Data and analytics firm, GlobalData, says technology, specifically artificial intelligence (AI) will play a notable role in improving the efficiency of existing operations while helping insurers to expand product lines and customer service going forward. A new survey from the firm finds that AI platform spending will grow by almost a quarter each year between 2019 and 2024.

“Applications for AI in insurance now span the sector’s value chain – from product development and risk profiling to claims handling. As more legacy insurers inevitably move to the cloud, AI platforms, which are more compatible with these operating systems, are certain to see greater traction,” says GlobalData thematic analyst, Sophia Patel. “Existing insurance firms need to adapt and invest in newer technologies to remain competitive against insurtechs. We have seen some bigger insurance companies leading the way with AI tools, but the emergence of specialist tech vendors over the last few years means these platforms are increasingly accessible to ordinary insurers.” 

Vendor partnerships 

A new report from GlobalData, Thematic Research: AI in Insurance, forecasts that AI platform revenues in the insurance sector will reach $3.4-billion in 2024, up from $1.2-billion in 2019. “This represents a huge compound annual growth rate of 23 per cent over this period,” says the report. The research also suggests that vendor partnerships over in-house expertise, will be the preferred and most cost-effective mode of AI adoption.

According to the research, 56 per cent of insurance executive respondents say they believe AI will significantly improve operational efficiency over the next three years. Of those surveyed, 47 per cent said their investment in AI would accelerate in the coming year. “General insurance lines have seen greater AI innovation due to less complex products and underwriting processes, but pandemic-induced stay-at-home orders will likely push life insurers to adopt more advanced AI tools,” as well, says GlobalData. 

Context-aware computing 

“Machine learning, computer vision and conversational platforms hold the most potential across the insurance value chain,” says the report. More advanced applications include the use of data science and context-aware computing to enhance risk profiling.

“While insurtechs continue to disrupt the insurance sector, incumbents hold an advantage as they have access to swaths of historic customer data on which to train AI models, resulting in superior decision-making outputs,” says the report. “Nonetheless, explainable AI practices and algorithmic transparency will need to be integrated into the early stages of AI deployment to safeguard consumer trust.”