AIG Scores Upgrade in Goldman’s Assessment of Insurers’ AI Risks 

Even insurance companies can’t protect themselves against the rise of robots. But American International Group (AIG), a major player in property and casualty insurance, is faring better than most.

Analysts at Goldman Sachs upgraded AIG’s stock to buy from neutral, saying that it, along with Chubb, is better equipped to take on AI-related changes in the industry, thanks to its multinational and large account business mix that largely avoids products where demand may shrink over time. The analysts also raised the stock’s 12-month price target by $7 (or 8%) to $90. 

Allstate wasn’t so lucky. The Goldman analysts downgraded the company’s stock to neutral from buy and cut the 12-month price target by $7 (or 3%) to $231. They are concerned, in part, about the insurer’s competitive positioning in AI, given its impact on policy distribution and autonomous vehicles. 

Risk and Potential Reward 

Artificial intelligence is threatening to upend the property and casualty insurance business. It can analyze mass datasets that insurance companies use to measure risk, trim human agents from the equation as bots offer customers instant quotes, reduce the actual risk people face (by potentially limiting car crashes with autonomous vehicles) and more. 

That puts insurance companies at an inflection point. They can fall behind or harness the power of the new technology to better their business:  

• “To create lasting business value from AI, insurers … will need to completely retool workflows, rethink operating models, work toward a modern data and tech stack, and scale AI by harnessing reusable components for various use cases and business areas,” experts at McKinsey wrote last year. “And they will need to do this in a manner that creates meaningful improvements in unit economics.” 
• AIG is getting ahead. As AI tools help to reduce time requirements and increase accuracy in both underwriting and claim evaluation, AIG has “highlighted that a generative AI tool is allowing AIG employees to underwrite a greater percentage of the policies submitted by brokers in certain segments,” the Goldman analysts wrote. 

Winners and Losers: While AIG and Chubb are best positioned amongst commercial insurers (and all the companies Goldman covered in its analysis) to take on AI risks and opportunities, Aon and Ryan Specialty are best positioned amongst insurance brokers, the firm says. Personal line insurer Progressive joins Allstate as least well-positioned.