Up to $170bn of insurance premiums could be at risk in the next five years due to poor claims experiences, with process inefficiencies in underwriting potentially costing the industry another $160bn over the same period, according to a new report titled ‘Why AI in Insurance Claims and Underwriting?’ from Accenture.
The report is based on surveys of more than 6,700 policyholders across 25 countries; more than 120 claims executives in 12 countries; and more than 900 US-based underwriters. It explores how the insurance industry is responding to the latest market dynamics, pressure from new competitors, challenges facing underwriters, the growing demand for seamless customer experiences and how AI technologies can be applied to satisfy and retain customers and transform the underwriting function.
The report found that 31% of claimants were not fully satisfied with their home and auto insurance claims-handling experiences over the past two years. Of this 31%, six in 10 (60%) cited settlement speed issues and 45% cited issues with the closing process.
Dissatisfaction around the claims experience is one of the main reasons driving customers to switch insurers. Nearly one-third (30%) of dissatisfied claimants said they had switched carriers in the past two years, and another 47% said they were considering doing so. Overall, consumers who reported not being fully satisfied could represent up to $34bn in premiums annually, or up to $170bn over the next five years.
The report states that AI technologies could improve the claims process. Four in five (79%) of the claims executives surveyed said they believe that automation, AI and data analytics based on machine learning can bring value across the entire claims value chain - from flagging fraudulent claims, to damage assessment and loss estimation, reserving, adjusting, processing optimisation and subrogation.
However, the adoption of these technologies has been slow, with only 35% of claims executives reporting that their organisations are advanced in their use of these technologies. This could change, though, as nearly 65% of insurance companies plan to invest $10m or more in these technologies over the next three years, prioritising AI-based applications and automation technologies, according to the claims executives surveyed.
The report also found that insurers could reduce underwriting operating costs through the adoption of AI technologies, making up to $160bn in efficiency gains by 2027. As underwriters currently grapple with ageing systems and inefficient processes, the research found that up to 40% of their time is spent on non-core and administrative activities — an annual efficiency loss of between $17bn and $32bn. More than half (60%) of the underwriters surveyed believe that improvements could be made to the quality of their organisations’ processes and tools.
“AI is no longer a technology of the future, but an established capability that many insurance innovators are already putting to work to deliver better customer experiences and empower their workforce,” said Accenture insurance industry group lead Kenneth Saldanha. “As humans and AI collaborate ever more closely in insurance, companies will be able to reshape how they operate, becoming more efficient, fluid and adaptive. Those that are already moving to leverage AI will be able to create sustained competitive advantage.” M