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.

The global life insurance industry has seen significant changes over the past decade. Developing economies--predominantly emerging markets in Asia that were formerly small contributors--have become global growth drivers and now account for more than half of global premium growth (Exhibit 1) and 84 percent of individual annuities growth (Exhibit 2). The availability of data has skyrocketed, and insurers have made progress in advanced analytics and artificial intelligence. Digital and mobile advances have raised the bar on transparency and service quality: customers can now file claims and access agents, insurance quotes, and policy information with a few taps on a screen. The past decade has also introduced new challenges. Life insurers have not benefitted from the bull market (Exhibit 3). Global penetration fell to 3 percent, and premium growth within most developed markets, hovering just below 2 percent per year, struggled to match GDP.

Medical information and data has grown exponentially in recent years, posing new challenges for life insurance underwriting. With often voluminous medical histories to assess risk, the process can take an inordinate amount of time. Applicants can end up frustrated, dropping out of the application process and seeking other alternatives, perhaps with competitors, in search of a quicker turnaround. In response, insurers are turning to natural language processing – a more focused implementation of conversational AI – to assist with sifting through massive amounts of medical documentation to identify and even assess mortality risk. The benefits are manifold: not only does this result in an accelerated and accurate new business underwriting process, but it's also a way to create a quality data set for improved predictive underwriting.

When it comes to insurance, an industry rich in data but a laggard in digitization, a software-as-a-service startup founded by former MetLife Global CIO Gary Hoberman believes a solution is at hand. Looking to establish accountability across disparate project teams? Trying to automate processes or allow for lean methodology support? Hoping to enable business consequence modeling or real-time reporting? If you answered'yes' to any of these questions, then you need to download this comprehensive, 68-page PDF guide on selecting, managing, and tracking IT projects for superior service delivery.

This story was delivered to BI Intelligence "Fintech Briefing" subscribers. To learn more and subscribe, please click here. Insurtech continues to be an active segment of fintech, with startups emerging in all areas of the industry, including within the life insurance space. One such insurtech, Israeli firm Atidot, is now bolstering its capabilities, announcing the launch of its cloud-based, predictive data analytics platform for incumbent life insurers on Wednesday, according to a press release seen by BI Intelligence. Atidot says its platform can help life insurers better leverage their data to more accurately predict their policyholders' behavior, and adjust their business strategies more effectively.