Artificial Intelligence

The financial services (FS) sector, as a whole, and insurers in the Netherlands have undergone significant transformations in recent years, with the rapid adoption of digital technologies being a major driving force. Artificial Intelligence (AI) has been used within insurance already for quite some time. AI developments has democratized the intelligence and emerged as a particularly disruptive technology that has the potential to revolutionize the industry, thereby offering new insights into customer behavior, risk management, and fraud detection, among other things.

By now, most insurers have at least experimented with AI over the past year, and many are moving beyond implementation of initial use cases. Therein, the most favorite use case has been a tailored company version of ChatGPT for efficiency and productivity gains. The majority of Dutch insurers expect that AI will drastically change their industry within the next three years. The current focus is on improving operations, thereby making things better, faster, and cheaper. The emphasis of its impact has not yet been on how it may change other industry dynamics, such as new market entrants, society, or the influence on other sectors such as (big)tech. All these dynamics and more will have an impact on changing customer behavior and interaction. In general, in terms of what is expected in the short run, AI will increase productivity, create better and faster insights, increase personalized communication, stimulate growth of existing businesses, and help launch new products, services as well as business models.

Insurers demonstrate a good understanding of the risks associated with (generative) AI. Insurers indicate that the Data Ethics Framework adopted by the industry three years ago, through the Dutch Association of Insurers, has helped them to formalize their own controls and guardrails in this area. Insurers have developed a clear understanding of their responsibility when it comes to adopting this technology and therefore, value responsibility over speed.

However, although insurers expect AI to drastically disrupt the industry within the next three years, not all of them are ready for what is next in that realm as many organizations still lag behind in their digital landscape journey. This is also reflected in the way in which some organizations handle AI as an integrated solution within their organization while others only deal with stand-alone AI use cases. Insurers that have a higher digital maturity view AI investments as an integral part of their digitization efforts, whereas organizations with a lower digital maturity do not have AI as part of their integrated strategic vision. This may widen the performance gap between insurers going forward as value from AI is expected to be exponential, not linear. As a result, many insurers with a lower digital maturity should feel incentivized to double down on their digital transformations, as prior to that, they would need to finalize their cloud transformation, improve data quality and accessibility, scaled agile changeability as well as their digital and data capabilities.

Eventually, organizations may need to go back to the drawing board as AI may fundamentally change the way organizations operate from front to end (i.e., their operating models). AI brings a lot of opportunities and value potential, but also risks. A gameplan is essential to properly embed AI within all layers of the organization from strategy to operations. Having the right strategy is not only key to achieving a positive return on investment in AI, but it can also help organizations differentiate themselves from competitors by reshaping their target operating model, and redefining roles and structures.