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AI boosts underwriting, But underwriters’ confidence lags

AI boosts underwriting, But underwriters' confidence lags

Today, Capgemini Research Institute published its World Property and Casualty Insurance Report 2024, revealing operational challenges and technologies to watch for in insurance. The report underlines that only 8% of property and casualty (P&C) insurers are among underwriting “trailblazers,” the ones that combine AI-driven insights with automation and use them to achieve better decision-making and risk assessment processes. They are outperforming their peers and gaining large collaboration and customer trust by involving underwriters in all decision-making processes.

The report covers major challenges encountered by the P&C industry as they struggle with a progressively complex environment. Policyholders are willing to pay less and prefer simpler services with better transparency from their providers, yet they still fit the inflation problem. Consumers need help with the application forms. About 42% of policyholders find them too complicated and time-consuming. In comparison, about 27% of those surveyed have switched insurers in the past two years, driven by the search for lower premiums and better coverage.

In addition, the sector is currently facing rocketing premiums and underwriting issues resulting from events like natural disasters, new tech like cyber threats or generative AI, and complicated regulatory frameworks. These factors, among others, fuelled the accumulated ratio to be more than 100%, showing a crisis of profitability. Insurers also have to address internal issues like data access, outdated legacy systems, and lack of qualified professionals, as 54% of insurance executives describe insufficient data access as a major factor that impacts customer satisfaction.

Adam Denninger, head of Global Insurance at Capgemini, stressed the need for the sector to redesign itself by renovating current models and introducing advanced technologies. This production is vital to improving results and preserving transparency because AI-driven solutions promise a competitive and lucrative underwriting process that takes advantage of clients’ changing backgrounds and behaviors.

Although the significance of AI and machine learning in enhancing the quality of underwriting and reducing fraud is evident to everybody, there is still a degree of skepticism among underwriters about the endorsement of automated tools. While 43% of underwriters consistently trust and apply these techniques, their complexity and data reliability concerns often discourage them. The report proposes maximizing the role of underwriters from the initial stages to minimize existing fears; however, AI models are understandable and transparent.

The process of leading the way in the insurance industry is a challenging one. Only some insurers have the expertise and abilities to make timely and fair underwriting decisions. Still, having these attributes will yield better results regarding effectiveness, precision, and customer approval. They also notice a considerable decline in the business objectives they miss compared to traditional insurance companies.

For the future, 83% of P&C insurance executives consider predictive modelling the underwriting future, but only a few have the required capabilities. The power of data-driven insights lies in creating a strong data ecosystem.

Although privacy is a concern, many policyholders would be willing to share more personal information to get benefits such as discounts and added security.

In sum, P&C insurers face myriad impediments, from data integration to incorporating technological changes.

Yet those exploiting new tools and engaging their underwriting crew in these innovations will meet the ever-more demanding policyholder expectations and steer the industry through rough waters. The disparity in data requirements and abilities, particularly when analyzing real-time data from connected devices and drone images, highlights the importance of insurers increasing their data analytics capabilities to improve risk assessment and pricing accuracy, which may impact the overall solvency and viability of the business.

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ToAI Team
Fueled by a shared fascination with Artificial Intelligence, the Times Of AI journalists team brings together various researchers, writers, and analysts. We aim to provide a comprehensive knowledge of AI for a broad audience of the Times Of AI. Through in-depth analysis of the latest advancements, investigation of ethical considerations around AI development, AI governance, machine learning, data science, automation, cybersecurity, and discussions about the future impact of AI across various sectors, we aim to empower readers with the details they need to navigate this rapidly evolving field.

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