InsurTech weekly - Benefiting from AI requires more than just embracing technology

_{Generative AI already revamping the insurance value chain}

The insurance industry faces a new reality: embrace genAI or be left behind. Insurance leaders are looking to emerging AI capabilities to reshape how they work. For instance, on AIG’s August 2024 earnings call, chairman and CEO Peter Zaffino highlighted an objective to use AI to “redesign and refine the end-to-end underwriting workflow.” The industry’s opportunity in generative AI centers on increasing decision-making capabilities and operational speed, from improving quote-to-bind ratio to offering real-time guidance for employees. Two forces drive the opportunity: tech advances across the broader genAI ecosystem; and a wealth of unstructured data within the insurance industry.

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_{Walmart's initiative in the payment industry}

Walmart will launch a Pay by Bank offering. Customers will be able to pay instantly when shopping online. They're most impacted by cost out of almost anyone. Walmart is one of the world's largest merchants. Its business operates on tiny margins, and its whole brand is about price. Any cost they can remove goes directly to the bottom line. They've got a track record of launching finance products. Historically, merchants launched their own credit cards and even tried countless times to get decoupled debit (a card that uses ACH) to work. Walmart also has an extensive portfolio of wallets, co-brand cards, and initiatives.

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_{The technology landscape is all about AI}

In 2024, the technology sector moved firmly into the AI phase of computing. Cloud service providers, enterprises, and technology vendors are spending more on AI than ever, and adoption rates are high. But skeptics are wary of AI’s return on investment. What explains the dissonance? Our work (Bain & Company) with clients suggests that AI, more than other technology disruptions, generates little value from deployment alone. Creating value with AI requires changes in the working processes of hundreds or thousands of employees. Companies need to conduct business diagnostics, redesign processes, set targets, and manage change as they deploy this technology. But early proof points from our client work are encouraging, showing that generative AI initiatives could be worth up to 20% of EBITDA.

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