Accelerating AI innovation and advanced analytics in insurance

Simon Axon, financial services industry director, international at Teradata.

Last year, a report was published by McKinsey which revealed a concerning lack of data and analytics maturity among insurers in Europe, the Middle East, and Africa (EMEA). While four standouts drove a 10-20 percent uplift in profit in 2022 by implementing AI and advanced analytics, most have yet to capitalise on the estimated €1.2 trillion in realised and potential value in analytics for the sector.

Meanwhile, insurers are facing a new threat: competitors from outside the sector are using AI-powered opportunities, technology, and data-driven insights to disintermediate the sector and offer insurance products directly to consumers.


Too much talk, not enough action

Given this reality, it is no surprise these technologies are at the top of the list for insurance executives. Overall, EMEA insurers seem to understand the need to rapidly accelerate their capabilities if they hope to survive and thrive in the AI-driven decade ahead. However, for most players, there is still a huge gap between talk and action. According to the McKinsey report, only one in five of the EMEA firms surveyed said they are using automated analytics for the majority of decisions, and nearly 60 percent described their maturity stage as aspirational. Interestingly, none of the firms surveyed, even the top performers, identified themselves as analytics-driven organisations.


Lessons from the leaders

Many other sectors are already way ahead of insurance in terms of generating value from advanced analytics. Leaders are finding ways to apply AI, machine learning, and other analytics-based approaches to business segments like marketing, renewals, claims handling, and customer experience. For example, Verizon, a global telecom giant, leverages advanced analytics to identify potential churners and tailor its retention programs. By spotting customer trends early, it is able to alter products and services to keep customers happy and create new revenue streams.

Another telco, Saudi Telecom Company, uses AI to analyse structured and unstructured data and build a clearer picture of individual customers’ wants and needs based on their behaviour. Using these insights, the company is optimising the customer experience in ways that build loyalty and increase cross-selling opportunities.

Within the insurance sector, Mitsui Sumitomo Insurance created a system called MS1 Brain that uses AI to predict demand and suggest next best actions for agents to take in sales interactions with customers. Since implementation, the rate at which customers add supplemental coverage at policy renewal has increased by 250 percent. And another leading medical insurer leverages advanced analytics to detect anomalies and navigate elusive diagnosis, enabling them to prevent losses while improving customer service.


Enterprise data platforms: the critical piece

What is the common thread that enables these different businesses to successfully deploy AI and advanced analytics at scale to drive growth and profitability? The answer is putting data at the heart of the organisation. And this does not mean simply acknowledging data as an asset; it is about putting data to work across every department and in every decision. This requires deploying an enterprise-wide analytics and data platform with high levels of governance to drive better insights and intelligent decision-making. Implementing a handful of point solutions operating in departmental or product-specific silos is not enough.


Capturing the true value of AI and advanced analytics

Becoming an analytics-driven organisation involves more than just a technological transition. It takes a shift in mindset and a whole-hearted commitment from leadership to responsibly integrate data analytics and trusted AI across the enterprise. There is much that insurers can learn from other industries, but the insurance landscape is changing fast and time is running out.


Image: Canva.
Emma Cockings
Emma is a content editor for Claims Media.