Insurance firms bet big on AI, but human touch remains in high demand

A hot potato: Despite the increasing costs of generative AI investments, companies are still scrambling with the potentially disruptive effects of the new algorithmic paradigm. Enterprise-class executives are more than willing to bet on AI agents, but clients aren't always thrilled about dealing with them.

IBM recently shared some notable research regarding the current state of generative AI and its implementation in the insurance industry. Big Blue said there is an apparent "disconnect" between insurance companies' priorities and their customers. However, many consider AI technology essential to keep revenue flowing.

The study involved 1,000 insurance c-suite executives in 23 countries and 4,700 insurance customers in nine countries. Opinions among chief executives are almost evenly divided on generative AI outcomes, with 49 percent of the surveyed industry leaders seeing the technology as a risk and 51 percent considering it an opportunity.

Seventy-seven percent of executives surveyed said their businesses need generative AI to keep up with their competitors. Investments in AI technology are expected to grow by over 300 percent between 2023 and 2025. Pilot projects are now being implemented in production environments, although business leaders could face a challenging relationship with clients after spamming their carefully trained AI algorithms everywhere.

Only a modest 29 percent of insurance customers felt comfortable dealing with AI-powered virtual support, and even fewer people (26 percent) trusted the reliability of their answers. Big Blue still thinks generative AI is good for business, with advanced algorithmic capabilities improving revenue prospects by up to 14 percent.

However, the AI bubble could eventually burst, bringing chaos and disruption to Wall Street, a situation many CEOs might welcome, as generative AI has shown to be better at doing their job than they are. IBM has a few recommendations for enterprise clients, although it is likely more interested in selling its AI and cloud solutions than anything else.

IBM says insurance companies should use generative AI to build "more tailored" products that are flexible and linked to realistic risk data. They must also address the trust issue, ensuring that their AI behaves ethically and giving local (human) experts the ability to connect the algorithm to the insurance value chain is paramount.