It’s no secret that companies that integrate artificial intelligence (AI) into their business practices have a leg up when it comes to understanding customer needs and developing new products. For insurers, using AI could help deliver services seamlessly while breaking down silos internally and externally. McKinsey spoke with Violet Chung, a partner in the Hong Kong office, to understand more about what it takes for insurers to adopt AI into their business models and the benefits that come with adoption.
McKinsey: What are the latest trends with AI that insurers should be aware of?
Violet Chung: The latest McKinsey Global Survey on AI found that AI adoption continues to grow and deliver significant benefits to businesses: 50 percent of respondents reported using AI in at least one business function across their organizations. As AI becomes more common in businesses, the tools and best practices associated with it are also becoming more sophisticated. The insurance industry has seen similar trends, with leading players integrating AI into daily functions and activities.
We explored how AI and other key trends would shape the future of the insurance industry in the article “Insurance 2030—The impact of AI on the future of insurance.” We also looked at how each business function is evolving within insurance, including distribution, underwriting and pricing, and claims.
McKinsey: How can insurers incorporate AI into their models?
Violet Chung: There are four main ways insurers can use AI in all aspects of their business, from how they engage with customers to how they operate.
First, they can revamp traditional engagement and distribution channels digitally. Here, they could leverage AI tools to gain better insights on customer needs, which would then help advance and improve customer experiences. Second, they can use AI, advanced analytics, and edge capabilities to navigate complex decision making in various functions, such as underwriting, pricing models, and claims. Third, they can update core data and tech capabilities to help deliver seamless experiences to customers while engaging with external and internal stakeholders. And fourth, they can develop new ways of working and additional capabilities that adhere to changing customer preferences and hybrid working models.
McKinsey: What can insurers do to improve their capabilities in each of these areas?
Violet Chung: To improve engagement, insurers can work to build a fully personalized and consistent experience across all channels for customers. This is something that music and movie streaming services do well. Insurers can also leverage data more to manage content, automate marketing planning, and produce better design libraries.
Internally, companies can strengthen their core technology backbones to enhance speed, flexibility, and scalability across the enterprise. Then they can update these technologies based on risk and customer outcomes. And finally, insurers can use technology and data to break down silos internally and externally. They can integrate technology and business teams to enhance collaboration as employees work virtually across the globe, and they can use data to become more attuned to consumer behavior and develop new products and services based on these trends.
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Violet Chung is a partner in McKinsey’s Hong Kong Office.
More insights on digital and analytics in insurance:
- How personalization at scale can invigorate Asian insurers
- How Asian insurers can use digital marketing to fuel growth
- Building new digital businesses in insurance
- Driving business impact through customer centricity and digital agility
- How insurers can act on the opportunity of digital ecosystems
- Insurance 2030—The impact of AI on the future of insurance
- How top tech trends will transform insurance
- Global perspectives on insurtechs
- Tech-driven insurers: How to thrive in 2030