Aon, a broker for insurance and reinsurance, predicts that automated decision-making enabled by artificial intelligence and prescriptive analytics will generate over $100 billion in additional insurance premiums.
More than half of the $200 billion premium opportunity the broker sees across the ten revolutionary industry trends it has identified in a new research are accounted for by prescriptive analytics, according to them, making it the largest insurance and reinsurance mega-trend opportunity at the time.
Prescriptive analytics, according to Aon, is the use of artificial intelligence, machine learning, and data flood to offer actionable insights and the capability to make prompt judgments.
This has significant effects on both product opportunities and the operations of the insurance and reinsurance business.
Aon estimates that the potential gross written premium (GWP) associated with prescriptive analytics will likely approach $100 billion by 2030 based on the artificial intelligence market as a whole as an indicator.
The market is expanding as a result of rising demand for data-driven decision-making and the adoption of big data and AI technologies, but the technology is still in its infancy. Re(Insurers) are putting more emphasis on improving operational effectiveness than they are on creating specific insurance products to guard against related risks, according to Aon.
Aon warns that while this is related to many other trends, “prescriptive analytics requires careful consideration and planning by re/insurers to seize the opportunity and mitigate the risk.”
The CEO of Aon’s Strategy and Technology Group, Sherif Zakhary, offered his thoughts on the various themes that could spur the expansion of the insurance sector. “As risk specialists, we cannot afford to wait for these megatrends to materialize because they all represent risk and opportunity for the global insurance sector. We have the know-how and capacity to foresee the terrain of the future and create novel products and solutions to help stakeholders meet their most pressing demands, from gaining access to new sources of financing to navigating increasing volatility. Insurers need to employ cutting-edge technologies, like as advanced analytics, and a wider range of expertise to speed up this innovation.
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.
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