Generative AI: A Risk Or Opportunity In Insurance?

A recent study by IBM's Institute for Business Value has highlighted a significant gap between how insurance leaders and customers view the rapid adoption of generative AI.

IBM study reveals insurance leaders embrace generative AI, but customers remain cautious about trust and reliability.

While industry executives are keen on using AI to enhance customer experiences and streamline operations, insurance customers are more cautious, particularly regarding the reliability and trustworthiness of AI-driven solutions.

The study, titled Generative AI in the Insurance Industry: You Can’t Win if You Don’t Play, surveyed 1,000 C-level insurance executives across 23 countries and 4,700 customers in nine countries.

It found that 77% of insurance leaders believe adopting generative AI is crucial to remain competitive.

Investments in generative AI are expected to surge by over 300% between 2023 and 2025, as companies move from pilot projects to widespread implementations across various business functions.

However, insurance customers are less convinced, with only 29% expressing comfort with AI-powered virtual agents and just 26% trusting the advice these systems offer.

Mark McLaughlin, Director of Global Insurance with IBM Technology, emphasized that the insurance sector has made progress in enhancing customer experience through generative AI, particularly with the use of chatbots and virtual agents.

However, he noted the need for robust governance frameworks to ensure transparency, privacy, and explainability.

“Insurers must focus on building trusted AI assistants and reliable processes,” McLaughlin said, while also stressing the importance of connecting customers to the right products.

Interestingly, insurance CEOs are split on their views of AI, with 49% seeing it as a risk and 51% as an opportunity.

This divide illustrates the complexity of AI adoption, where executives must balance innovation with ethical and operational concerns.

Despite these concerns, AI's potential to improve outcomes remains strong. Insurers who embrace decentralized AI development models could see business improvements by up to 14%.

As generative AI becomes more embedded in the industry, the study recommends that insurers focus on developing personalized products linked to risk data, address customer trust issues, and ensure AI systems are governed ethically.

The future of AI in insurance will depend on how well companies can align technological advancements with customer expectations.