MUNICH, GERMANY – Media OutReach – Forrester’s “Predictions 2025: Insurance” explains the increasingly changing world of insurance and how insurers would necessarily have to undergo digital transformation in order to compete within the market. Central to the findings in this report is a strong focus on AI as a golden key for insurers. While its potential is well-understood across other sectors, there has been poor full-scale adoption in insurance due to many significant hurdles. The report puts across that despite obstacles, AI would be inescapable in improving customer relations, fine-tuning underwriting, and efficient processing of claims. But Forrester has a warning for insurers: less than five percent of them actually benefit directly and tangibly from AI by the year 2025. Quite a wake-up call for companies probably too dependent on the charm of AI sans a well-framed and effective strategy for implementation and integration.
One of the key reasons AI has not succeeded in insurance is the strongly entrenched legacy systems existing in the industry. For many insurers, such forms of systems inhibit insightful interpretation of data and restrict agility toward the seamless integration of newer technologies. A Forrester report says that for realising the potential of AI to its fullest, insurers need to give due attention to the quality of information coming their way and a streamlined approach to gathering data. Such a piecemeal or hurried approach will further aggravate problems inside legacy systems and might lead to the undesired outcome of misaligned strategies with fragmented customer experiences. The report competence says, “Rather, the focus for insurers should be more on targeted AI use cases, not broad-scale adoption.” In other words, an insurer should begin with subsets of AI use cases at the start, such as automation of claims or detection of fraud, whereby AI can actually add measurable value to the insurer. They will be better placed for future AI-driven gains by identifying particular opportunities and building the data-driven culture in a soft way.
Given the promise of AI, Forrester’s report remains cautious in promising radical returns. Insurance happens to be one of the highly regulated industries of late, while AI’s intrinsic complexity further raises the bar. Companies have to deal with regulations for data privacy and transparency, which can make AI implementation even more complicated.
This means that the investment in partnership with specialised AI vendors like Dajon Data Management should be done by insurers to overcome such challenges. This would provide the insurers with the deepest AI capabilities without actually having to build them within, enable ways for short-term results, and build the foundation for long-term innovation, thereby enabling them. Insurers who take up this approach can bridge the gap between the potential of AI and the actual current reality: thus, becoming fully agile and customer-centric players in a fiercely competitive arena. Other avenues where AI will most likely be used by insurers include embedded insurance and usage-based products. Embedded insurance, which goes within other services themselves, helps companies tap into new segments and achieve efficiency in their distribution. Usage-based products are fed through with real-time data from IoT devices that help insurers offer more bespoke coverage.
Forrester predicts that by 2025, this will more than explode, and AI will be necessary to analyse the mountains of data required to keep them running. Companies that invest in developing robust data analytics capabilities now will be better positioned to create products that align with customer needs and usage patterns. In other words, what Forrester’s report suggests is a frank look at the direction forward for the insurance industry: to progress with caution yet commitment towards AI. While immediate, transformative results may elude most, a focus on data quality, strategic vendor partnerships, and incremental AI adoption offer a way in which insurers can differentiate themselves in a crowded market. In 2025, insurers that can invest in those foundational elements will likely be leading the pack-not because they raced into AI but because they applied the technology thoughtfully and with a strategic mindset.