Your Cognitive Future in the Insurance Industry

©2015 IBM Corporation1 May 3, 2023

Your cognitive future in the insurance industryUnderstanding customers and risk

©2015 IBM Corporation2

The insurance industry is facing a broad range of disruptive forces

Rapid digitization

Rising customer expectations

Economic environment

Sophisticated fraud

Digitization is creating new modes of interaction and unprecedented connectedness, with increases in unstructured data from disparate sources

The new generation of customer expects individualization, responsiveness, integration and seamless experiences1

Economic volatility and a challenging investment environment is adversely affecting the insurance sector and eroding profit margins

Incidence, sophistication and severity of fraud is increasing

Changing demographicsBaby boomers are nearing retirement and millennials are impacting business across the board, from products to interactions

$

Source: IBM Institute for Business Value Analysis 2015


To navigate these forces, successful insurers need to excel in the three pursuits Engage, Discover and Decide

Engage DecideDiscover

Outperformers are 65% more competent in customer

engagement than underperformers

66% more outperformers are strong in decision making

50% Outperformers

13% Underperformers

285% more outperformers make innovation a major priority

Source: IBM Institute for Business Value Analysis 2015

66% Outperformers

40% Underperformers

68% Outperformers

41% Underperformers


Customers demand speed, transparency and personal interaction – but many insurers struggle to meet it

…of insurance CXOs agree customers demand more personalized experiences

Engage

Industry need1

Major areas in which insurers are not competent enough in delivering customer service

Achievement gap2

How can insurers engage customers better, faster and more personalized?The key question

Personalized experience

Self service

Addressing concerns with speed

53%

56%

63%

72%


Insurers have limited capability in innovation and struggle to translate insight into innovation

… of insurance CXOs are actively pursuing industry model innovation

Discover

Industry need Achievement gap

Key roadblocks to pursuing disruptive innovation

Insufficient business case/ modelling skills

Insufficient buy-in from management

Insufficient skilled resources

Customers reservations to new possibilities

65%

52%

52%

51%

50%

How can insurers free themselves from the contraints of traditional capabilities and foster innovation?

The key question


Insurance executives lack confidence in making strategic and cost reduction decisions

Decide

Industry need Achievement gap

… of insurance executives are not

confident in taking cost reduction decisions

⅔… of insurance executives are not confident in taking

strategic business decisions

15

21

13

51

17

23

14

46

+12%

+13%

+7%

-10%

Control

Decision support

Management

Transaction

Comparison of maturity levels for Insurance finance and actuarial groups

FSS BAO Level 3

FSS BAO Level 4&5

What capabilities can help insurers make correct and timely decisions efficiently?The key question


Cognitive computing can provide a foundation for insurers to overcome these challenges

Engage DecideDiscover

Acts as a tireless agent providing expert assistance to human users

Carries a conversation naturally, e.g. in human language

Understands consumers from past history and enriches interactions with context- and evidence-based reasoning

Helps people discover insights far above human levels

Finds insights and connections, understands the vast amounts of information available

Visualizes possibilities and validates theories like experts

Offers evidence-based recommendations

Evolves continually towards more accuracy based on new information, outcomes, and actions

Provides traceability to audit why a particular decision is made


Insurance executives believe cognitive computing will disrupt the insurance industry – and they plan to make cognitive investments

85%… of insurance executives believe cognitive computing will play a critical role in the future of their business1

Most insurance executives say they plan to invest in it2

Sources: IBM Institute for Business Value Cognitive Computing Survey (Q22,Q23) 2015, Insurance data

… of insurance executives believe that it will play a disruptive role in the insurance industry 1

98%

1-2yrs 3-4 yrs >= 5 yrs0%

10%20%30%40%50%60%

13%

28%

55%


To learn how your organization can use cognitive computing to open up opportunities in the insurance industry, please contact:

Visit our website to read full report on this topic:

ibm.biz/cognitiveinsuranceibv

Contact study authors

Craig BedellGlobal Insurance ExecutiveIBM Sales & [email protected]

Christian BieckGlobal Insurance LeaderIBM Institute for Business [email protected]

John FranzisInsurance Industry LeaderIBM’s Watson [email protected]

Anthony MarshallResearch Director and Strategy LeaderIBM Institute for Business [email protected]

Dr. Sandipan SarkarCognitive Computing LeaderIBM Institute for Business [email protected]

http://ibm.biz/cognitiveinsuranceibv

http://ibm.biz/cognitiveinsuranceibv

Your Cognitive Future in the Insurance Industry

Technology

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