McKinsey warns life insurance is blind to power of AI

McKinsey has warned the life insurance industry does not realise the full impact artificial intelligence (AI) will have on the sector. Its expert associate partner Nick Milinkovich believes AI will change how businesses are run and serve customers. Milinkovich spoke at the ProtectX4 event organised by Protection Review this morning. He deplored that life insurers have not adopted AI to the same extent as other industries did. He said: "We live fundamentally in a more digital world than we did just 18 months ago. "It means that while we have been able to pivot mostly all of our internal and customer facing processes onto some part of a digital backbone, it provides the foundation on which we can embed artificial intelligence more deeply into how we run our businesses." Milinkovich also found that consumers are now expecting more from life insurance firms. They are also looking to engage differently with the industry. He added that financial services and the retail industry had undergone a "much more fundamental" customer experience transformation. Milinkovich observed that there is a stronger willingness from customers to share more information than before with their insurance carrier. As a result, the amount of data available has increased exponentially. Research by McKinsey found almost every insurance carrier worldwide feel they are not getting the full value of their analytics investments. But most of insurance carriers are looking to invest more next year in analytics. "What we as an industry have yet to figure out is how to scale these investments and see the returns," said Milinkovich. McKinsey considers that there are reasons why there are leaders who have been able to separate themselves from the pack. The first reason is that they focus on a basket of use cases. This means they do not focus on only one part of the enterprise but on its entirety. They also look at a portfolio of AI related investments. Secondly, leaders are deeply embedding AI into the way that they run the business. They also rigorously track impact, so that they can prove value and fund further investments. The third point is that management teams are focusing on business problems and bringing the right set of people together to do that. Milinkovich said that they are fundamentally AI literate. It means they understand the power of AI and know how to use it. He said: "They have brought together the resources in a cross functional way to solve these problems beyond just the traditional silos that we see in most institutions.