potential fraud, predict claims behavior, make advanced calculations around risk and even make recommendations for new products, client profiles or additional markets to enter. Insurer Tokio Marine, for example, has been using AI to process auto insurance claims in minutes.
Security in the Age of Generative AI – New Types of Risk
Generative AI will not only be employed for the benefit of society and business, unfortunately, but is already being wielded by criminals. Bad actors seek to transform the new data AI tools into capabilities to bypass security systems, steal personal information, access financial data and perform other nefarious activities.
A consequence of this is reputational risk for insurance clients as well as for the insurers themselves. This is a whole new class of risk for insurers to manage and also to advise their clients on.
Conversely, just as fast as criminals can devise new tricks to perform crimes, AI security organizations and insurers themselves are using AI to combat attacks by detecting suspicious activities and identifying and sealing off potential vulnerabilities before a breach occurs.
Insurtechs at the Vanguard of AI
Insurtech start-ups and established organizations by their very nature are at the forefront of technological innovation, but with the advent of generative AI insurtechs are primed to accelerate beyond even the fast pace that the industry has seen in recent years.
Generative AI can help insurtech entrepreneurs develop innovative products and services that resonate with the market. Existing companies will also be better able to refine their offering, improve loyalty for current clients and reach new ones. The digital insurer Lemonade, for example, even describes itself as “AI doing insurance.”
An increasingly important value proposition from the insurance sector is expanding personalized coverage and product offerings that meet the unique requirements of both individuals and groups of customers. Generative AI will be able to further hone those capabilities for insurtech organizations.
AI for Automation and New Job Profiles
Generative AI will further enhance the automation of previously manual or even legacy technology processes in the insurance space, such as underwriting. While the Covid 19 pandemic sped up the adoption of automated processes, the new generation of generative AI products will accelerate that change even faster.
There will also be a growing need for new types of professional profiles trained in the management of data and analytics, for example in the types of queries that need to be fed into AI engines. AI researchers will become increasingly important in the sector. Carrier Liberty Mutual partnered with MIT university to gain access to the skill sets needed to improve its underwriting and claims management processes.
What’s Next on the Horizon?
Generative AI will play a significant role in the future of insurance, though much remains to be seen in what ways it will impact the industry. As with many sectors, generative AI is only recently beginning to be understood, let alone harnessed, though the industry can expect much innovation, and quickly.
What is certain is that the most nimble legacy carriers and insuretechs which are able to adopt new innovations quickly will be well-positioned to thrive in this rapidly changing landscape.