Insurance: Customer Service in the Age of AI

As inflation intensifies and policyholders demand greater transparency, a recent study by the Capgemini Research Institute highlights the critical challenges facing the property and casualty insurance (P&C) sector. 

The report on property and casualty insurance (World Property and Casualty Insurance Report 2024) highlights the limitations of insurers' underwriting capacity, which is hampered by organizational constraints.

Only 8% of insurers are considered “pioneers” in underwriting, fully leveraging AI and automation to make informed decisions. Yet 62% of executives acknowledge that AI improves the quality of underwriting and reduces fraud.
 

Improving the customer experience while tackling new challenges

In response to inflation, 27% of policyholders have switched insurers to get lower premiums and more comprehensive coverage. They are also calling for greater transparency, with 42% finding the current application process complex and time-consuming. 

Despite the increase in premiums, insurers posted losses, with combined ratios exceeding 100 percent, due to natural disasters, cyber threats, and regulatory complexity.
 

Organizational Barriers

Industry leaders cite major organizational challenges: insufficient access to data (54%), outdated technology systems (51%), and a shortage of skilled talent (47%). Adam Denninger, head of the insurance sector at Capgemini, emphasizes the need to modernize core systems and deploy advanced technologies to improve performance and transparency.
 

Build trust among subscribers

Although executives view AI as a way to improve underwriting and reduce fraud, only 43% of underwriters trust automated recommendations. This hesitation stems from perceived complexity (67%) and concerns about data integrity (59%). The solution would be to involve underwriters from the very beginning of model development, keeping a "human in the loop" to ensure that AI models are explainable and transparent.
 

The Need for Effective Use of Secure Data

Although 83% of property and casualty insurers recognize the importance of predictive models, only 27% have the necessary advanced capabilities. The gaps between the importance of different data sources and insurers’ ability to process them are striking. Globally, 53% of policyholders are concerned about the collection of personal data, but nearly two-thirds are willing to share more data in exchange for greater transparency and preferential rates, provided that the information is secure.

Property and casualty insurers face the challenge of meeting policyholders’ data expectations. For example, 49% of policyholders value data from drones, but few insurers can process it effectively. Similarly, one in two policyholders wants real-time data from connected devices, but only 12% of insurers can capture it effectively.

According to Capgemini experts, the lack of data control hinders insurers' core business, as 77% of them do not fully assess risks, leading to inaccurate pricing and long-term solvency issues.