General insurers across Southeast Asia face a potential profitability deficit of up to four percentage points if they attempt to implement artificial intelligence (AI) upon antiquated data systems. Industry experts warn that substandard infrastructure is currently obstructing the operational gains typically associated with automation and advanced analytics.
Raunak Mehta, co-founder and Chief Executive Officer of the insurance technology firm Igloo, noted that the strategic deployment of AI could significantly bolster financial performance. Speaking to Insurance Asia, Mehta stated that with appropriate investment over a three-to-five-year horizon, profitability could increase by 300 to 400 basis points. However, he cautioned that this growth trajectory is contingent upon systemic upgrades; insurers relying on obsolete frameworks are unlikely to realise these gains.
Structural Challenges and Profitability
The Southeast Asian general insurance market is characterised by high combined ratios, which often result in marginal net incomes. The integration of AI is viewed as a critical lever to alleviate these pressures. According to a March report by Boston Consulting Group (BCG) Inc., AI investment in the sector is projected to rise from approximately 0.6% of revenue in 2025 to 1.9% within the current year. Despite this, BCG highlighted that only one-third of property and casualty insurers currently acknowledge the utility of AI across their entire workflows.
Mr Mehta emphasised that AI’s primary value lies in its ability to streamline claim handling, facilitate earlier fraud detection, and mitigate overpayments. By refining risk selection, the technology can also lower loss ratios. “It will definitely go a long way in bringing down the loss ratio by cutting down fraud and, in a way, doing a better job of reducing adverse selection,” Mehta commented during a telephonic interview.
Executive Sentiment and Investment Priorities
Data from KPMG International Ltd. suggests a prevailing sense of optimism among industry leadership, notwithstanding prevailing economic and climate-related volatilities. Approximately 82% of insurance CEOs expressed confidence in their company’s growth prospects, an increase from 74% in the previous year.
| Key Performance & Investment Metric | Value/Percentage |
| Potential Profitability Gain (with AI) | 300–400 basis points |
| Projected AI Investment (current year) | 1.9% of revenue |
| CEO Confidence in Company Growth | 82% |
| CEOs Prioritising AI Investment | 73% |
| Budget Allocation for Analytics/GenAI | 10%–20% (by 67% of firms) |
| Executives Citing Cybercrime as Top Threat | 83% |
Addressing the Infrastructure Gap
A significant disparity exists between market enthusiasm and technical readiness. Mehta urged firms to distinguish between the “hype layer” and the “infrastructure layer,” noting that many regional insurers continue to operate on systems that are decades old. These legacy platforms require comprehensive modernisation before AI applications can be effectively utilised.
While the adoption of faster, more integrated systems often raises concerns regarding digital safety, Mehta argued that increased system speed does not inherently correlate with higher risk. He noted that the majority of cybersecurity incidents are the result of social engineering rather than technical velocity. Consequently, the industry focus remains on enhancing data quality and internal systems to support robust, enterprise-grade decision-making.
Currently, Igloo processes approximately 90 million policies monthly, providing services to over 50 million customers throughout the Southeast Asian region. The firm focuses on utilising proprietary data to extract actionable knowledge rather than developing foundational AI models independently.