3 Key Aspects of Underwriting Influenced by AI

By Insurance CIO Outlook | Wednesday, November 06, 2019

AI capabilities are enabling the underwriters to dig deeper into the critical business aspects involved in insurance. 

FREMONT, CA: Underwriting is an important aspect of the insurance industry. It enables a company to choose who and what the insurance company will insure depending on risk assessment. An underwriter is specialized in risk assessment and makes policies based on the information provided by the insurance agents. However, with an exponential rise in data in the recent few years, a lot of underwriting is getting automated. The extraordinary complexity involved in underwriting is forcing the firms to leverage technologies such as artificial intelligence (AI) for the purpose. Here are aspects where AI will shape the insurance industry.  

Risk Assessment

Insurance underwriters analyze and evaluate the data provided by the agents to determine the potential risks involved. However, the data is not necessarily adequate each time. For instance, an applicant may conceal some vital information, thereby leaving the underwriter’s analysis ineffective. With the incorporation of natural language understanding (NLU), which is a subset of machine learning (ML), insurance underwriters will have increased access to various sources of information thereby, revealing more about a potential client. The incorporation of NLU will make the system transparent and enable faster payouts to the customers who rightfully deserve the claims. 

Fraud Detection

Fraudulent claims have been one of the greatest challenges for insurance firms. Many consider it a common practice that is difficult to eradicate. Moreover, fraudulent activities significantly undermine the efforts and effectiveness of underwriting. However, technologies such as AI and ML algorithms can address the challenge more effectively by detecting patterns and correlations that are often associated with fraudulent practices. As a result, several insurance firms have already started to integrate AI technology into their fraud prevention operations. 

 Enhanced Efficiency

While it’s a fact that human underwriters are prone to errors, digitalizing the system will offer an effective alternative. Moreover, the efficiency of the system can be further improved if the system is coupled with AI capabilities. For instance, ML algorithms assess and detect errors in the data faster and with high precision as compared to human efforts. An error-free system will not only streamline the insurance processes but also enable the firms to offer better customer service.

AI capabilities will enhance the efficiency and effectiveness of underwriting in insurance. The technology will assist the underwriters in understanding their targeted customer base and in designing economically viable policies.

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