Banks and insurers must chase AI value creation, not cost savings

They should consider AI as an operating system by itself, not whether it can write them a system.

Banks and insurers adopting artificial intelligence (AI) should not think in terms of use cases or the costs saved but should think more about the value it creates, according to senior officials of Indonesia-based financial companies.

Financial institutions, when considering AI, often ask where they can use it and how it can automate workflows. But these questions will only lead them to drown over hundreds of ideas or, due to AI’s limitations, lead to little difference in past workflows.

For insurance companies, for example, AI can automate the payment, the underwriting, and the claims process individually. But the water between these islands will still need to be crossed manually, said Vikas Sinha, vice president director at Prudential Indonesia.

“The right question is: “Can AI become an operating system by itself? Can it change my entire way of how things were operated in the past?” Sinha told attendees of the Asian Banking & Finance and Insurance Asia Summit’s Indonesia leg, held at Jakarta on 13 May.

Igloo’s chief business officer Wilson Teng echoed this sentiment. “If you apply AI in specific, you know, touch points, you might not be able to fulfill the full end to end experience,” he said.

Teng noted that there is a gap in how traditional banks and e-commerce companies see AI. He recalled Igloo’s experience working with a large e-commerce company to adopt embedded insurance.

“The conversation is more about how and what we use AI for, whereas when we speak with traditional banks, it is more why or where do we start,” Teng said.

Melisa Hendrawati, CFO of PT Super Bank Indonesia, highlighted that organisations must know the business outcome they want out of AI, “otherwise it’s just a good buzzword.”

“I really love to hear more about the value creation angle, in terms of measuring the benefit of AI more, rather than just, you know, cost of credit or the OPEX,” Hendrawati said in a panel moderated by Oki Stefanus, partner at EY-Parthenon Indonesia Strategy & Transactions.

“I don’t want to just listen to the cost savings. There is a limitation to how much it reduces costs,” she said.

PT Maybank Indonesia’s Ade Rangkoto, meanwhile, emphasized that financial institutions should examine the value of each AI project not just for the business but for their clients as well.

“How is it going to help, Number one, the business; obviously we ended up in the risk business. How is it going to help the clients?” Rangkokot said. “I think this is the part that everybody will need to ask, you know, truly, how is it going to bring impact to the business as well as to the client?”