Insurers could boost their collective annual profits by US$20 billion (about CA$26 billion) through the use of intelligent solutions like artificial intelligence (AI), machine learning and data analytics, according to new research from global management consulting firm Accenture.
An Accenture report, entitled ‘Reimagining Insurance Processes with Intelligent Solutions’ suggests insurers who embed intelligent solutions into their business processes in order to reinvent the customer experience and drive human-machine collaboration are seeing returns in excess of 10 times their investment. The research also suggests widespread adoption of intelligent solutions could boost industry-wide profitability by between US$10.4 billion and US$20.8 billion.
The “potential [of intelligent solutions in the insurance industry] is huge,” according to Sharad Sachdev, managing director and the analytics lead in Accenture’s Insurance Strategy Practice. The purpose of the study, he added, was to “motivate insurers to accelerate their innovation journey.”
“You can start this journey anywhere,” Sachdev told Insurance Business. “An insurer or broker can start by investing in one area of the business, like underwriting, claims, distribution, product, pricing or customer service, and then build up their intelligent solutions capabilities over time. What we’re starting to see in North America, which is really exciting, is a desire to look across the entire business value chain to use intelligent solutions to create a competitive advantage throughout all day-to-day processes.
“Insurers are starting to look at innovation and change from an enterprise level rather than just a functional level. Change at a functional level makes small improvements to existing business processes, whereas change at an enterprise level can transform a company’s entire culture and philosophy.”
Despite the huge potential profit, the insurance industry worldwide has been slow to capitalize on the true potential of intelligent solutions. Sachdev attributes this to the fact that the insurance industry is “doing quite well” without it.
“If you look at the retail industry in comparison, a lot of retail players have gone out of business in North America as a result of the e-commerce phenomenon,” he said. “The insurance industry, on the contrary, is doing quite well and has remained profitable. There’s no red-hot platform disrupting everything. Because of that, and because of the fact that the insurance industry is traditionally quite conservative, insurance firms have waited to see how some of the most advanced technologies and capabilities have played out in other industries before making investments.”
Cautious investment is sensible, but Sachdev warns “the trend is coming faster than you think.” The luxury of time can be fleeting at best, which is why Accenture is encouraging insurance firms to think about implementing enterprise-wide innovation strategies.
A key driver of change is customer expectation. Companies like Amazon, Google and Apple have transformed the customer experience, so if insurers want to stay relevant, they need to offer similar experiences.