{"id":79292,"date":"2026-01-22T14:00:00","date_gmt":"2026-01-22T19:00:00","guid":{"rendered":"https:\/\/staging.majesco.com\/?p=79292"},"modified":"2026-01-21T13:21:34","modified_gmt":"2026-01-21T18:21:34","slug":"majesco-benchmarks-quantify-real-ai-business-value-for-lah-insurers","status":"publish","type":"post","link":"https:\/\/staging.majesco.com\/?p=79292","title":{"rendered":"Majesco Benchmarks Quantify Real AI Business Value for L&AH Insurers"},"content":{"rendered":"\n

In the industrial age, nothing made more progress toward efficiency than the assembly line. In 1913, in a back corner of the Ford automotive factory in Highland Park, Michigan, a test was underway. Before Ford would employ conveyor belts for many different operations, they practiced on the magneto \u2014 an electrical device that provided sparks to each of the Model T\u2019s four cylinders. Assembly time for the magneto went from 20 minutes to under 5 minutes  \u2014 setting the stage for a completely new type of scalable manufacturing process.[i]<\/a><\/p>\n\n\n\n

One year later, Ford doubled employee salaries and cut work hours, surmising that this move would make the workforce itself more productive. It did.<\/p>\n\n\n\n

The three changes \u2014 technology, conveyors (process) and wages \u2014 seemingly have nothing in common, yet we now know that there is an inextricable link between people, process and technology \u2014 that no matter what industry you are in, people, process and technology contribute to efficiency and satisfaction. This is how and why AI, Agentic AI, and Generative AI (GenAI) implementation needs a people-first approach. AI-driven insurance solutions aren’t just technologies to be implemented in a vacuum or a black box. It is creating a new process (conveyor) and an intelligent facilitator where human touchpoints still matter.<\/p>\n\n\n\n

AI solutions to streamline insurance business operations and processes across industries, ultimately redefine what is possible in terms of speed, scale, operational efficiencies, reduced costs, and strategic decision-making. Organizations are embedding GenAI and Agentic AI into their operations to automate and streamline workflows, improve employee productivity, enhance customer engagement, drive down operational costs, and improve profitability and competitive pricing and market positioning. Insurance AI solutions is the transformative technology of our lifetimes.<\/p>\n\n\n\n

Today, L&AH insurers are facing pressure from multiple fronts. The cost of insurance has increased; the cost of claims, particularly for A&H products, has gone up. The inefficiencies of legacy systems have created productivity and customer service challenges, and overall operational costs have increased, leading to higher expense ratios and less competitive pricing for products. Plus, hiring and keeping good talent can be a struggle in a culture where 50% of employees are \u201cwatching for or actively seeking a new job.\u201d[ii]<\/a><\/p>\n\n\n\n

Majesco\u2019s recent Thought Leadership, <\/strong>A Powerful Chain Reaction: The Financial and Operational Impact of GenAI and Agentic AI Across the Insurance Value Chain<\/a>, outlines how insurers must set forth a strategy to capture the full value of AI\u2014GenAI and Agentic AI\u2014across the entire business operation to achieve cost efficiencies and productivity that will drive down expense ratios and improve human efficiency and satisfaction. To help insurers envision real-life applications of AI insurance solutions, use cases and benchmarks are given for L&AH that can be used to assess the business value and impact for your organization.<\/p>\n\n\n\n

Though the overall goal was to paint a holistic portrait of AI and GenAI for insurance, Majesco dived into detailed task samplings within departments, such as Product, Quote, Underwriting, Issue, Servicing, Billing and Claims. You\u2019ll find these benchmarked tasks within the report<\/strong><\/a>.<\/p>\n\n\n\n

L&AH Growth and Profitability \u2014\u00a0State of the Market<\/h2>\n\n\n\n

The U.S. L&AH insurance market posted strong top-line growth in 2024 but continued to struggle with rising operating costs and pressure on profitability. While total direct written premiums grew by 16.6% to $1.4 trillion, it was led by an 18.6% surge in annuities and only 4.7% for life.[iii]<\/a> <\/p>\n\n\n\n

For group and benefits, increased medical and healthcare costs have led to higher claims costs for some products and impacted enrollment for other voluntary or supplemental products due to rising costs for medical insurance, exacerbated by the impact of inflation on employees\u2019 finances. In addition, the rapidly changing demographics of employees are shifting the focus to worksite and individual products that meet people\u2019s changing behaviors and needs as they move between jobs.<\/p>\n\n\n\n

Overall, total expenses rose 14.7%, driven by higher surrenders, benefits, and operating costs.  Pretax operating income dropped 27.8%, and net income declined 13.3% to $33.3 billion.[iv]<\/a> Return on equity fell to 4.6% from 6.2% the prior year, reinforcing the pressure on margins.[v]<\/a><\/p>\n\n\n\n

Unfortunately, the L&AH segment has lagged in managing operating expenses \u2013 heavily influenced by the lack of business transformation and legacy replacement. A 2021 McKinsey article noted that many L&AH carriers missed earlier waves of cost transformation, relying on legacy systems, manual processes, and fragmented distribution models. This long-standing gap in modernization is now impacting L&AH insurers\u2019 operating costs, productivity and overall financials as seen in Figure 1.[vi]<\/a><\/p>\n\n\n\n

Figure 1: L&A industry’s relative historical cost efficiency (McKinsey & Company)<\/p>\n\n\n\n

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There is a heightened urgency to close the operational and technology gap. Future profitability and market competitiveness depend on whether the industry can break from its historical inertia and aggressively modernize its business operating model and cost structure.<\/p>\n\n\n\n

Operating expenses of life insurance companies include commissions to agents, other commissions, and home- and field-office expenses. In 2023,  home and field-office expenses represented 49.8% of operating expenses, as shown in Figure 2.[vii]<\/a> <\/p>\n\n\n\n

Figure 2: Life insurer expense categories<\/p>\n\n\n\n

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In looking at the top 10 AM Best L&AH groups based on premiums for 2024, there is significant room for improvement in expenses as a percentage of DWP. (SeeTable 1)<\/p>\n\n\n\n

Table 1:<\/em> 2024 Expenses as percentage of DPW by AM Best Top 10 L&AH DWP Groups<\/em><\/p>\n\n\n\n

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Sources: AM Best BestLink data, First Look: 2024 US Life\/Annuity Financial Results<\/em><\/p>\n\n\n\n

L&AH Market Leaders<\/h2>\n\n\n\n

Leveraging GenAI and Agentic AI solutions for L&AH insurance throughout the entire value chain equips insurers with enhanced operational capabilities, consistency, and quality that can deliver greater business value and customer satisfaction. By accelerating claims, service, underwriting, and quoting processes, these advanced technologies allow insurers to accomplish more with existing staff, respond to rising demand, and prioritize submissions more effectively, driving new levels of efficiency and profitability. At the same time, insurers face mounting pressure to meet the evolving digital and insurance expectations of an employee base increasingly dominated by Millennials and Gen Z\u2014segments that will not work with legacy systems.<\/p>\n\n\n\n

Once again, success requires leadership and the willingness to rethink the business. We see these key characteristics of AI and GenAI Leaders:\u00a0<\/p>\n\n\n\n