The underutilization of artificial intelligence (AI) by insurance companies, despite significant investments, is highlighted in a new Boston Consulting Group (BCG) report. Insurers are encouraged to narrow their AI focus to specific high-value areas to enhance near-term profits and performance.
BCG’s research suggests insurers should prioritize AI in key functions such as underwriting, customer service, claims processing, and sales. Companies that concentrate efforts on these areas achieve more significant financial benefits, as revealed in the 2024 Build for the Future survey. Insurers implementing a focused AI strategy are expected to extract twice the value compared to those spreading resources thinly.
In the US and UK, commercial property and casualty insurers could see efficiency improvements of up to 36% in underwriting through AI. Enhanced use of unstructured data can improve loss ratios by three percentage points. AI tools also bring productivity gains of over 30% in customer service, primarily through knowledge assistants.
Claims management benefits notably from AI, with potential cost reductions of up to 20% and faster processing times by as much as 50%. Fully automated claims processing for simple cases cuts operational costs by 30% to 50% and boosts customer satisfaction.
In sales, AI handles large volumes of leads for direct writers, streamlining processes, while it automates administrative tasks in agent and broker channels, significantly increasing productivity.
IT departments are pivotal in AI testing, including Europe’s AI-driven “smart migration” programs that halve migration time and reduce costs by 30%. AI applications extend to software development, test automation, and IT service management.
The report advises against a late-follower strategy due to the challenges in developing the necessary capabilities, emphasizing the importance of investing in human skills over technology alone.
In summary, the BCG report signifies that AI can substantially enhance insurers’ strategies, urging a focused approach, significant operational changes, and collaboration between business and IT departments for successful implementation.
