Deloitte: Insurers Race to Implement AI Amid Data Challenges

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Deloitte: Insurers Race to Implement AI Amid Data Challenges
New research reveals 76% of US insurance executives have deployed generative AI, but data quality and security remain top concerns for scaling adoption

Insurers are rapidly adopting artificial intelligence (AI) technologies, with a new survey from Deloitte revealing widespread implementation across the sector. However, data management challenges and talent shortages are hampering efforts to scale these initiatives.

According to research conducted by the Deloitte Center for Financial Services, 76% of US insurance executives report their organisations have already implemented generative AI capabilities in one or more business functions. 

The survey, which polled 200 insurance executives in June 2024, found that distribution, risk management, and claims handling were the areas with the highest number of generative AI implementations to date.

Data Challenges Hinder AI Scaling

Despite the enthusiasm for AI adoption, insurers face significant hurdles in scaling these initiatives. The survey revealed that data security, privacy, quality, and integration were the top challenges for implementing generative AI at scale.

Sandee Suhrada, principal at Deloitte Consulting LLP, says: “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.”

Sandee Suhrada

To address these challenges, insurers are focusing on enabling their data ecosystems to support and scale AI. 

This includes fostering a convergence that supports both real-time and batch environments, and developing data products to support specific use cases such as pricing optimisation and fraud detection.

Many insurers are also transitioning away from massive data warehouses towards a more compartmentalised approach tailored to specific business needs, known as data mesh architecture.

Talent Strategies Evolve to Support AI Adoption

The survey also highlighted a significant talent gap in the insurance sector when it comes to AI implementation. Respondents indicated they were least prepared in terms of talent availability and existing skillsets compared to other readiness factors.

To address this, insurers are rethinking their talent strategies and organisational structures. Many are prioritising candidates with digital literacy and AI knowledge for new job openings, while also focusing on developing their existing internal talent.

Some insurers are turning to AI itself to aid in talent development. For example, Zurich Insurance Group (Zurich) is using analytics to assess workers' current skills and future skill requirements to curate learning and development opportunities.

Global Tax Rules Impact Insurer Strategies

In addition to AI adoption, insurers are grappling with the impact of new global tax rules. The Pillar Two tax laws, which require multinational organisations with €750m (US$817m) or more in annual revenues to pay a minimum tax of 15% on net income earned in each country where they operate, are set to take effect in many jurisdictions in 2024.

These new rules are expected to have a significant impact on insurers operating in low-tax jurisdictions. Bermuda, for instance, has enacted a Corporate Income Tax of 15% on businesses that are part of multinational enterprise groups with annual revenues of €750m (US$817m) or more.

To respond to these new rules, insurance tax departments are focusing on understanding the regulations, modelling potential tax impacts and analysing corporate restructuring considerations that could help mitigate adverse impacts.

The implementation of these new tax rules is likely to require significant investment in data collection and reporting capabilities, further underscoring the importance of modernising insurers' data infrastructure.

As insurers navigate these challenges, the ability to effectively implement AI technologies while addressing data and talent concerns will likely be a key differentiator in the market. Sandee adds: “Insurers are building AI technology for the talent, by the talent.”

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