A recent IDC report, entitled ‘FutureScape: Worldwide Insurance 2024 Predictions’, predicted that by 2027, 40% of AI algorithms utilised by insurers throughout the policyholder value-chain will use synthetic data to guarantee fairness within the system and comply with regulations.
This integration of AI spans from underwriting to marketing and claims-handling. However, concerns about privacy and bias require insurers to develop guidelines aligning with evolving regulations like the European Union AI Act to ensure compliance, address biases, and enhance transparency.
According to IDC’s 2022 AI Strategies Buyer View Survey, 18% of enterprises are integrating synthetic data, notably in addressing privacy regulations and facilitating secure data exchange in insurance services.
Synthetic data is an emerging solution that mirrors real-world scenarios while protecting privacy. Advances in generative AI (GenAI) enhance accuracy, making it valuable for AI models. Its benefits include privacy preservation, unbiased risk assessments, and cost-effectiveness. IDC’s AI-driven IDC predictions for 2024 and beyond are:
- AI Empowered Sales: By 2027, GenAI-based advisor enablement tools will lead to a 5% spike in distribution sales-volume and a 10% boost in sales-RoI by delivering personalised and empathetic engagement at-scale.
- Outcome Optimisation: By 2025, insurtech market consolidation drives outcome-based pricing adoption by 15% of tier 1 and 10% of tier 2 insurers, enhancing value-driven partnerships and efficiency.
- Accelerating Insurer Digitalisation: By 2024, 25% of insurers will increase investments in external app development services, positively impacting digital monetisation models and increasing the share of digital revenues by 10%.
Insurance enterprises are increasingly integrating GenAI-powered synthetic data to enhance AI accuracy while safeguarding privacy. This aligns with broader trends in AI empowerment in sales and outcome optimisation. Insurtech consolidation drives outcome-based pricing adoption, fostering efficiency and partnerships. Meanwhile, insurers are increasing investments in external app development to bolster digitalisation and revenue streams.
Various innovations are reshaping the landscape of insurance: embedded payments in property and casualty insurance; collaboration between health insurers and telehealth providers; insurers adopting sovereign public cloud solutions; and auto-insurers adopting claims process digital twins:
- Embedded payments: By 2024, embedded payments in property and casualty (P&C) insurance will cut operational costs by 12% and streamline payments collection and reconciliation for policy bounding, renewals, and claims settlement.
- Protection gap: By 2025, bridging the ‘silver-economy’ protection gap will lead 30% of health insurers to collaborate with telehealth providers, offering wider access to personalised and preventative care.
- Sovereign cloud solution: By 2026, as public cloud is given priority for modernising agent-producer relationship systems, 15% of insurers will adopt sovereign solutions to foster regulatory compliance.
- Auto insurance transformation: By 2029, 30% of auto insurers adopting claims process digital twins will prioritise accident recreation underlying capabilities to reduce 20% of casualty claims adjustment expenses and fraud losses.
A significant transformation is expected in the Asia/Pacific auto insurance market, with insurers planning to increase their investment in trusted data exchange technologies. This strategic move aims to position insurers as preferred partners for OEMs in bundling insurance with vehicles. IDC predicts that through trusted data exchanges, by 2028, 40% of auto insurers will spend 10% more on trusted data exchange technologies to become preferred partners of OEMs bundling insurance, increasing auto coverage revenues and IP monetisation.