Despite all the potential benefits of artificial intelligence (AI), most re/insurers are not yet at a stage where they can harness the full potential of it within their business models.
Even in its fledgling stages of innovation, AI has altered and improved the customer experience, driving efficiencies in underwriting, claims processing, risk analysis and product development.
AI will augment re/insurers’ capabilities to analyze risk and design new products as it frees up re/insurance professionals to focus on value-added tasks and by alleviating administrative and process-related burdens.
Coleman noted that as AI changes the “after the fact” characterisation, “the insurance business model may evolve where re/insurers could play a larger role in risk management advice and services instead of risk transfer, under this new role they could also be competing against risk management advisers from non-insurance backgrounds.
“Re/insurers may have to reassess their underwriting based on how the nature of risks left to insure will have changed due to AI.”
Clients could come to rely on re/insurers for risk prevention knowledge and activities, with the industry being paid to help clients avoid some risks altogether.
In SCOR’s March report on how AI will impact re/insurance, Senior Risk Manager, Jennifer Coleman, noted InsurTech Lemonade’s achievement of settling a claim in three seconds using its claims bot “AI Jim”.
“AI Jim reviewed the claims details, checked the policy documentation, ran eighteen anti-fraud algorithms and then approved the claim. Not only was this a plus from a customer satisfaction standpoint but also from the insurer’s perspective in terms of cost efficiency. InsurTechs are having a profound impact on the insurance market with their innovation and drive to improve customer experience.”
Tasks that once took months to finish can be completed in a matter of minutes, opening the gate for material cost savings and a better customer experience.
AI will help re/insurers know their customers and risks more thoroughly, price and underwrite more accurately, better identify fraudulent claims, and detect and monitor evolving risks. They will be able to tailor products and services to the exact needs of their customers, when and as those needs appear and evolve.
However, as a second order effect, AI will improve efficiencies and product innovation but also create new intrinsic AI risks, Coleman said; “the enhanced knowledge of reinsurers’ clients that AI affords could also break down the principal of “pooled risks and cross-subsidisation especially for certain lines of business. Re/insurers are now able to provide much more specific pricing and policies for clients’ particular needs meaning that the need to pool broad groups disappears.
“In other words, people with safer risks pay less, people with higher risks pay more, and insurance could become a luxury affordable only for the very well off. Regulations or government may intervene to prevent such a shift in insurance practices and to ensure minimum insurance levels.”
Thus while the full impact of artificial intelligence (AI) on the industry and its clients is yet to be determined, what’s clear is that in coming years, the integration of AI in reinsurance could transform clients experience and outlook on the industry.
This could potentially help to close the protection gap by better-enabling insurance uptake and making claims processing a simple, cost-effective and user-friendly process.