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Transform Insurance Underwriting for AI
Faheem Shakeel
Faheem Shakeel Posted on May 2, 2024   |  5 Min Read

Rampant digitalization is indubitably transforming insurance to emerge as a “people-centric business.” While new-age technologies are having a profound impact on various facets of insurance, it has a particularly revolutionizing effect on underwriting. Underwriting, which once relied on intuition and experience, is becoming more reliable and accurate. Underwriters no longer have to face the challenges of manual risk assessment that result in errors, delays, and inefficiencies. With a data-driven framework, insurers can perform a comprehensive risk assessment and deliver personalized experiences. The incorporation of Artificial Intelligence (AI) in insurance underwriting is further fueling growth through automation and transparency.

Balance between AI and Human

AI-powered underwriting solutions are more intuitive as they collect information from various sources to make smarter decisions. They are also more agile in handling the complexities of underwriting while maintaining customer-centricity. Here’s a deeper look at how insurers can retain a humanized experience while leveraging AI in underwriting.

The Importance of AI in Insurance Underwriting

Before delving into the strategies of balancing AI technology and human experience to transform underwriting, here’s an overview of the significance of AI in underwriting.

1. Streamlined Underwriting Process

AI engines sift through the entire IT infrastructure to centralize data, effectively capturing data from diverse sources and in inconsistent formats and standardizing it. As a result, all the internal and external data, ranging from claims history to market trends gets consolidated in a single hub. Once such a unified repository is ready, it performs routine data validation and updates the information periodically. The blend of AI & automation in underwriting monitors data quality while cleaning and updating it to ensure integrity and reliability. Such proactive data hygiene and management practices ensure that your insurance business works with high-quality data that feeds higher accuracy in the underwriting workflows.

2. Dynamic Pricing of Insurance Products

The use of AI in insurance underwriting makes dynamic pricing of insurance products a reality. It is made possible by combining the capabilities of data analysis, predictive modeling, and automation in insurance underwriting. Using these, insurers can deploy automated underwriting in insurance that factors in market trends, customer behavior, risk factors, and other influential variables in real time to indicate appropriate pricing. It not only takes into account the current state of these factors but also anticipates any future trends, patterns, and risks for proactive pricing adjustment. Further, in case of any changes to these variables, the AI in underwriting updates the price dynamically to maintain profitability and competitiveness. Such a proactive approach to underwriting boosts customer satisfaction through personalization and competitive pricing for a richer experience.

3. Sharper Risk Assessment

Utilizing AI in underwriting has transformed risk assessment by harnessing its capacity to process vast amounts of data rapidly and accurately. This approach offsets manual analysis of data using limited resources as AI promises thoroughness and scalability while accessing comprehensive datasets from diverse sources. Then, by using advanced algorithms and machine learning techniques, AI-automated insurance underwriting analyzes data to detect patterns, correlations, and emerging trends that impact insurance outcomes. Based on these insights, the algorithm assigns a weighted score indicating the associated risk. Such a quantitative analysis empowers risk assessment by making it holistic and data-driven. Furthermore, intelligent data processing in insurance underwriting also helps insurers understand the risks associated with customers and products while ensuring the right data is available for risk assessment as efficiently as possible.

4. Enhanced Productivity

Manual underwriting is a resource-intensive task. Whether it is running multiple risk simulations or consolidating data, the simplest of tasks may require dedicated resources. AI-powered automated insurance underwriting offloads all these resources by automating repetitive tasks, streamlining processes, and finetuning decision-making efficiency. AI & automation in underwriting processes high volumes of data using advanced algorithms and machine learning techniques to derive actionable insights in record time. Such elimination of manual workload and administrative overheads allows underwriters to focus on more complex cases requiring strategic initiatives. Using AI in insurance underwriting also lends visibility to any patterns, trends, or insights that may otherwise go unnoticed in the traditional methods. The resulting productivity boost quickens turnaround times, improves operational efficiency, and increases employee satisfaction too.

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The Role of Human Expertise in Insurance Underwriting

We’ve seen the impact of AI in underwriting. Now let’s focus on what human expertise brings to the table:

I. Contextual Awareness

Human underwriters possess a deep understanding of the broader context surrounding insurance policies. This contextual understanding spans regulatory frameworks, customer behavior, and market dynamics. Such insights complement the capabilities of any technology, including AI, in making hyper-relevant and informed decisions based on specific situations by considering factors that data may not explicitly capture. Think of it as an additional reinforcement for data-driven technologies.

II. Policyholder Relationship Personalization

While AI has the capacity to strike personal connections with policyholders, four out of five consumers express no interest in accepting their recommendations. In such a scenario, human underwriters can act as an interface between customers and technology. After all, it combines the best of both worlds. The customers get to retain a personalized and human touch while interacting with the insurer, while the insurance business enjoys the bouquet of advantages offered by AI in insurance underwriting. Further, human underwriters can understand clients’ unique needs, preferences, and concerns, and input these into AI engines to generate tailored solutions that foster trust and loyalty over time.

III. Judgment and Discretion

Human expertise can account for complexities that may not fully be captured by data alone. Experienced underwriters apply their professional judgment, intuition, industry knowledge, and discretion, especially in ambiguous situations. Such diverse perspectives can also refine the capabilities of AI and automation in insurance underwriting by making it multi-dimensional and adding to the thoroughness of the algorithms. They may even innovate and develop new approaches to underwriting or suggest product or service innovations to keep up with the changing market dynamics. Automated underwriting in insurance can then be trained along these lines to harness the capabilities of AI.

Balancing Human Experience and AI in Insurance Underwriting

Human expertise will inject contextual understanding, professional judgment, and personalized relationships into underwriting. These qualities complement the AI’s capabilities to analyze data, automate underwriting, and make decisions backed by data. Human expertise adds more layers of insight to complex risks, adds discretion in ambiguous situations, and nurtures trust among clients and brokers. Meanwhile, AI powers productivity, streamlines underwriting workflows, and improves risk assessment accuracy.

From this discourse, it is evident that AI and human underwriters have distinct qualities that contribute to the well-rounded development of the process. As such, rather than viewing it as an either-or situation, insurers must look to amalgamate the two to compound their respective benefits and mitigate any limitations.

The best approach to balancing human experience with AI in underwriting would be through the integration of the two in underwriting workflows. Human expertise can validate AI-powered decisions while maintaining a human touch in customer relationships. Such a collaborative environment helps capitalize on the strengths of both for a more efficient, accurate, and customer-centric underwriting experience.

Closing Thoughts

The combination of human expertise and AI in insurance underwriting unlocks several opportunities for efficiency, innovation, and customer satisfaction. As such, striking the balance between AI and human experience can grant insurers a competitive advantage in speed, accuracy, and risk management while upholding the concept of “people business” in insurance.

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