Deloitte: Insurers Race to Deploy AI Amid Profit Pressures
Insurance companies are accelerating their adoption of artificial intelligence amidst mounting pressure to improve profitability and manage emerging risks, according to research from Deloitte.
The firm’s survey of 200 US insurance executives shows that three-quarters of companis have implemented generative AI (Gen AI) capabilities in at least one business function, with claims processing and customer service leading adoption.
In Asia, insurers are moving rapidly to embed AI capabilities. AIA Group, the Hong Kong-based life insurer, plans to integrate AI technology across its distribution, operations and customer service divisions. Meanwhile, Shenzhen-based Ping An Insurance holds the second-highest number of AI patents globally, behind only technology firm Tencent.
“In the AI space, technology and talent are two sides of the same coin. Insurers are building AI technology for the talent, by the talent,” says Sandee Suhrada, principal at Deloitte Consulting.
Changing market performance
The property and casualty sector achieved a US$9.3 billion underwriting gain in Q1 2024, recovering from an US$8.5 billion loss in the same period last year. The combined ratio - a measure of profitability where figures below 100% indicate an underwriting profit - improved to 94.2%.
Life and annuity providers have benefited from higher interest rates. Total US annuity sales increased 23% year-on-year to US$385 billion in 2023, with fixed annuities rising 36% to US$286.2 billion. In the first half of 2024, total US annuity sales rose 19% to US$215.2 billion.
Group insurance sales have shown mixed results. Total new premiums for workplace life insurance declined 2% year-on-year in Q1 2024. However, supplemental health insurance sales, covering accident, critical illness and hospital indemnity, increased 3% in the same period.
Climate challenges cause pressure for insurers
Weather-related losses continue to pressure insurers. Global insured losses from natural catastrophes exceeded US$100 billion in 2023, with total economic losses reaching US$357 billion. Only 35% of these losses were insured, leaving a protection gap of US$234 billion.
Insurers are responding with technology-driven risk assessment. Some firms are using telematics—devices that monitor driving behaviour—to improve underwriting accuracy. Others are partnering with data providers to better assess climate risks.
In the United States, the National Association of Insurance Commissioners has launched a state-level data collection initiative to understand localised protection gaps in property insurance markets.
Regulatory and tax impact
Regulators are increasing their oversight of AI deployment in insurance. The US state of Colorado is developing a framework to prevent bias and discrimination in AI models used for underwriting and claims.
New global minimum tax rules are reshaping corporate structures. The Pillar Two regulations, requiring multinationals with revenues over €750 million to pay at least 15% tax in each operating jurisdiction, are taking effect in 2024.
Bermuda has enacted a 15% Corporate Income Tax on large multinational enterprises, signalling a shift in traditionally low-tax jurisdictions.
Insurance industry facing a tech skills gap
The industry faces a skills gap in implementing new technologies. Deloitte's research indicates that insurers are least prepared in talent availability and existing skillsets compared to other AI readiness factors.
Zurich Insurance is addressing this through analytics-driven assessment of workers' current skills and future requirements to develop targeted training programmes.
Prudential Financial, the US-based insurance group, has partnered with technology firm Nayya to use AI and data science to help employees make workplace benefits decisions during open enrollment.
Data security and privacy, data quality and data integration remain top challenges for implementing AI adoption at scale, according to the Deloitte survey.
"Insurers are rethinking their talent strategies and organisational structures to adapt to the new AI reality," says Karl Hersch, US insurance lead at Deloitte.
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