GenAI in the insurance industry: Divine coincidence for human capital

• Who's afraid of GenAI?While experts predict substantial positive economic effects from the rise of generative artificial intelligence, public sentiment is not so optimistic. In our survey of over 6,000 people in Austria, France, Germany, Italy, Poland and Spain, 36% expressed concerns over the risks presented by AI, with 46% expecting AI to cut the number of jobs available (vs. 33% who expect AI to increase the number of jobs available). More worryingly, more than half of all respondents (51%) believed that the skills gap and inequality could widen as AI uptake expands across industries, with the smart getting smarter and the rest being left behind. Just 21% of all respondents were optimistic about the benefits of AI for their economies.
• But we find that fears of AI causing a massive labor dislocation in the insurance industry are overblown. As a data-driven industry like few others, the insurance industry in particular has significant potential for automation and productivity enhancement. AI applications can complement and augment employees' skills and are likely to improve efficiency, customer satisfaction and fraud detection. This could lead to labor reductions but economic models suggest only a modest correlation between productivity gains and labor reductions in the insurance sector: a 0.622% increase in productivity would yield only a 1% decrease in labor.
• In fact, the timing of the advance of AI seems to be fortunate. It coincides with demographic shifts, i.e. aging populations and shrinking labor forces, which could lead to labor shortages in many sectors, including insurance. By increasing productivity and automating routine tasks, AI could help the industry combat this looming challenge.
• As AI adoption increases, balancing innovation with regulation will be crucial. While many advocate for strict AI regulation to prevent harm, others emphasize the need to maintain competitiveness. Policymakers and industry leaders must navigate these challenges to harness AI's potential while addressing societal concerns.

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