Embedded insurance and artificial intelligence (AI) are two of the most powerful forces shaping the insurance industry. When combined, their impact will be enormous.
Already, embedded insurance provides insurers with an extensive range of distribution channels that deliver convenient, relevant and affordable cover. Revenues from embedded insurance are growing about 25% a year, according to Munich Re, and could contribute more than US$500 billion in global gross written premiums by 2030.
And AI is helping insurers boost the efficiency of key operations such as claims processing and fraud control. Furthermore, the arrival of generative AI (GenAI) has substantially enhanced the effectiveness of insurers’ contact centers and document processing systems. AI sales to the insurance industry are growing around 33% a year and could reach US$80 billion by 2032, forecasts Precedence Research. The surge in demand for GenAI is likely to propel AI investment even higher.
So, what happens when embedded insurance is supercharged with AI?
GenAI will be able to clarify grey areas and tell clients if they are covered for specific events.
Joe Mason, Allianz PartnersThe relationship between consumers and insurers will change dramatically, according to Joe Mason, Global Head of Product Management and Innovation at Allianz Partners. Insurers will be able to shake off the stereotypes that depict them as slow and cumbersome organizations. Instead, they’ll have a chance to prove themselves as agile service providers that surprise and often delight their customers.
At the heart of this shift will be the rollout by scores of insurers of personalized intelligent embedded products that use AI to address many different aspects of consumers’ lives. Mason believes such cover will be constantly and easily accessible.
“In future, insurance will be like a seatbelt. You’ll just wear it.”
Mason was speaking at the recent Qorus Reinvent Forum in Lisbon. Addressing a workshop on the future of GenAI and embedded insurance, hosted by Amazon Web Services (AWS), he pointed to likely examples in the travel insurance. Insurers, he said, will be able to use GenAI to provide customers with a digital policy-concierge that could answer queries about the client’s cover.
“Few customers read the 27 pages, or so, of a policy’s terms and conditions. GenAI will be able to clarify grey areas and tell clients if they are covered for specific events. Such information will give customers more confidence when they buy products.”
What’s more, embedded insurance offerings equipped with GenAI could provide customers with proactive advice that alerts them to threats they may not have considered.
“You don’t know what you don’t know. Whether it’s about finance, housing or your children’s education, there can be gaps in your knowledge that you’re unaware of until something happens. GenAI will enable you to ask a machine whether, based on all the data available, you are safe. That’s a massive upside.”
Within minutes, GenAI could provide an insurer all the information it needs to create a product tailored specifically for a particular client.
Arno de Wever, AWSWhen booking a family trip, for example, a policyholder could in future turn to a GenAI-powered insurance service and ask it to assess factors such as flight delays and local incidents of thefts and strikes and use this information to recommend the best destinations and routes.
“If we can nudge customers to go to places where they’re more likely to be safe, it’s good for business and fewer people get hurt.”
Allianz Partners’ embedded travel insurance offering, allyz, already provides the insurer’s customers with real-time policy management facilities; location-based safety alerts; flight-delay notices and compensation; healthcare assistance; and cyber security cover.
Arno de Wever, EMEA lead for commercial P&C insurance at AWS, believes the arrival of GenAI could open the way for the development of a new generation of “empathetic” insurance products that match the needs of each customer.
“Within minutes, GenAI could provide an insurer all the information it needs to create a product tailored specifically for a particular client. It could prompt customers with questions that give insurers the information they need to establish the right price, premium and warranties.”
De Wever said GenAI could improve product development among insurers by aggregating and synthesizing marketing data from a wide range of sources and generating ideas for new offerings. It could also strengthen insurers’ marketing, sales and distribution by, among other things, identifying upselling opportunities, automating customer segmentation, and personalizing communications with clients. Further potential benefits might include better pricing and underwriting of insurance products, more efficient claims analysis and fraud detection, improved risk management, and enhanced employee training and support.
However, to capitalize on the enormous potential of GenAI, insurers must have the right data resources and infrastructure, warned De Wever.
“To create personalized policies, you need data. Not just access to data and a large range of data partners. You must to be able to integrate your data and your technology.”
The rise of telematics, and the vast volumes of data such services generate, has shown insurers the importance of developing a data strategy that ensures they get data of the right quality, in the correct format, for their specific purposes, said De Wever.
Looming Open Insurance legislation, which will force insurers to make the customer data they hold available to third parties, will enable insurance providers to personalize their products even more. They’ll be able to deliver embedded insurance offerings, guided by GenAI, that offer clients options precisely tailored to their needs and contexts across multiple touchpoints.
Open Insurance will be a challenge for insurers. But we are here for challenges.
Telmo Pinho, Millennium bcpInsurers and their customers will both benefit from Open Insurance, according to Telmo Pinho, director responsible for accounts, product bundles and bancassurance marketing at Millennium bcp.
“There’ll be more players sharing more information. And insurers will be able to offer customers more complete proposals. Open Insurance will be a challenge for insurers. But we’re here for challenges.”
Pinho added that advances in AI will enable Millennium bcp to refine how it markets insurance products by identifying the best moments, products, channels, prices and communications methods for specific audiences.
While the combination of embedded insurance and AI, particularly GenAI, offers insurers tremendous business benefits, providers still need to overcome some big obstacles.
Speakers at the workshop expressed concerns about the stability of current GenAI applications. They pointed out that many organizations lack the accurate and reliable data these applications require. Such organizations are also often hampered by the limitations of their legacy systems. While plenty of insurers are piloting or developing applications that incorporate GenAI, most of them are looking to improve operational efficiency. They’re deploying GenAI to increase customer retention, by providing better services, rather than using the technology for client acquisition. Insurers are wary that client-facing GenAI applications could malfunction and damage customer relationships.
Customer trust is crucial for the success of embedded insurance, noted De Wever at AWS. The more embedded offerings use GenAI to get closer to consumers, the more insurers will need to build trust with their customers.
Data privacy and security, for example, are major concerns for consumers. When training their GenAI applications, insurers will have to ensure those new systems request and deliver the correct data, said De Wever.
Rules enforced by regulators in local and regional markets will likely determine much of scope and reach of AI-guided embedded insurance offerings.
Another influence shaping the consolidation of embedded insurance and GenAI will be the strategies of technology service providers. De Wever expects technology providers to further standardize the solutions and building blocks they offer insurers. Increased “modularization” of technology services will simplify the development, roll out and ecosystem integration of embedded offerings. But it will also prompt insurers to try and outpace competitors by being quicker and more innovative in the design and distribution of embedded products.
De Wever advises insurers to be cautious but deliberate in their approach to integrating embedded insurance and GenAI.
“Start small, move fast and think big. Look at use cases in other industries, identify what works and adapt them to fit your model. Then integrate these GenAI use cases into your products.”
Looking ahead
Business leaders at the AWS workshop were asked to identify the embedded insurance applications they thought most likely to benefit from AI. They were also prompted to pinpoint possible obstacles to such convergence. Here’s what they said:
Top applications
• Intelligent policy concierge.
• Upselling and cross-selling.
• Fraud detection.
• Tailored personal policies.
• Customer-centric communications.
Main obstacles
• Current IT installations are sometimes unable to support GenAI apps.
• Lack of regulatory clarity.
• Customer distrust.
• Poor quality data sources.
• Insufficient technology resources.
