Intelligent automation is poised to transform the core of the insurance business. It will change substantially how insurers underwrite risk.
The conventional practice of underwriting, which relies on historical data and analytical expertise, has been pivotal to the insurance industry for centuries. Intelligent automation, a combination of sophisticated artificial intelligence (AI), machine learning and powerful robotic process automation (RPA) technology, will enable insurers to improve how they determine their exposure to risk. “Virtual underwriters” will be quicker and more accurate than traditional methods.
More important, intelligent automation also allows insurers to shift their focus. They’ll be able to move away from simply assessing risk, based on past experience, and paying claims, determined by calculating damages or losses. Instead, insurers will be able to use intelligent automation solutions, with real-time data analysis and predictive analytics, to help their customers better manage risk and avoid losses. Insurance companies will increasingly become risk advisers and mitigators instead of compensators for misfortune. The compelling point here is that risk mitigation is a superior value proposition for the customer, which is why this model will win out in the long run. If insurers don’t offer this service, someone else will.
Intelligent automation will enable insurers to analyze huge volumes of complex, real-time data and make myriads of swift, far-reaching decisions across their organizations. They’ll be able to use this capability to develop new products, enter additional markets and forge strategic partnerships. Insurers will also be able to apply intelligent automation to better manage the rising tide of external data, such as census information, credit scores and weather forecasts, which is essential for risk assessment. Think about the real-time ability of the new traffic apps like Waze to immediately give us advice on different routes to take to avoid traffic. The parallel is clear: the technology being deployed today will allow insurers or others to offer this kind of real-time risk avoidance advice for all kinds of risks.
Some far-sighted insurers are already deploying intelligent automation to enhance their underwriting. AXA in France, for example, has introduced intelligent support systems with underwriting capabilities to improve the performance of its sales force. Canadian firm Manulife has cut the turnaround time of its Quick Issue Term online life insurance offering by automating its application and underwriting processes. Lincoln Financial is automating its analysis of third-party data to cut costs and speed up the issuing of policies.
Intelligent automation will further disrupt insurers’ underwriting as more carriers recognize the potential of the technology. Scouring supporting documents for insights to risk assessment; demand-analysis for potential new products; automating asset classification; improving the accuracy of policy and pricing ratings; and helping employees search for underwriting information are likely applications.
The growing investment by insurers in data analytics and the Internet of Things, which complement the data management and workflow capabilities of intelligent automation, will accelerate this trend and spur more insurers to offer real-time risk management services. US insurers State Farm, USAA and AIG, for example, are looking at using drones to gather additional risk assessment data.
The shift to intelligent automation is certainly not a trivial task. It will require insurers to rethink and redefine their business models and IT architectures. However, the rewards for companies that quickly grasp its potential are likely to be substantial and enduring.
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