To lead and to lag: APAC insurance’s conflicted AI journey in 2024
Published by Insurance Asia on 8 January 2024.
Whilst AI investments reached 23.93% of the total market, 41% of firms in Asia Pacific cling to outdated tech, hindering efficiency and scalability.
As 2024 unfolds, artificial intelligence (AI) applications, especially those reliant on generative pre-trained transformer (GPT)-based models, are expected to redefine claims processing and underwriting in the insurance sector. Credit that to the leaps and bounds seen in 2023.
However, the situation also presents significant challenges in handling multiple systems because 41% of companies still cling to legacy systems, aiding the persistence of outdated technology.
“In 2024, we will see more applications of AI and increased use cases of GPT-based AI models embedded in insurers’ applications,” said Joseph Yew, chief information officer of MSIG Asia, as he presented his outlook to Insurance Asia.
Yew said he sees that the insurance landscape in Asia will continue to evolve and transform not just this year but beyond. However, he also notes how insurers seem to be lagging behind this new-age technology, begging the need to be assisted in their transition.
“The insurance industry is not a solo game. Traditional insurers burdened by legacy systems could partner with Insurtech firms to utilise technology that they may struggle to develop in-house,” Yew pointed out. “This enables collaboration to develop efficient processes, improve customer offerings and new technology-based insurance products.”
Companies, particularly in agency/broker management and policy administration, typically use an average of five systems for complex operations like claims, billing, and underwriting. In larger firms with over 5,000 employees, 76% manage six to 10 systems or more, often relying on legacy systems averaging four years in use, according to Novidea’s The State of Modern Insurance Technologies 2024 report.
The main issues with multiple systems include high maintenance costs, inefficiency due to various logins, and time and resource consumption. Scalability concerns are also prevalent with current technologies.
In terms of AI, investments in the Asia Pacific region alone account for 23.93% of the total AI market size, according to a report by community-driven prompt management tool AIRPRM with data from OECD and the World Bank.
These factors suggest a shift in the late-stage credit cycle, prompting the recommendation that insurance portfolios align with liability targets. However, Yew cautions against neglecting the human interface in the digital consumer journey, emphasising the need to balance personalisation and data protection.
“Another set of technologies gaining much prominence among insurers in Asia, though not necessarily innovative, are technologies used to enhance the customer experience (“CX”). Investment in CX solutions that simplify the purchase and renewal process, embedding it seamlessly into the customer journey, and providing the human touch when it is required will be the order of the day,” Yew said.
The rise of co-pilot work solutions powered by generative AI is predicted to shape the future of work in 2024. This approach enhances creativity, productivity, and efficiency.
Yew said he believes the forecast for insurtech investments in Asia remains positive, with the region leading the way in digitalisation.
A PwC global report predicts a compound annual growth rate of 36.5% from 2019 to 2024, reaching $10.14 billion. Key drivers include the adoption of cloud computing, AI, big data analytics, and the Internet of Things (IoT) to enhance customer experience.
AI in the dynamics
Yew noted a growing demand for health insurance products, leading to insurers offering more comprehensive and flexible coverage. This includes value-added services such as telemedicine, wellness programmes, and preventive care.
Additionally, there is a rising awareness of Environmental, Social, and Governance (ESG) issues, with insurers aligning practices and products with ESG principles.
MSIG, for instance, collaborates with tech partners like Dedoco, Embed Global, and Hillridge to combat cyber threats and venture into new markets, showcasing the industry's commitment to embracing technology.
Insurers in the region also adapt to the evolving market by focusing on a customer-centric approach.
“Insurance companies in Asia are facing a rapidly evolving market where customer expectations and preferences are shifting towards more personalised, convenient, and transparent services. The bar is raised in 2024. To adapt to these changes, insurers need to adopt a more customer-centric approach that focuses on delivering value and satisfaction throughout the customer journey,” Yew told Insurance Asia.
Insurers are turning to technology to address rising challenges posed by cyber threats and climate change. Utilising AI, cloud computing, and big data enables insurers to boost cyber resilience, minimise their carbon footprint, and provide innovative, sustainable solutions.
Embracing these technologies safeguards insurers’ businesses and supports global initiatives to tackle cyber threats and climate change.
Amidst the unpredictable insurance landscape, Richard Sega, global chief investment strategist at Conning, pushes for effective risk mitigation.
Sega raised the issue of how ongoing global tensions, such as Russia’s invasion of Ukraine and the Hamas attack on Israel, impact energy markets and pose risks to trade, affecting domestic and global GDP.
Looking forward, the impact of AI offers a potential lift, with technologies like generative AI, machine learning, and natural language processing contributing to innovation across various sectors, he said.
Despite a gradual decline, inflation continues, putting upward pressure on interest rates. Central banks may respond, potentially ending the US market’s decade-long dominance and creating opportunities for non-US investors.
Unchecked spending may persist, contributing to economic imbalances and a potential government shutdown.