The landscape of insurance is poised for significant transformations as artificial intelligence (AI) continues to emerge as a leading technology driving innovation and efficiencies within the industry. A recent survey by Digital Insurance, which included 120 leaders and staff from various segments of the insurance sector, indicated that a substantial 78% of respondents plan to increase their budgets for technology spending in 2025. Among these innovations, AI stands out prominently as the top priority, receiving approximately 36% of the focus from industry experts, followed closely by big data and analytics at 28%, and cloud and digital infrastructure, which garnered 26%.
Despite the promising prospects of AI, the survey revealed that many organisations remain in the exploratory phase regarding generative AI adoption. Specifically, 30% of professionals within insurance carriers and 41% in agencies or third-party firms reported still in the early stages of delving into the technology. In contrast, about 37% of experts in the health insurance sector indicated their firms already have generative AI tools in full production. Abhishek Mittal, a vice president at Wolters Kluwer Financial & Corporate Compliance, highlighted a common pitfall for organisations attempting to implement AI across the board without a nuanced understanding of its applications, emphasising that "application AI should be prioritised in areas where there is a large set of transactions and content, feedback loops, and repetitive tasks with limited subjectivity."
The complexities of AI's role are particularly evident in claim determination processes. A notable instance is a class-action lawsuit filed against UnitedHealthcare in 2023, alleging that the company utilized AI to wrongfully deny care to elderly patients under Medicare Advantage Plans. Optum, a subsidiary of UnitedHealthcare, responded by clarifying that their naviHealth predict tool is designed not to make coverage determinations, but to guide providers in understanding patient needs. However, additional insights from a U.S. Senate report revealed a significant rise in denial rates—from 10.9% to 22.7%—during 2020 to 2022, correlating with UnitedHealthcare's exploration of AI for prior authorisation of post-acute care claims. The company stated that over 90% of medical claims are approved upon submission, asserting that only a small fraction requires further review due to medical reasons.
Looking towards 2025, AI-driven predictive care is anticipated to take precedence in health technology trends. Gary Coffey, chief technology officer at Spectrum.life, noted that the integration of predictive insights will revolutionise the way raw data is transformed into actionable information for healthcare providers and insurers, marking a significant shift from traditional reactive models to proactive, user-focused strategies.
In the startup realm, Nakita Devlin launched Ric, a parametric insurance firm, in response to a perceived deficit in catastrophe coverage. Drawing from her extensive industry experience, Devlin's firm targets specific risks like rainfall and flooding, demonstrating the evolving needs within the insurance landscape.
The complexity of AI adoption continues to rise, and experts suggest that establishing clear guidelines can bridge the gap between technological innovation and practical application. According to Raj Mohanty, a managing principal at Capco, AI and automation are redefining the industry by streamlining operations and enhancing decision-making processes, although these advancements may also affect traditional roles.
Moreover, Mark de Waal, head of premium audit at Davies, discussed the evolution of audit processes facilitated by AI, enabling professionals to navigate vast data sets more effectively. This reflects a broader trend where AI is not only poised to clarify underwriting risks but also to counteract the rise of "nuclear verdicts"—court awards exceeding $10 million that can be significantly influenced by AI usage among plaintiffs.
As the insurance sector heads into 2025, the interplay between AI technologies and traditional business practices is set to alter the operational dynamics, necessitating a careful balancing act of integrating innovation while managing inherent risks.
Source: Noah Wire Services