While the vast majority (94%) of Canadian insurance professionals surveyed believe that artificial intelligence (AI) will transform the insurance industry, the jury is still out on whether carriers are receiving a return on investment from analytics yet.
Insurance Nexus released Tuesday the results of what it is calling “Canada’s first insurance analytics and AI survey,” a poll of 250 industry professionals. When asked if carriers have seen a return on investment from analytics yet, 12% responded that they are seeing a “healthy return,” while 24% said that they aren’t seeing a return yet. Thirty-six per cent said that they are beginning to see a return, 12% expected to see a return this year and 16% said that they might not see a return for over two years.
“The result highlighted a reality that a substantial proportion of companies have not seen ROI from analytics yet,” said Eugene Wen, Vice President of Group Advanced Analytics at Manulife Financial. “It deserves extra attention from all analytics executives.”
The survey findings mirror those of McKinsey & Company, which polled 1,000 global insurance executives and found that 85% reported that they didn’t think they were getting value from their investment. “There’s not really that many people who can point to their income statement and say, ‘Here, here and here is where we generated a huge uplift from the application of advanced analytics,’” said Nick Milinkovich, leader of the insurance analytics practice (Canada) at McKinsey & Company. “The reason why this is happening is [that] doing this is really hard,” Milinkovich said May 30 at Insurance-Canada.ca’s first Technology in Action seminar.
Insurance Nexus’ survey also asked Canadian carriers where they are in their analytics journey. The responses overlapped, with 53% responding “implementation, they are using analytics in some area,” 53% said “excelling, they are really advanced in analytics,” 24% said that they were in the strategy phase (just planning to make the first steps) and 5% said they are not ready to start analytics yet.
Among the other survey results:
When asked which core business function will see the biggest overall impact from advanced analytics, 36% said underwriting, followed by customer service (26%), marketing and distribution (14%), fraud (11%), claims (10%) and product development (3%).
In response to the question of which analytics tools are going to be the most transformative for insurance carriers, 38% said AI/machine learning/deep learning, followed by advanced/predictive analytics (34%), business/market intelligence (18%), robotics and automation (5%) and chatbots/virtual assistants (5%).
When asked what are the biggest challenges to the effective use of analytics, 32% said data quality, 28% legacy systems, 20% talent, 8% unstructured data, 6% data privacy and 6% garnering support at the highest level.
Most (64%) of Canadian carriers said that they were investing in AI and machine learning. For companies investing in it, 74% said that they plan to increase investments over the next six months.