Deloitte: Insurers Deploy Gen AI Across 76% of Organisations
Insurers are embedding generative AI capabilities across their organisations at a pace that signals a shift from experimentation to implementation.
Research from Deloitte reveals that 76% of insurance organisations have deployed gen AI capabilities in one or more business functions, marking a departure from the sector's traditional risk-averse approach.
The transformation comes as insurers confront mounting pressure from climate-related losses and protection gaps that reached US$234bn globally in 2023.
A survey of 200 US insurance executives conducted in June 2024 by the Deloitte Centre for Financial Services found that distribution, risk management and claims handling represent the areas with the highest number of implementations.
The property and casualty sector in the United States achieved a US$9.3bn underwriting gain in the first quarter of 2024, recovering from the US$8.5bn loss recorded in the corresponding quarter of 2023. Pretax operating income increased by 332% to US$30bn, bolstered by underwriting gains and a 33% increase in earned net investment income.
However, rate increases have created affordability challenges. In the United Kingdom and Australia, personal property and motor insurance premium growth outpaced inflation and disposable income growth over the past three years.
Worldwide insured losses from natural catastrophes surpassed US$100bn for the first time in six years, with economic losses reaching US$357bn in 2023.
AIA Group and Ping An lead Asia Pacific gen AI deployment
Insurers in Asia Pacific are advancing with AI implementation, driven by technical talent availability and cultural acceptance.
Hong Kong-based life insurer AIA Group plans to embed gen AI into distribution, operations, and customer service, while Shenzhen-based insurer Ping An owns the second-highest number of patents on gen AI technology globally, trailing only Chinese technology company Tencent.
Insurers are prioritising efficiency gains and experience enhancement as they scale deployments. Most surveyed respondents indicated they are using profitability, efficiency in handling customer queries, and employee satisfaction scores as success metrics.
However, data security and privacy, data quality and data integration remain the top challenges for implementing gen AI at scale.
Embedded insurance partnerships target US$722bn market
Demand for customer-centric experiences has contributed to the popularity of embedded insurance, which refers to distributing policies at the point of sale.
The distribution model is projected to exceed US$722bn in premiums globally by 2030. Insurers are partnering with real estate companies to offer homeowner's insurance directly through sales platforms, with these partnerships requiring less investment than build-or-buy alternatives.
Research from Deloitte predicts that by 2032, insurers could generate approximately US$4.7bn in annual global premiums from insurance products related to artificial intelligence risks, representing a compounded annual growth rate of around 80%.
This growth opportunity emerges as businesses across industries deploy AI technologies, creating new liability exposures.
In the life and annuity sector, total US annuity sales increased 23% year over year to US$385bn in 2023, led by a 36% jump in fixed annuities. In the first half of 2024, total US annuity sales rose 19% to US$215.2bn.
Life premiums are expected to increase 1.5% through 2025 in advanced markets, while emerging markets including China, India, and Latin America could boost premiums by 7.2% and 5.7% in 2024 and 2025 respectively.
Prudential Financial partners with Nayya on benefits technology
Group insurance carriers are pursuing partnerships with insurtech companies to differentiate themselves. In July 2023, Prudential Financial announced a partnership with Nayya, a benefits technology platform, to harness AI and data science to help employees make workplace benefits decisions during open enrollment.
More than 70% of respondents to a 2023 consumer sentiment survey indicated their company's benefits package is critical to attracting and retaining employees.
Group life insurance sales for the fourth quarter of 2023 totalled US$857m, representing an 8% increase year over year. Supplemental health insurance sales posted 5% annual growth in 2023.
One survey revealed that 86% of respondents consider it important for employers to offer supplemental insurance benefits to protect against the loss of income or expenses arising from unexpected events.
Life and annuity carriers are investing in core system modernisation and automation to achieve operational excellence.
One solution is to invest in an application programming interface-based architecture, which enables digital distribution and gives carriers flexibility with distribution channel interactions.
Zurich uses analytics to assess workforce skills
The talent challenge represents a constraint on AI adoption. When asked about organisational readiness, survey respondents indicated they are least prepared in terms of talent availability and existing skillsets.
Prioritising candidates with digital literacy and AI knowledge for new job openings was the top-ranked change respondents are making in how they manage and hire talent.
Zurich Insurance Group is using analytics to assess workers' current skills and future requirements to curate learning and development opportunities.
The approach reflects insurers' recognition that relying on new talent alone will not be sufficient. Employees already perceive employers to be as much as 2.3x less empathetic when AI tools are offered, making workforce buy-in critical.
As AI adoption exposes organisations to risks from hallucinations to propagating biases, insurers are working to understand their data sources and inventory.
A perceived lack of transparency around data collection in underwriting is concerning to consumers and regulators.
Colorado is developing a regulatory framework to help prevent bias and discrimination in AI models.
In Brazil, digital banking has increased the banked population over the past decade. These banks are now adding life insurance to their service offerings, enabling millions to access these products for the first time.
In the United States, the mortality coverage gap is estimated at US$25tn, while the global retirement savings gap is around US$70tn.
"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 LLP.
