The insurance industry has big ambitions for analytics but struggles to realize benefits as progress stalls

Rhea-AI Summary

WTW’s 2024 P&C Insurance Advanced Analytics Survey reveals that AI adoption in the insurance sector is accelerating, but significant challenges remain. Despite considerable investments, many North American P&C insurers are struggling to integrate advanced analytics into operations beyond pricing and underwriting.

49% of insurers are incorporating AI, but progress in other areas like claims and marketing is slow due to IT bottlenecks and difficulties translating analytics into business applications.

Leadership commitment is high with 86% of organizations showcasing strong support, but meaningful implementation is lacking. The survey emphasizes the need for robust technology solutions and a clear roadmap to harness AI's full potential.

Positive

• 49% of insurers are incorporating AI into their analytics processes.
• 86% of organizations show strong leadership commitment to analytics.
• The insurance industry is rapidly moving towards AI adoption.
• Agile, fit-for-purpose technology solutions exist and can deliver real business value when used appropriately.

Negative

• IT bottlenecks are the most significant impediment to increasing the use of analytics.
• Progress in implementing advanced analytics is significantly slower than expected.
• Considerable investments in technology have not translated into expected improvements.
• Many insurers struggle to integrate analytics into areas beyond pricing and underwriting.

Insights

Technology Analyst

The insurance industry's growing ambition for advanced analytics, particularly AI, reflects a critical juncture. Despite billions invested, progress lags due to IT bottlenecks and the challenge of aligning technology with business needs. This scenario underscores a key risk: investment without return. Companies must ensure a robust, flexible technological foundation to align with AI adoption. Key areas like claims processing and customer service can revolutionize with successful AI integration, offering efficiency and improved customer experience. However, the industry's failure to effectively deploy existing AI technologies like machine learning raises concerns about readiness to embrace more advanced AI. Investors should monitor how insurers address these tech obstacles and align their IT strategies with business goals.

Financial Analyst

From a financial perspective, the current scenario presents a blend of caution and opportunity. Significant investments into analytics and AI have not yet yielded expected returns, creating a potential overhang on financial performance. The survey indicates insurers acknowledge this gap, which may lead to more strategic investments and partnerships to bridge it. For the retail investor, the critical points to watch are cost management around these technologies and improvements in operational efficiency. Over the long term, successful integration of AI could lead to better risk assessment, pricing strategies and claims management, ultimately enhancing profitability. Yet, short-term financial performance might remain pressured if these challenges persist.

WTW’s latest P&C Insurance Advanced Analytics Survey shows AI adoption accelerating, but technology challenges threaten real progress.

ARLINGTON, Va., May 29, 2024 (GLOBE NEWSWIRE) -- According to a new survey result from WTW (Willis Towers Watson, NASDAQ: WTW), a leading global advisory, broking and solutions company, companies reveal slower than expected progress in their efforts to implement advanced analytics. Despite the scale of investment made by North American property and casualty (P&C) insurers, WTW’s 2024 P&C Insurance Advanced Analytics Survey highlights the challenges these companies face with data and analytics.

Insurers have long used analytics in pricing and underwriting, and only a few outliers remain today. However, traditional analytics is increasingly insufficient in these functions, with 49% of insurers saying they are incorporating AI into their analytics processes.

However, while AI is used more in pricing and underwriting, insurers struggle to integrate analytics into other areas of their organizations. The aspiration is present, with many insurers stating that they intend to incorporate analytics into different areas, including claims, marketing, distribution, and others, within the next two years. Nevertheless, considering the actual use of analytics over the last few years, the results demonstrate that progress has been significantly slower than initially hoped for and, in some cases, non-existent.

When asked about the most significant impediment to increasing the use of analytics in their organizations, the most frequent survey response was IT bottlenecks. Despite the considerable investment in technology over the last few years, this trend has deteriorated instead of demonstrating improvement. In addition to technology challenges, translating analytics needs into business realities was frequently cited in the survey as a driver behind the slow progress.

