A new research report from Information Services Group (ISG) highlights how an unpredictable global environment, combined with the rise of AI and intelligent technologies, is reshaping the risk landscape and altering the dynamics between insurers, clients, and regulators in Europe. According to the 2024 ISG Provider Lens™ Insurance Services report, AI-powered tools are revolutionizing the insurance value chain, providing solutions to both existing and emerging challenges. Insurers are increasingly adopting these tools to streamline operations, enhance service delivery, and comply with evolving regulations.
The Evolving Risk Landscape
“The residual effects of COVID-19 and the ongoing global climate crisis are rapidly evolving the risk landscape and disrupting traditional actuarial models,” said Thorsten Stüwe, EMEA director, ISG Insurance. These factors are influencing not only the actuarial models but also the affordability and consumer demand for insurance products. Insurers must now assess how these forces will impact their strategy moving forward, especially as consumers and businesses adjust their spending on insurance.
AI’s Transformative Role in Insurance
AI has evolved from a speculative concept to a transformative force in the insurance industry. New applications, including data-driven agent profiling, predictive health analytics, and advanced fraud detection, are fundamentally reshaping how insurance companies operate. Service providers are focusing on delivering more specialized solutions that meet the increasing demand for personalization. These technologies, particularly AI/ML, are enhancing various areas of insurance, including claims processing, policy administration, and customer service.
Data-Driven Decision Making & Digitization
For the European insurance market, service providers are focusing on data-driven decision-making and predictive analytics to enhance operations. This shift toward digital transformation is particularly evident in how insurers are optimizing their business process outsourcing (BPO) to improve the customer experience throughout the entire insurance service lifecycle. The adoption of these advanced technologies is essential to keeping up with the rapidly changing market.
Expanding IT Outsourcing Services
While managed services and application data management remain core components of IT budgets in the insurance sector, the ISG report also notes that IT outsourcing providers are expanding their portfolios. They are incorporating system integration, IT advisory services, and business consulting, leveraging cutting-edge digital technologies such as conversational AI to improve customer engagement and drive value in the industry.
Customer Experience & Innovation as Competitive Differentiators
“Customer experience and innovation have become key competitive differentiators in the insurance industry,” said Jan Erik Aase, partner and global leader of ISG Provider Lens Research. Insurers that partner strategically with providers offering next-generation technologies and innovative business processes can position themselves for cost-effective and sustainable growth.
Building AI Capabilities
The report also emphasizes the need for insurance leaders to evaluate their organizational posture thoroughly. To effectively capitalize on AI’s potential, insurers should establish scalable AI infrastructures, encourage collaboration between data science and actuarial teams, and maintain a culture of continuous innovation. By adopting these measures, insurers can harness the full power of AI to stay competitive and drive future growth.
