How Insurers can use AI to increase profitable growth

GFT sees the rise in AI affect three keys opportunity areas: new products, customer satisfaction and core underwriting. To understand and leverage this intersection of AI and profitable growth, it’s important to explore these three areas and consider how to build your AI strategy to optimize each of them. 

As we know, not all top-line growth results in immediate profitability. As insurers balance sustainable growth with all-important profitability, GFT suggests focusing on these three key areas:  

Changing demographics, consolidation and ever-increasing competition across the insurance space has accelerated over the past five years. This competition places huge time and resource pressures on the traditional innovation process: analyze, design, program, integrate and test.  

Your organization’s ability to create innovative and effective products is a direct indicator of success—consumers gravitate towards products that cut through copy-cat thinking and instead provide integrated value that fits with each customer’s unique lifestyle. Such products earn customer loyalty and lead to longer term relationships that insurers can, in turn, leverage to drive improved profitability.

While growing your customer base through new product adoption is critical to profitable growth, retaining existing ones is just as important. Classical methods of surveys and monitoring of consumer behavior are “table stakes” in today’s cut-throat market. Instead, leading insurers have become expert marketers and data miners across wide swaths of data—Including demographic shifts, social media data and buying patterns.  

Furthermore, leading insurers have retooled their customer experience with the goal of anticipating needs before they even arise. If executed correctly, this virtuous cycle can lead to happier customers and increased profits for insurers.

As a core competency of insurance, it’s not an overstatement to claim that effective underwriting could be the single most important driver of both profitability and success for your firm. Unbalanced claim expenses versus premiums can lead to budget deficits, as can uncontrollable occurrences such as natural disasters and other unforeseen events. Clearly, it’s of paramount performance to create a robust, scalable underwriting process that ensures profit by effectively pricing products.  

While leading insurance providers have leveraged increased automation to reduce manual tasks and free up expert resources and lower overhead, current conditions spell trouble ahead. For example, Mark Englert from ALM Property Casualty 360 states that “Economists predict that, in most markets, the industry will not be able to generate sufficient returns to cover its cost of capital in 2024 or 2025 due to the rising expense of litigation and economic inflation, which leads to higher claims costs.” 1 Englert, M. (2024, February 27). Will the P&C Insurance Market Stabilize in 2024?

With continuous advancements with AI and so many possibilities and options, it is sometimes challenging to know how to get started. 

Based on hundreds of AI projects across insurance, financial services and manufacturing, we suggest these initial guardrails: 

A robust data management strategy is essential. Insurers must ensure data quality, accessibility and security to extract insights from data sets. This need not be perfect from day one but is a prerequisite if you expect success in specific subject areas. As a recent Gartner article suggests: 

Instead of tackling enterprise-wide solutions, you should instead look for tangible, bound use cases that your customers have asked for, or ones that you believe to be enables for additional value. And, at the beginning of AI adoption, incremental changes benefit your technical approach, data and measurements. This will pay off handsomely down the line. 

Collaborating with the right set of technology and service providers is critical, as much of the industry is currently in learning mode. While early in the game, find firms (such as GFT) that can accelerate innovation and partner with you to “right size” your efforts and reduce risk. 

Developing and nurturing an internal team to spearhead your AI projects and build expertise is crucial. This core team can act as a hub to collect experiences and growth your firm’s technical memory. The team also assists in reducing confusion and duplication of effort, especially as AI efforts grow in size and business importance. 

AI Integration into traditional insurance can result in pushback, fear of reduced job security and other misgivings by internal staff. This cultural shift can be reduced by tying your AI efforts into existing change management mechanisms and management practices. This can actually help transform anxiety about AI into a set of personal and professional growth opportunities. 

Visit GFT’s AI.DA marketplace, an ever-growing catalog of AI solutions, templates and thought leadership. There you will see and explore areas in which we’ve expanded our knowledge and experience. While not all explicitly tagged as insurance-centric, many are absolutely applicable to the industry. With a track record of excellence and a reputation for innovation, GFT features both ready-for-market solutions as well as custom systems to meet your digital needs.