Insurers in ANZ leverage AI amidst tightening margin

Due to inflation, extreme weather events, and evolving consumer expectations.  

Insurance companies in Australia and New Zealand are intensifying their investments in advanced technologies, including artificial intelligence (AI), to become more data-driven and digitally focused, according to the 2024 ISG Provider Lens Insurance Services report by Information Services Group (ISG). 

Michael Gale, partner and head of ISG Asia Pacific, emphasised the need for insurers to overcome legacy systems and cultures to maintain competitiveness, with service providers playing a crucial role in this transition.  

The report highlights digital transformation efforts as insurers face tightening margins due to inflation, extreme weather events, and evolving consumer expectations.  

AI, particularly generative AI, is becoming a key driver in areas such as automated claims processing, customer interaction, and predictive analytics for risk management. 

AI is expected to simplify complex insurance offerings and optimise costs, although achieving full AI readiness requires advanced data capabilities.  

Property and casualty (P&C) insurers are leveraging data analytics to enhance risk assessment and customer segmentation whilst integrating traditional and digital channels to improve personalisation. 

Partnerships with insurtech companies are emerging as a strategy to foster innovation and efficiency.  

Life and retirement (L&R) insurers, whilst less prevalent than P&C insurers in the region, are responding to growing consumer demand amidst economic uncertainty. 

Business process outsourcing (BPO) providers are aiding both P&C and L&R insurers in meeting regulatory requirements and automating operations.  

“Digital transformation for insurers in this region will require major investments in cloud, data management and security,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research.

Traditional IT outsourcing (ITO) remains significant for insurance enterprises, but companies are exploring nearshoring, offshoring, and cloud-based platforms to modernise IT infrastructures.