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Intuition vs. Algorithms: Can AI Replicate the Underwriter’s Humanness?

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Published on:8th March 2024
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Here is a recap of insights from Insurance Insider’s Webinar “Tools, Tech and Talent: Creating the Evolving Underwriter of the Future,” which spoke a lot about the art and science of underwriting, much like how we at Send see AI and technology enabling the human expertise of underwriters to be more efficient.

Despite assurances from insurance executives, a recent survey sponsored by Send found that 70% of underwriters are apprehensive about AI reducing their roles within the next year. We don’t think AI will replace the underwriter, but the role will evolve.

While many organizations are transforming to meet the expected demands of regulatory requirements and consumer needs, AI offers a host of benefits to underwriters and carriers willing to embrace change. But how prepared is the insurance industry to harness the latest technologies to help shape the future?

Insurance Insider, in sponsorship with Send, hosted a webinar, “Tools, Tech and Talent: Creating the Evolving Underwriter of the Future,” alongside Kelly Cusick, Managing Director at Deloitte, Anthony Shapella, Deputy Chief Underwriting Officer at SiriusPoint and Michelle Fesi, Technical Director for Special Lines at Zurich North America, and our Co-founder and CEO, Andy Moss, to debate the impact of AI on underwriting and discuss the evolving skill set required for the underwriter of tomorrow.

Incorporating AI into operations promises enhanced predictive capabilities, customer relationship management, and faster product line expansion. Underwriters empowered by AI will be able to allocate their cognitive resources towards more value-added endeavors, fostering a culture of innovation and agility within underwriting departments. But the panel were quick to caveat that while AI is exciting, it can’t be at the cost of running blindly to implement innovations without knowing what type of data is powering it.

In other words, AI is only as good as the data it receives. Even the most advanced algorithms can’t make decisions on their own. They need human oversight to ensure they’re making the right moves.

Michelle Fesi noted, “Large language models have a certain error rate. Insurance companies are slow to implement new technology and we’re very risk averse. So, we need to explore and validate when we introduce these tools…. Large language is something that acts human, but it’s not actually human.”

Navigating the Technological Frontier

Using AI’s predictive capabilities, insurers can process submissions faster and identify profitable risks more efficiently, giving them a competitive advantage in a rapidly evolving market. Andy Moss explained: “One of the pitfalls I see is that the insurance industry is attracted to shiny things but forgets the basics. Some of the organizations I talk to don’t track submissions across lines of business, time scales, quotes of bind, or how much business they’re declining – if you get these basics right – you’re going to be better than your competitors and that gives you the platform to do all the exciting stuff.”

By integrating data analytics strategically, insurers can identify emerging risk trends and adapt negotiation strategies, safeguarding their bottom line despite market dynamics.

“At the executive level, there’s skepticism about ROI for technology investments, and the risk you’ll create technology debt. How do you manage that debt? You need to demonstrate the business case of the ROI,” Anthony Shapella stated. “I think it helps us make a business case for technology because other industries are already using AI and making it work. At the end of the day, the ROI lies in how we apply AI to a business problem. You don’t want to invest a lot of money in a technology that’s aimed at the wrong thing. You need to spend a lot of time upfront defining what problems you’re trying to solve and what results you’re trying to see.”


The Evolution of Underwriting Skills

As AI takes over automating rote tasks, underwriters must pivot towards cultivating a deeper understanding of emerging risk landscapes and fostering a culture of continuous learning and adaptability.

AI models are starting to simulate future scenarios, enhance the accuracy of risk estimation, drive better pricing, and identify false claims more effectively. Transformation propelled by AI has changed the requisite skill set for underwriters.

Kelly Cusick emphasized the need for underwriters to cultivate a nuanced understanding of AI’s mechanics and its ramifications for underwriting practice. “Skills like contract negotiation need to focus on understanding the impact of data and technology on the underwriting role, and honing other underwriting skills now that you don’t need to do the basic admin tasks…. So, underwriters may be looking less at individual transactions and more focused on how the portfolio is performing. Skills like portfolio management, how to design leading indicators, and understanding trends will become the focus.”

Embracing the Future of Underwriting

The webinar closed with the panelists encouraging underwriters to proactively engage with their community and leverage emerging technologies to drive meaningful change within their organizations. They advocated for embracing AI’s transformative capabilities while remaining committed to core underwriting principles.

By striking a balance between human intuition and technological innovation, underwriters are navigating toward a future marked by exceptional efficiency, adaptability, and foresight.

Watch the full webinar here.

To learn more about AI’s influence on underwriting, view this related webinar: AI is the norm now, what is next?

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