It is this kind of customisation that is contributing to the rise of AI and algorithmic risk assessments within the insurance sector. As such, this then enables customers to receive more personalised policies that have lower premiums and more flexibility in their coverage limits, particularly when it comes to business or credit insurance. AI is now helping to reduce costs for customers at a time when it seems as though everything else is increasing.
These advances are completely changing how insurers are underwriting policies, which makes the turnaround much quicker, more accurate and more profitable. But, as well as these developments, there are other advantages and advancements that AI is bringing to insurance underwriting.
Transparency
AI is proving itself to be a very useful tool in helping to address any unfairness or biases when it comes to insurance underwriting. By giving insight and visibility into the wider underwriting process, AI can then work to identify or eliminate decision-making discrepancies. This then help to create a more equitable process and system as it removes conscious or unconscious biases which may exist.
This then helps to generate better transparency within insurance underwriting. It helps insurers to better track data points and verify any decisions which have been made by humans that have better accuracy. With this kind of review process, insurers can better ensure that their policies are fair, or adhere to guidelines and best practice standards.
Data-Focused Insights
AI allows insurance provides to get better and deeper insight into their customer and client base using data set which is something that can be near impossible when using traditional underwriting processes. Being able to measure and analyse large volumes of data, such as customer preferences or demographics, AI can help businesses to identify trends or common occurrences in client risk profiles, helping to then generate tailored solutions for each client or customer.
With this insightful information, insurers are then better equipped to make more informed decisions when it comes to risk models, policy terms and conditions or pricing and payment strategies. AI can provide insurance providers with real-time risk assessments, helping with faster decision-making and, therefore, allowing the insurers to respond quickly to changes. This then gives insurers the ability to stay ahead of competitors by ensuring that their customers are ensured at a better price, using a more personalised quote.
Risk Mitigation
AI is becoming increasingly important when helping insurance providers better understand and mitigate risks. AI systems can analyse huge amounts of data, more so than human counterparts, to help insurers better understand the potential outcomes of potential different scenarios. This then allows them to make better decisions and reduce future losses.
Risk mitigation can include anything from the identification of high-risk customers or businesses, or using AI to try and predict customer behaviours within complex models. This can assist insurers in better understanding the long-term risks and effects of decisions that have been made.
AI-driven risk management systems can be integrated with current insurer systems, where the use of algorithms can quickly and accurately predict and report on risks, such as fraud or credit issues, which may be more tricky to spot with manual human processes.
Addressing Artificial Underwriting Concerns
The insurance industry is one which hasn’t needed to progress over time - it is a very black and white process. That is, until now. Insurers need to adopt more proactive approaches when it comes to using AI within their insurance underwriting processes. Companies should be naturally curious about the data sets which are used for AI technologies as it is essential to understand whether these datasets are suitable to encompass a broad range of industries.
Companies should also be asking insurers about the mechanisms in place which are used to identify and mitigate any insurance biases. This could potentially involve the questioning of whether AI systems in use are frequently audited for both fairness and accuracy. As well as this, companies should also enquire about the potential for manual reviews so that they are not solely reliant upon AI technologies. This is vital for the instances where overrides are needed should AI-driven decisions seem skewed, or unfairly made.
It’s important that insurance companies make sure that comprehensive and detailed audit trails are recorded so as to ensure full accountability and compliance. Insured need to comply with any predetermined industry standards or regulations which involve AI in insurance. Checks should be regularly carried out to monitor how the AI algorithms in use reach the decisions that they do, as well as any errors, biases or changes in the data which could pose problems.
How Insurers Can Prepare For The Use Of AI
AI continues to evolve and become a more integral part of numerous industries, including the insurance industry. As such, it is important for insurers to remain ahead of the cure. As such, there are some steps which can be taken in order to better embrace these advancing technologies.
Insurance companies should be looking to invest in AI technology and infrastructure, such as through website chatbots or via intelligent assistants
It’s important to re-evaluate any pre-existing processes which can help to identify potential opportunities for automation
Be sure to understand the legal implications of using AI, and update data privacy laws to reflect these
Create and build a strategic plan in order to successfully implement AI and then make sure that the implementation of such suggestions is efficient and effective
Make sure to educate employees on any new technologies and prepare them for workplace cultural changes which might occur
Proactively support and engage in ongoing research and development in AI uses to ensure new processes are up to date
AI is truly set to transform the insurance industry and many of the leading companies are taking note and implementing AI technologies within their processes. Don’t get left behind!