Underwriting the Future! 🚀💼

How AI will change insurance forever

December 11, 2023

Welcome to Answers on AI: making you smarter about artificial intelligence, one email at a time. First time reader? Sign up here to get Answers in your inbox.

Today we want to help you get smarter about a field that AI will impact substantially, despite it not getting the attention that other industries have been receiving: insurance.

Today’s question is:

How will AI impact the future of the insurance industry?

AI is set to completely transform the healthcare industry. Here are some things you should know:

  • 🤖 AI Takes the Wheel: The future of the insurance industry is set to be revolutionized by AI, particularly in the realm of risk assessment and management. By harnessing vast amounts of data and using sophisticated algorithms, AI can predict risks with unprecedented accuracy. This means insurers can offer more tailored policies, and customers can enjoy more competitive rates. Expected advancements in AI will enable real-time risk assessment, potentially transforming how policies are priced and managed.

  • 🚀 Claim Processing at Light Speed: AI is anticipated to drastically streamline the claims processing workflow. Using natural language processing and machine learning, AI systems will be able to review claims, validate them, and even detect fraud more efficiently than ever. This will not only speed up the process for customers but also reduce operational costs for insurers. We might see a future where claim approvals, currently taking days or weeks, are completed in mere hours or even minutes.

  • 🛡️ Cybersecurity Front and Center: As AI becomes more integral to the insurance industry, the importance of robust cybersecurity measures skyrockets. AI systems, while powerful, are also vulnerable to sophisticated cyberattacks which could lead to data breaches or manipulation of risk assessment models. Insurers will need to invest heavily in securing their AI infrastructure, ensuring that both their data and their AI-driven decision-making processes are safeguarded against threats.

  • 🌍 Global Insurance, Local Nuances: AI's impact on the insurance industry will be global, but its implementation will have to navigate the complexities of regional regulations and cultural differences. AI models that work well in one country may need significant adjustments in another. This highlights the importance of developing adaptable AI systems that can learn and adjust to diverse regulatory environments and customer expectations.

  • 📉 The Human Factor: One notable challenge in the AI-driven future of insurance is maintaining a balance between technology and human insight. While AI can handle vast amounts of data more efficiently than humans, it may lack the nuanced understanding of individual circumstances. Insurers will have to strike a careful balance, ensuring that AI aids but does not entirely replace the human element in decision-making processes, particularly in complex cases where empathy and understanding are crucial.

What do the experts say?

Now, let’s hear from some experts on the topic:

“There are two broad areas of impact AI will have on the future of the insurance industry:

1. Industry-specific: AI will make it much faster and cheaper to utilize multiple datastreams, in real time, during all phases of an insurance product lifecycle: definition, regulatory review / compliance, marketing, the application process, risk assessment / underwriting, claims processing, policy modifications and renewals. As with many of knowledge- and data-intensive legacy industries, insurance still relies on humans directly participating in the value-creation loops, and AI will help eliminate this scale-limiting factor like it already has in social media, or say, personal transportation. Specifically on the side of commercial insurance, most of the business today is still conducted with human brokers. Just like taxi company dispatchers (or webmasters before them), insurance brokers will gradually disappear from the workforce over the next few years. This will also accelerate the wave of consolidations that's already starting and we'll end the decade with a handful of winners who'll figure out how to best optimize the last mile in delivering risk-mitigation value to companies and individuals.

2. Nonspecific knowledge worker productivity improvements: employee onboarding, education and knowledge sharing inside insurance companies, improved productivity of both technological and operational areas will all benefit from what is essentially an almost free army of digital interns working for and alongside every human employee.”

— Gene Linetsky, CTO of Embroker

“The transformation from a ‘detect and repair’ model to a ‘predict and prevent’ model will reshape every aspect of the insurance industry. It will enable insurers to anticipate risks, optimize pricing, and enhance the customer experience. The integration of AI will also accelerate the pace of change, as stakeholders become more proficient in utilizing advanced technologies.”

— Sherief Mursyidi, from Navigating the Impact of AI on Underwriting in the Insurance Industry

Stay Tuned for More

In each issue, we bring you the most interesting and thought-provoking questions of the day to help make you smarter about AI. Stay tuned for more questions, and more importantly, more answers.