Fast Five: Generative AI in Insurance

Transcript

With an ever expanding digital ecosystem, how does an insurance company arrive at the right balance between expanding its customer base and delving deeper into its existing customers to generate more profit? Hello and a warm welcome to Financial services Fast five. Today we're going to ask five questions about the insurance industry and its future. And I'm really thrilled to be joined here by David Mamane, who is a senior analyst with the firm, an actuary and one of our foremost experts in this space. David a warm welcome to you. Thank you, Peter. Thanks for having me. It's really great to have you so. So- five questions. We're going to get stuck right in. So, David, what do you think the future holds for the insurance industry over the next, say, three to five years? I think over the next five years, we're going to see a mix of headwinds and tailwinds facing the insurance sector. On the headwind side, we're gonna see stricter regulation as more regulatory agendas continue to evolve. We're going to see rising costs from an inflation standpoint as well as the growing impact of climate change on insurance portfolios. But that's not without some strong tailwinds. We are seeing a big push towards more personalized insurance products as well as digital distribution channels, which can really enable new growth opportunities for carriers. That's great. I really love the climate reference: the tailwinds and the headwinds. So next question, David, what are you seeing in this space that perhaps nobody else is seeing? I think one of the things I'm seeing is this struggle where insurance carriers are trying to strike a balance between quickly responding to emerging risks and opportunities while balancing the regulated nature of the industry. And with all the technology available today, we're seeing larger carriers and even some mid market carriers develop innovative solutions faster than they ever have before. I think it's going to be paramount for insurance executives to embrace technology and being able to respond quickly to these market trends. Yeah. And I think you would agree with me, David. The insurance has not always been the fastest moving industry across financial services. So that's absolutely fascinating. So David, you're deep in this space every day. When you talk to people, what are they most getting wrong? I think what the insurance industry is not necessarily getting it wrong, but what they can improve upon is really how they enable growth through their platforms. So I think right now carriers invest tremendously in their ecosystems and strategic partnerships to enable growth through distributions of their products to a wider customer base. But to really generate sustainable growth is going to require a real understanding of your customers and offer these deeply tailored products that meet their specific needs. And I think that's the way to win. In today's world. So that sounds to me like you're going deeper rather than broader. Is that, is that right? Absolutely. Really interesting. OK, so let's say I'm a senior executive in the insurance space. What would your advice be to me? What should I be looking out for in this future that you're describing? When I think about the insurance space, I really think about AI. Insurance is one of the oldest data-driven industries out there and we were quite early to adopt AI and machine learning in the context of risk modeling and pricing. But when you think about the latest evolutions in AI, particularly generative AI, there are a lot of new ways and use cases that insurance carriers can think about when using this technology. For example, regulatory rate filings are extremely arduous, require a lot of rule following. Uh, certain exceptions that you're allowed to do and not allowed to do, and this is documented in a tremendous amount of regulatory guidance. Generative AI can be a great technology to consume that guidance and give tangible advice to your business partners. All right, So it's not all gloom and doom with AI then. That's that's really, really good to know. So David, we've talked about quite a bit. What else would you, what did we miss even? Well, I think on the last topic, when we talked about AI, certainly we mentioned some of the advantages and benefits of the use of AI and insurance. But it's important to understand that using AI is not without risk. The concepts of bias, fairness and transparency of outcomes from AI models still remain paramount in this really highly regulated insurance industry. And in my view, AI will not replace, but rather enable the insurance professionals of the future. And that's something to really think about as an insurance executive as you're looking to adopt AI technologies within your business. Yeah, too, right. I mean, AI is not perfect. We all know that. And so that's really helpful advice. So David, I want to thank you very much. This has been a really interesting talk and thank you: audience for dialing in for this Fast 5 if you like this and if you'd like to see more of these in your feed, press one of the engagements buttons below. And if you have any comments or ideas for future topics. Would like to hear discussed, then make a comment as well. Meanwhile we'll see you all again next time. Thanks very much, goodbye.