Generative AI offers insurance sector multiple routes to adding value

08 October 2024 Consultancy.eu

In the insurance industry, AI has so far had the biggest impact on the areas of claims, pricing, risk selection, and customer service. That is according to a study from Xebia, which further highlights data governance and data quality as the biggest challenges to AI adoption.

AI – and GenAI (generative AI) more specifically – have been huge for a wide range of industries around the world. As the technology inches closer to maturity, more and more companies are adopting these technologies to boost efficiency, productivity, client services, and much more.

In fact, adopting AI is becoming an imperative for companies that want to keep up with the competition. The insurance industry, however, seems to be either lagging behind or holding back for now.

Divergent approaches to AI

The study by Xebia, an international IT consulting firm, shows that not everyone in the insurance industry agrees on the role AI should play, how it can be most effective, questions surrounding ethics, and whether AI capabilities should be outsourced.

A total of 26% of the survey respondents (mostly leaders and middle management) said that they had not started their AI journey yet. While only 4% said that their AI strategies were in place already, 70% said that they had started pilot programs aimed at specific areas with proofs of concept (PoC).

Generative AI offers insurance sector multiple routes to adding value

Source: Xebia

For those in the insurance industry that have considered AI or have already begun adopting AI tools, 54% said that it will have the biggest impact on claims, with 52% pointing to pricing and risk selection.

Customer service was another area of the insurance industry that leaders expect AI to make a significant difference in. Across many industries GenAI has been hailed as a game-changer for customer service, with the ability to run complex chatbots that can boost customer service agent productivity immensely.

“I believe that the customer service area can significantly benefit from GenAI technology. At Xebia, we developed a PoC in the form of a chatbot for a client in the insurance industry,” said Caio Benatti, data science consultant at Xebia. “This GenAI-enhanced chatbot delivers responses that are customized to the unique circumstances of each customer rather than offering standard, generic answers.”

Generative AI offers insurance sector multiple routes to adding value

Source: Xebia

Despite that relatively gradual implementation of GenAI in the insurance industry, almost 30% predicted that in a low-cost future human touch will not be nearly as important. 48% went even further, opining that human touch will only be needed in the most complex of cases.

Considering the ethical side

AI can present companies with some tricky ethical questions to consider. A total of 82% of respondents said that they currently “don’t know” or “have no view” on how to approach the ethics surrounding GenAI.

Another 16% said that they have already created committees to address the ethical concerns that typically arise after adopting AI tools. That can include things like cybersecurity, avoiding algorithm bias, and concerns over accuracy.

When it comes to how insurance companies plan to manage their AI tools, 58% aim to manage AI tools in-house, by creating AI-focused departments in their organizations and hiring engineers to focus on AI. Another 38%, on the other hand, said they would work with an external partner and 4% said they do not know how they would proceed.

Since the emergence of incredibly popular consumer-level GenAI tools like ChatGPT in the past few years, there has been a huge boom in the use of such tools across industries. Despite some concerns, most companies see the adoption of Generative AI as an imperative to remaining at the forefront of their industry, and many appear to be rushing to get in on the trend before it is too late.

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