Where are the robot underwriters? New report shines spotlight on the true potential of automation

Automation has arrived in the insurance market and will revolutionize many roles, especially that of the underwriter. But companies must develop a long-term strategy designed to embrace automation rather than just seek short-term wins.

That is one of the conclusions of a report by London based software developer Excel in Business (EiB), which provides automated premiums and claims management information (MI) for MGAs, insurers and brokers, exploring the impact of data quality in the insurance industry.

Detailing the results of detailed interviews with a number of experts in this field, the report’s contributors make a number of predictions about how this sector will develop – and the best way for companies to embrace it.

“InsurTech is aiming to do to the insurance industry what Fintech did to the banking industry,” said Nick Pester of Capital Law. “Customers are demanding more information, more flexible products, efficient claims handling and the ability to make insurance decisions in a matter of minutes from smart devices.

“For this to work, technology has to play a far more active and sophisticated role and technology like IoT devices, real-time data streaming, and predictive analytics are all part of how InsurTech is looking to improve the insurance industry.”

The report cites a 2017 EMEA Insurance data analytics study by Deloitte, which discovered that only 40 percent of respondents found their data quality to be sufficient for trusted insights to be generated, and for an equal proportion, their data was undefined and of very poor quality.

Indeed, much of the recent rhetoric surrounding this topic, has shown that a significant proportion of underwriters admit to delivering inaccurate MI on the back of bad data quality.

This report seeks to explore the role of the underwriter as the insurance industry undergoes a major digital transformation amidst the InsurTech revolution, and discusses the future long-term impacts and strategies that can be brought by embracing automation.

The report acknowledges that the underwriter is largely considered the most at-risk from InsurTech thanks to AI’s predictability and reliability – but this technology also provides a golden opportunity for underwriters to move from being hands-on to a much more strategic advisory role.

“We see technology feeding into what is effectively AI - automated underwriting - so you’ve got a constant loop of data being harvested, amalgamated, analysed, and feeding into algorithms to actually produce the pricing,” said Pester.

“It also means we can have much more by way of on-demand insurance - hiring a car for a day, for example, or insuring a property for a week.”

Nico Kichenbrand, the CTO of EiB, notes that stakeholders will need proof that any new system they are buying into is accurate and reliable otherwise insurtech will struggle to take hold. But he believes this hurdle will be overcome and the influence of technology will continue to grow.

“I believe the market is going through change and will continue on this path,” said Kichenbrand. “On the one hand customers are demanding far more complex and flexible products, and on the other hand insurance companies are trying to make the customer journey as short and as simple as possible.

“For this to deliver on both sides, I see technology playing an even greater role in the coming years, not necessarily in the way they operate, but more how they operate, but more how they interact with customers, their understanding of customer behaviour and their ability to adapt products at very short notice.”

Pester added: “I think the reason we haven’t seen as much of a change as perhaps we should’ve seen over the last couple of years is partly the culture - there has been a resistance from some parts of the market because people don’t necessarily want things to change - but I think also there is a healthy amount of fear. Insurance is a heavily-regulated industry. The old adage that nobody ever got fired for buying IBM - that is absolutely the view that a lot of insurers take.

“Play it safe on a day-to-day basis; let others jump first, we’ll follow those that succeed. You’re not going to make any glaring errors that way, but you’re not going to find any game-changers either.

“Having said that, there are things like the use of AI for pricing contrasted against data protection laws coming in May, which does actually present some pretty interesting issues. How do you regulate AI? When you have AI that is genuinely self-learning, how do you actually ensure its accountable? How do you ensure you understand the decisions that it’s making, the decisions that it’s declining?

“That’s a really hard thing to do; as far as I’m aware there isn’t a clear-cut answer right now. It’s a real open-ended question, because as it gets more and more intelligent, you can’t discount the prospect of a rogue AI employee.

“There are reasons why it’s not moved as quickly as it should’ve done, but it has to go that way. People are starting to realise this because of cost pressures in the market.”

Robin Patterson, performance analytics manager at Charles Taylor, acknowledges that underwriters are divided on their willingness to embrace such technology.

“Our underwriters are divided on this,” he said. “Some of the more traditional underwriters do not see the need to ‘over-complicate’ by developing innovative pricing techniques or using analytics platforms in the search for new insights.

“They are skeptical about the benefits, and perhaps perceive that they can manage just fine without exploring these new opportunities. On the other hand, some are optimistic that newer techniques and possibly AI could be used to help them better understand and price risk - to be able to process such vast volumes of data that hitherto would be impossible.”

Click here to see the full report.

Excel in Business is also holding a conference on this topic on April 25 in London. More details can be found  here.

Join us at Intelligent Automation in Insurance - London 2018. Spring Special:  Book before the March 31st and save £200. 

More of today's news

Sompo poaches two to launch new specialty unit in Europe

Channel and Canopius join Liberty to back $27bn consortium

JLT's new cyber policy targets coverage ‘gaps’ in airline industry

Willis Towers Watson appoints COO of corporate risk and broking

Terra Brasis Re renews its LatAm cat bond via AlphaCat

Munich Re bolsters US property and casualty executive board

VIPR and ACORD partner on breakthrough in processing of bordereaux reports

Extratropical cyclone Zeus insured losses at up to €272m

Don't miss our insurtech email newsletter - sign up today