According to leaders from ZestyAI, an AI-enabled property and risk analytics platform, property and casualty (P&C) underwriting can be significantly improved using AI.
In a recent discussion with McKinsey, executives from ZestyAI noted how insurers’ capacity to accurately estimate, price, and mitigate risks is core to their value to the market.
AI is now contending with a new set of challenges that has disrupted traditional risk approaches. Specifically, climate risk has reached new levels of urgency as ongoing floods, wildfires, and other catastrophes erode the insurability and widen protection gaps of the communities they strike, warned the execs.
When questioned on how AI can assist property insurers and what its limits are, Kumar Dhuvur, the co-founder and chief product officer of ZestyAI, commented, “To me, the carriers that adopt AI first will definitely see a massive benefit. As other carriers cede market share, the forward-thinkers will be able to protect that market share and garner a share of the profits by leveraging models that manage risk better. Obviously, AI is a key enabler. But at the end of the day, it’s all about a better risk-splitting model, and that’s why they’re able to capture that value.”
Attila Toth, the co-founder and CEO of ZestyAI, noted that the thing that the industry needs to focus on is value rather than not nice-to-have R&D, or a secondary review on risk, nor process efficiency enhancements.
“It’s moving AI to the core of the business, which is underwriting and rating, and avoiding billions of dollars in losses as an industry. It’s about proving and realizing that value,” she further commented.
Dhuvur added that AI will not only help in setting better rates, but it will also help improve segment risk. “But the question is, what do you do with those insights? One of the things we have done is provide not only risk scores but also the underlying drivers at the property level for those scores.
“So, if you really want to reduce systemic risk instead of just splitting it, you also have to take steps to bring the risk down for each and every property. And I think this is where AI will be quite helpful.”
Toth further added, “As you know, a lot of public and private funding is targeted at climate risk mitigation. If you look at how much money electric utilities in California, for example, are spending to mitigate risk in their own system, you have to ask, How do you spend those dollars most efficiently? AI has a very big role to play in understanding the structure-specific vulnerability of critical infrastructure and that of homes and businesses depending on such infrastructure.”
