AI & prescriptive analytics are drivers for $100bn+ new premium: Aon
Insurance and reinsurance broking group Aon believes that artificial intelligence and prescriptive analytics for automated decision-making could be drivers for the creation of over $100 billion of new insurance premiums.
They see prescriptive analytics as the largest insurance and reinsurance mega-trend opportunity of the moment, accounting for more than half of the $200 billion premium opportunity the broker sees across ten transformative industry trends it has identified in a new report.
Aon describes prescriptive analytics as the application of machine learning artificial intelligence and data influx to provide actionable insights, with the authority to make automatic decisions.
This has important implications for the insurance and reinsurance industry’s own operations, as well as for product opportunities.
Based on the overall artificial intelligence market as an indicator for prescriptive analytics, Aon sees potential gross written premium (GWP) linked to this as likely to exceed $100 billion by 2030.
“Increasing demand for data-driven decision-making and the adoption of big data and AI technologies are driving market growth, but the technology is still in initial stages of development. Re(Insurers) are focusing on greater operational efficiencies rather than developing specialized insurance products to protect against associated risks,” Aon explained.
However, this is also linked to multiple other trends, Aon cautions, saying that, “prescriptive analytics requires careful consideration and planning by re/insurers to seize the opportunity and mitigate the risk.”
Sherif Zakhary, CEO of Aon’s Strategy and Technology Group, commented on the range of trends that can drive insurance industry growth, “These megatrends each equate to risk and opportunity for the global insurance industry, and so as risk experts we cannot afford to sit on the sidelines and wait for these trends to crystalize. We have the technology and ability to anticipate the future landscape and develop innovative products and solutions to enable stakeholders to fulfill their biggest needs, from accessing new forms of capital to navigating emerging volatility. In order to accelerate this innovation, insurers must attract a broader range of talent and make use of cutting-edge technology, including advanced analytics.”
When it comes to artificial intelligence and specific uses in cases such as prescriptive analytics, the reinsurance and insurance-linked securities (ILS) community stand to benefit from improvements in risk selection, automation of portfolio management, improved hedging thanks to much better data insights and understanding of risk, as well as more efficient and effective use of capital as well..
Gaining the granular understanding of risk needed to confidently make automated decisions, when it comes to underwriting, portfolio management and optimisation, hedging and also trading in risks, can drive significant benefits for market participants, as well as returns for capital providers as well.
There is a lot to gain from the adoption of advanced technologies and in trying to quantify some of this Aon is helping to make clear the size of the opportunity for risk markets.
The new premium opportunity from covering the risks that emerge is just one side of this, as the additional premium income that can be extracted through more efficient and optimal ways of working could potentially be just as significant for reinsurance and ILS markets in years to come.
