AI is revolutionizing the reinsurance sector by enhancing risk assessment, claims analysis, and pricing models to improve operational efficiency and profitability.
Artificial Intelligence (AI) has become a widely discussed topic across industries. While its transformative potential is evident, the reinsurance industry, historically conservative and risk-averse, has been slower to adopt new technologies, including AI.
This cautious approach is influenced by several factors: Legacy systems often lack the capability to integrate AI-driven features, while face-to-face interactions remain a cornerstone of reinsurance’s B2B environment. The industry's highly regulated nature, coupled with risk-averse corporate cultures, further complicates adoption. Many organizations also lack a clear understanding of AI’s potential benefits, leading to hesitancy in embracing change.
Despite these barriers, the rise of digital technologies is disrupting traditional models in reinsurance, bringing opportunities and challenges. The primary limitation to fully leveraging AI is not technology but experience. AI and machine learning (ML) systems require vast amounts of data to learn and improve. While the algorithms and infrastructure are already available, the industry is only beginning to feed these models with the necessary information.
To gain competitive edges, companies must incorporate the right technology, skilled personnel, and a core platform capable of integrating AI. Such an approach ensures organizations can effectively harness and act on insights generated by AI-driven tools.
AI’s initial adoption has been more apparent in B2C models, but its potential in the B2B reinsurance space is increasingly evident. The Lloyd’s insurance market, long known for its traditional people-and-paper operations, has recently embarked on a phased digital transformation of its re/insurance processes, highlighting a broader shift within the industry. AI-driven tools can significantly enhance productivity and accuracy by analyzing large volumes of data efficiently. For example, these tools can:
- Streamline risk assessment: Improve underwriting decisions through data-driven insights and analysis of the current risk profile as well as the past performance.
- Enhance claims analysis: Generate snapshot reports from loss adjuster documentation to accelerate claims processing.
- Refine pricing models: Predict losses using historical trends as well as the current market trends, weather data, location, and seasonality, enabling more accurate pricing.
- Analyze unstructured documents: Summarize complex reports to support better-informed underwriting decisions.
By automating and optimizing these processes, AI reduces operating costs and enhances profitability and efficiency, creating a sustainable competitive advantage.
A recent McKinsey survey of leaders from the largest European insurers revealed more than half believe generative AI (Gen AI) could drive a 10–20 percent improvement in productivity, along with a 1.5–3 percentage point increase in premium growth and technical results.
In claims management, a recent analysis by BCG highlights even more promising opportunities. Gen AI adoption could reduce claims payouts by 3–4 percent through improved damage assessment accuracy and enhanced fraud detection and prevention. Additionally, it has the potential to cut loss-adjustment expenses by as much as 20–30 percent, unlocking significant cost-saving and operational efficiencies. While these statistics specifically address the insurance industry, similar transformative benefits can be expected in reinsurance, as well.
At msg global we remain at the forefront of technological advancements, integrating AI into our SAP S/4HANA Insurance for Reinsurance Management system. Our AI-based solutions are designed to bring measurable value to our clients, helping them improve operational efficiency and profitability. We have a dedicated AI and advanced analytics team whose mission is to harness the power of AI to deliver value for msg global and our clients. Through strategic collaborations with innovative startups and world-renowned academic institutions such as Harvard Business School, the University of St. Gallen, and MIT, our team is leading innovation and driving transformation in the industry.
If you are interested in learning how AI can transform your reinsurance operations, reach out to us, we would be glad to share how our solutions can make a difference for your business.
