How Artificial Intelligence May Be Impacting How We Perform Underwriting

AI. It sounds sci-fi when you think about it, and you might correlate it to the same technology used to power the Voight-Kampff machine in Blade Runner. Artificial intelligence has already begun working its way into our world, and it exists in our everyday lives. It’s in our smart homes, our vehicles, our phones, our businesses, and so much more. It’s even beginning to branch out into the insurance industry, and it looks like it might be about to transform the way that insurance companies perform underwriting and risk assessment.

First, what is underwriting? What is “risk assessment?”

Risk assessment and underwriting are the same thing, just interchangeable terms. They are the process by which insurers evaluate and assess the risks that accompany an insurance policy. This also helps to calculate the most accurate premium for the insured. Having more meticulous risk assessment is beneficial for both the insured and the insurer.

Read on for how artificial intelligence is making such huge advances in the insurance industry.

What is artificial intelligence?

Artificial intelligence isn’t quite as advanced as what we see in our science fiction novels and action movies nowadays, and unfortunately not everyone has their own private Jarvis, but it’s certainly made some crazy advancements over the last few decades as we embrace this tech-driven shift.

Imagine, in ten years, we hop in our vehicles and plug in our destination. Without even needing to put our hands on the wheel, our vehicles’ map out our route and take us there. We don’t even have to lift a finger. Now, consider that with regards to AI advancements in the insurance industry.

Consider the same situation, but when you put your destination into your vehicle, this automatically shares the info with a mobility insurer who provides an alternative route that has a reduced chance of accidents and offers a calculated adjustment to your monthly rates.

What about this? Imagine you got into an accident – a very small one – and your car’s internal diagnostics immediately determined the extent of the damages. You take documentation of the damages, send it in, and once you’re back in your car, you receive a message saying that your claim has been approved. If your vehicle is driveable, you can immediately go right to the nearest garage.

Sound futuristic? It might be – but AI has advanced incredibly over the last few years, so it’s not impossible that these things might come about in the next little while.

AI, in essence, is the development of computer and robotic systems so that they can perform tasks that would ordinarily require the natural intelligence that a human possesses. It can accomplish speech recognition, translation between languages, decision-making, and visual perception.

What is risk assessment?

As mentioned previously, risk assessment – or underwriting – is the process where an insurance company uses a variety of stats to gauge risk. They can then calculate and hand out insurance premiums based on the policyholder’s perceived risk. There are different types of risks that are associated with different insurance products, like morbidity rates, accident rates, theft rates, gender and age statistics, natural weather frequencies, crime rates, and so much more. Every insurance company weighs risks differently, and every product uses different metrics.

How is artificial intelligence automating underwriting?

Automation is one of the biggest buzzwords when it comes to AI and its potential opportunities in the insurance industry. AI may not be advanced enough to fully handle the backend of complex claims and talking clients through their various coverage options that would be most fitted to their special circumstances, but AI has advanced to where it can help automate much of the underwriting process.

Let’s put it this way – by using AI-powered decision-making and workflow automation, many insurance companies can streamline their underwriting process. AI looks at non-typical analytics derived from social media feeds, reviews online, and even chatbots to gauge risk, and it can do so much quicker than a human can. AI does decision-making like we do, but much faster.

A number of insurance companies are already using artificial insurance to automate some of their underwriting processes. Today, companies like Aviva Canada, Crawford & Company, and The Co-operators stand out for their track records in using AI.

What are the benefits of artificial intelligence for the consumer?

While it might sound like the incorporation of artificial intelligence in underwriting might be solely for freeing up the time of the human employees on the insurer side, it’s a huge benefit for the consumer as well. Why? Well, because when risk assessment is done accurately enough, it ensures that policyholders are receiving the most accurate insurance rates. Gone are the days of having to pay for “cookie-cutter” rates because AI analytics derive more accurate assessments of what risk is, so high-risk rates will be allotted to the high-risk policyholders and spare the rest of consumers from having to pay for more than what they need.

Accurate analytics can also help to better determine coverage needs. Everyone works differently, lives differently, runs their business differently, even drives differently – and AI can determine exactly what your particular “lifestyle” necessitates when it comes to coverage. You can tailor-make insurance the way that best supports your peace of mind.

Better risk assessment means more affordable insurance for the general population and more customizable insurance policies. For insurers, this means that the underwriting process becomes more efficient. It’s a win-win!

While the future of AI is currently unknown, there’s enough evidence to suggest that the way forward involves adapting to a more tech-oriented world. Already, we’re seeing what great changes and impacts AI can have on how we live and work!