Laura Doddington, Head of Personal Lines, Insurance Consulting and Technology (ICT), North America, WTW, stated: “Insurers want to use analytics across their business - the ambition is there, but it’s not translating into reality. If insurers are to transform their aspirations into more tangible capabilities, they must ensure that the right foundations are in place. This requires technology solutions that allow for more sophisticated use of analytics across the organization, ultimately driving better decisions and a faster, more streamlined speed to market. Technology needs to move from a bottleneck to an enabler. This requires a robust roadmap and a clear translation from business needs to analytics and technology requirements. And this preparation cannot take years – insurers can’t afford to get left behind. However, the good news is that agile, fit-for-purpose technology solutions exist and, when utilized appropriately, can quickly deliver real business value.”

Regarding the increasing trend towards the use of AI, Lauren Finnis, Head of Commercial Lines, Insurance Consulting and Technology (ICT), North America, WTW, stated, “The use of AI is going to transform the insurance industry, resulting in better outcomes for both insurers and consumers. Areas such as Generative AI offer enormous potential to revolutionize our industry, and investment in innovation is important. To maximize value from this investment, ensuring that the right foundations are in place is critical to allow insurers to capitalize on the benefits this new technology can deliver. This includes a focus on infrastructure, governance, data, and, above all, on solving real business and customer needs. In addition, while companies are eager to implement the newest technological solutions, it is important to note that most companies are still not even close to realizing the full benefit of more traditional AI approaches such as machine learning. There are immediate and real gains to be realized by applying these techniques throughout the organization.”

The insurance industry is moving faster than ever, and those who can effectively activate analytics across their organizations will be in the strongest positions to respond. With 86% of organizations surveyed saying they have seen a strong leadership commitment to analytics, there are good intentions from the top. The winners will be those who can execute at pace and scale.

About the Survey

WTW’s 2024 Advanced Analytics Survey asked P&C insurers in the United States and Canada for their insights on using advanced analytics in insurance. Read the complete report here.

About Insurance Consulting and Technology

WTW’s Insurance Consulting and Technology business serves the insurance industry with a powerful combination of advisory services and leading-edge technology. Our mission is to innovate and transform insurance, and we deliver solutions that help clients better select, finance, and manage risk and capital.

We work with clients of all sizes globally, including most of the world’s leading insurance groups. Over 1,000 client companies use our specialist insurance software on six continents. With over 1,700 colleagues in 35 markets, we continually strive to be a partner and employer of choice to the insurance industry.

About WTW

At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk, and capital. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience, motivate their workforce, and maximize performance.

Working shoulder to shoulder with our clients, we uncover opportunities for sustainable success—and provide perspective that moves you. Learn more at wtwco.com.

Media Contact

Douglas Menelly, Public Relations Lead, North America
Douglas.Menelly@wtwco.com | +1 (516) 972 0380

Arnelle Sullivan, Public Relations Associate, North America
Arnelle.Sullivan@wtwco.com | +1 (718) 208-0474

FAQ

What are the main findings of the WTW 2024 P&C Insurance Advanced Analytics Survey?

The survey highlights that while AI adoption is accelerating, integrating advanced analytics into operations beyond pricing and underwriting remains a significant challenge for insurers.

What percentage of insurers are incorporating AI into their analytics processes?

49% of insurers are incorporating AI into their analytics processes, primarily in pricing and underwriting.

What are the biggest challenges insurers face with advanced analytics according to the WTW survey?

The biggest challenges include IT bottlenecks and difficulties in translating analytics needs into business realities.

How committed are insurance organizations to analytics?

According to the survey, 86% of organizations have shown strong leadership commitment to analytics.

What areas are insurers planning to integrate analytics into within the next two years?

Insurers plan to integrate analytics into claims, marketing, distribution, and other areas within the next two years.