40% of insurers to use synthetic data in AI for fairness, compliance by 2027

Due to regulations surrounding artificial intelligence, by 2027, 40% of AI algorithms utilized by insurers throughout the policyholder value chain will utilize synthetic data to guarantee fairness within the system and comply with regulations, according to IDC.

As per IDC’s 2022 AI Strategies Buyer View Survey, around 18% of enterprises are integrating synthetic data, notably in addressing privacy regulations and facilitating secure data exchange in insurance services.

Synthetic data is an emerging solution that mirrors real-world scenarios while protecting privacy. Advances in GenAI enhance accuracy, making it valuable for AI models. Its benefits include privacy preservation, unbiased risk assessments, and cost-effectiveness. These are the AI-driven IDC predictions for 2024 and beyond:

• AI Empowered Sales: By 2027, generative AI (GenAI)-based advisor enablement tools will lead to a 5% spike in distribution sales volume and a 10% boost in sales ROI by delivering personalized and empathetic engagement at scale.
• Outcome Optimization: By 2025, insurtech market consolidation drives outcome-based pricing adoption by 15% of tier 1 and 10% of tier 2 insurers, enhancing value-driven partnerships and efficiency.
• Accelerating Insurer Digitalization: By 2024, 25% of insurers will increase investments in external app development services, positively impacting digital monetization models and increasing the share of digital revenues by 10%.

Insurance enterprises are increasingly integrating GenAI-powered synthetic data to enhance AI accuracy while safeguarding privacy. This aligns with broader trends in AI empowerment in sales and outcome optimization. Insurtech consolidation drives outcome-based pricing adoption, fostering efficiency and partnerships. Meanwhile, insurers are increasing investments in external app development to bolster digitalization and revenue streams.

Various innovations are reshaping the landscape of insurance: embedded payments in property and casualty insurance; collaboration between health insurers and telehealth providers; insurers adopting sovereign public cloud solutions; and auto insurers adopting claims process digital twins:

• Embedded payments: By 2024, embedded payments in property and casualty (P&C) insurance will cut operational costs by 12% and streamline payments collection and reconciliation for policy bounding, renewals, and claims settlement.
• Protection gap: By 2025, bridging the silver economy protection gap will lead 30% of health insurers to collaborate with telehealth providers, offering wider access to personalized and preventative care.
• Sovereign cloud solution: By 2026, as public cloud is given priority for modernizing agent-producer relationship systems, 15% of insurers will adopt sovereign solutions to foster regulatory compliance.
• Auto insurance transformation: By 2029, 30% of auto insurers adopting claims process digital twins will prioritize accident recreation underlying capabilities to reduce 20% of casualty claims adjustment expenses and fraud losses.

A significant transformation is expected in the Asia/Pacific auto insurance market, with insurers planning to increase their investment in trusted data exchange technologies. This strategic move aims to position insurers as preferred partners for Original Equipment Manufacturers (OEMs) in bundling insurance with vehicles. IDC predicts that through trusted data exchanges, by 2028, 40% of auto insurers will spend 10% more on trusted data exchange technologies to become preferred partners of OEMs bundling insurance, increasing auto coverage revenues and IP monetization.

“Across various sectors, AI is revolutionizing processes and driving transformative changes. In the insurance industry, AI adoption is reshaping operations, from enhancing risk assessment with synthetic data to optimizing sales through generative AI-based tools,” says Surya Narayan Saha, Research Manager, Financial Insights, IDC Asia/Pacific.

“Integrating AI with emerging technologies like trusted data exchange and digital twins promises significant advancements, such as improved customer experiences and reduced operational costs. As AI becomes ubiquitous, businesses are leveraging its capabilities to innovate and stay ahead in the competitive landscape,” ends Saha.

Each year, IDC releases its top technology predictions at worldwide, regional and country level through its IDC FutureScape R eports and gives a crystal ball view of what is ahead for the rapidly changing IT industry. These predictions have been used to shape the strategies and business objectives of technology leaders and business executives in the next 1-5 years. All the predictions stated here cover Asia/Pacific implications. IDC