Insurers are increasing investments in generative AI by 300%

Half of CEOs view AI as an opportunity, whilst the other half see it as a risk.

Insurers are seeing early success with generative artificial intelligence (AI) in customer experiences, leading to improvements in customer satisfaction, including a 14% higher retention rate and a 48% higher Net Promoter Score compared to insurers not using AI. 

Whilst many insurers are focused on improving brand and product experiences, customers prioritise tailored products that meet their specific risks, according to IBM Institute for Business Value’s “Generative AI  in the insurance industry” report.

Generative AI is helping insurers meet these demands by enabling more personalised services, but challenges remain.

Insurance CEOs are split on the potential of generative AI—51% view it as an opportunity, whilst 49% see it as a risk. 

Executives believe AI can enhance sales, customer experiences, and organisational capabilities, but they are also concerned about risks related to cybersecurity, operational disruptions, and issues like bias and inaccuracy. 

Despite these concerns, 77% of industry leaders agree that adopting generative AI quickly is necessary to remain competitive. 

Investments in generative AI are projected to increase by over 300% from 2023 to 2025 as insurers move beyond pilot programs and integrate AI across multiple functions. Early adopters using AI across direct, agent, and bank channels report improvements in sales, customer experiences, and customer acquisition costs. 

However, a disconnect between what insurers offer and what customers expect from AI, signalling the need for insurers to carefully evaluate their AI strategies, the IBM report said.

Insurers can address this gap by focusing on three critical areas: customer engagement, technology preparedness, and operating models. 

These factors will help insurers align their AI strategies with customer expectations, improve legacy infrastructures for AI delivery, and refine their operating models to optimise business outcomes. 

The report emphasised the importance of responsible AI adoption and offered an action guide for insurers to convert AI’s potential into tangible growth.