Artificial Intelligence (AI) and Business Innovation in Insurance: A Comparison of Incumbent Firms versus New Entrants

Abstract

Artificial Intelligence (AI) systems evolve in response to new data by using adaptive algorithms. The insurance industry is data intensive, and dynamic. It is therefore particularly suitable for AI implementation. An innovation triangle framework is proposed that consists of product, process and value chain innovation. A comparison of leading incumbent insurance firms with new entrants illustrates significant competitive differences. The incumbents apply AI to defend their market positions by enhancing existing strengths and capabilities across the three innovation types. The new entrants exploit AI technology to build new products with innovative features that emphasise customer value and user experience. The innovation triangle is a useful managerial tool to analyse the nature and extent of innovation in insurance and can be used to evaluate and plan AI strategies by mapping existing AI initiatives to specific types of innovation and identifying innovation objectives and opportunities. Future trends and research opportunities are outlined.