Generative AI is expected to be transformative for the specialty and reinsurance sectors, according to a new report by Oxbow Partners, but are industries prepared for its effects?
In a report titled “Generative AI: The Opportunity for Specialty Insurers and Reinsurers,” Oxbow Partners conducted interviews with senior leaders from 22 of the world's largest insurers and specialty players.
Key findings indicate that generative AI (Gen AI) is expected to be “very transformational” over the next five years, with 19 out of 22 respondents rating its long-term potential as at least 7 out of 10.
However, insurers are still in the early stages of their AI journeys, with even the most advanced carriers only building “strategic foundations.”
A significant barrier to Gen AI adoption is the prioritization of other strategic objectives, cited by 80% of respondents. As a result, many carriers are adopting a “wait and see” approach, making some investments in foundational capabilities while monitoring industry progress.
The report identifies various use cases for Gen AI, including increasing efficiency, extending or enriching existing activities, and substituting current ways of working. Notably, 62% of carriers have implemented or are developing internal chatbots, and querying large datasets is the most mentioned use case.
Incumbent carriers, meanwhile, are focusing on expense ratio opportunities, while newer players are targeting loss ratio opportunities.
Despite the potential, carriers feel unprepared to integrate Gen AI across their operating models, with an average readiness score of 5.2 out of 10. Leadership is seen as a strength, with an average score of 6.3 out of 10. Executives are enthusiastic about Gen AI, but seek proven benefits before fully committing.
The talent gap is revealed to be the biggest concern, with an average score of 4.4 out of 10. To address this, some companies are using third parties, adjusting recruitment strategies, and training teams internally.
Governance is also recognized as essential, with clear executive ownership and senior leadership buy-in. However, there is concern that governance could become an "inhibitor instead of an enabler."
“The report backs up our hypothesis that Gen AI will be truly transformative for the industry. However, there is a lot of foundational work that must be done,” said Miqdaad Versi, partner and head of Gen AI at Oxbow Partners. “Executive teams need to create a deliberate strategy for AI and Gen AI, consider how to set AI and Gen AI up in the business, and consider the AI and Gen AI angle on carriers’ transformation agendas and short-term priorities. We believe executives should think big, even if they are not yet ready to make the leap.”
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