Generative AI Set to Transform Insurance Distribution Sector

Generative AI’s potential to transform insurance distribution, boosting revenues and cutting costs, is explored in a new report by Bain & Company.
By: | April 1, 2024
Topics: Brokerage | News | Technology
AI in insurance

Generative AI is set to transform insurance distribution, according to a recent report by Bain & Company.

The report highlights four key areas where generative AI will transform insurance distribution: agent productivity, customer self-service and sales support, hyper-personalization at scale, and business insights and decisions. The technology will enable agents to navigate and produce content faster, reduce low-value interactions, and provide coaching for more effective interactions with customers.

“For insurers, benefits due to generative AI will come through three routes,” said Bhavi Mehta, global lead of AI in Financial Services at Bain. “This includes raising productivity, lifting sales through more effective agents and digital advice, and better risk identification and targeting that will help both customers, agents and the enterprise.”

The application of generative AI in insurance distribution could yield over $50 billion in annual economic benefits, according to Bain & Company. These benefits would come through increased productivity, more effective sales and advice, and reduced commissions as direct digital channels gain share. For individual insurers, the technology could boost revenues by 15% to 20% and cut costs by 5% to 15%.

The report also provides examples of companies already utilizing generative AI.

  • An Asian financial services firm developed a wealth adviser hub to increase client coverage and improve lead conversion.
  • Helvetia in Switzerland launched a direct customer contact service using generative AI to answer customers’ questions on insurance and pensions.
  • HDFC Ergo in India opened a center to apply generative AI for hyper-personalized customer experiences.

However, the report warns of new risks emerging with the use of this nascent technology, such as hallucination, data provenance, misinformation, toxicity, and intellectual property ownership.

“As with any nascent technology, there will be risks,” said Sean O’Neill, leader of Bain’s global Insurance practice. “To manage risks, insurers should adopt a responsible AI strategy that includes short-term priorities, as well as a long-term vision enabling companies to build valuable AI capabilities to redefine their business operations.”

The report concludes with recommendations for technology and distribution leaders in the insurance industry. Technology leaders should align with business units on how AI can support business strategy, determine what to build internally and what to buy from vendors, ensure that delivery teams are cross-functional, and build foundational capabilities with an eye to repeatability.

Distribution leaders should define clear goals around cost savings, customer experience, and sales growth, frame initiatives around the art of the possible, constantly measure outcomes and progress, and design an operating model that can adapt as implementation matures.

For more information from the report, visit Bain & Co. website.

The R&I Editorial Team can be reached at [email protected].

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