Benefits of artificial intelligence in insurance underwriting 

Digital transformation of the insurance industry is progressing rapidly, revolutionizing the field with cutting-edge innovations and custom insurtech products. Among various IT advancements, artificial intelligence technology is a disruptive game-changer that penetrates an ever-widening circle of insurance pipeline activities. The use cases of artificial intelligence in insurance sector cover such shop floor processes as claims management, fraud detection, data analytics, and more. Another niche workflow where AI and insurance make a perfect match is underwriting.  

Let’s find out why manual underwriting is inefficient and how using AI in insurance underwriting can give companies that embrace it a competitive edge. 

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The downsides of manual underwriting made plain

The insurance underwriting system is the bedrock of the domain. Agents perform a comprehensive risk assessment to understand whether the organization will insure a person’s life, health, property, etc. If the game is worth the candle, underwriters determine the policy’s price.  

For many generations of insurers, this job has totally depended on their understanding and gut feeling. Acting on a hunch and manually sifting through client data doesn’t work today. The exponential growth of the customer base and the need to analyze tons of information manifest the inadequacy of hand-underwriting.  

What are the greatest shortcomings of manual underwriting technology? 

• Complexity and lengthiness. In our fast-paced world, it takes an employee ages to complete all steps of the intricate underwriting routine, which results in a long turn-around time. 
• High probability of errors. However trained or experienced an agent is, they can still make mistakes. Errors, omissions, oversights, and inaccuracies in human-handled documents will cost the company or clients dear.  
• Low productivity. Given the enormous amount of work to be done in each case, manual underwriting becomes a plodding, resource-consuming activity that negatively affects the company’s performance. 
• Inefficient pricing. The human factor is often the cause of quality issues, procedural confusion, and other problems that account for higher premiums and slipshod pricing. 
• Low competitiveness. Without the power of machine learning and AI technology, agents can hardly hope to leverage predictive analytics or implement product personalization. Naturally, it lags behind tech-savvy rivals who have been far-sighted enough to harness AI in their underwriting initiatives. 

Because of all the inadequacies of manual processes in this field, employees of companies that don’t leverage AI for insurance underwriting spend 40% of their working time on non-core activities, which is likely to cost organizations from $85 to $160 billion within the next three years as an efficiency loss. If you don’t relish the idea of such huge financial setbacks, you have no choice but to implement artificial intelligence in insurance software honed for underwriting.  

You might be interested in reading our article “Insurance analytics and artificial intelligence”

Benefits of artificial intelligence in insurance underwriting

As a seasoned IT company specializing in developing underwriting solutions, DICEUS realizes that AI is used in insurance underwriting in three ways. First, it can analyze loss statistics for various threat vectors. Second, it can calculate a median risk score. Third, it can enable agents to apply different pricing scales to those use cases that are below or above a definite score. If a software solution is equipped with the necessary features, it will usher in the following perks for the organization that utilizes AI in insurance underwriting.  

• Minimizing error and manual jobs. Unlike the human workforce, machines won’t make mistakes, no matter how long, redundant, or complicated the assignment they deal with is. AI automation allows the analysis of large data sets in different formats very quickly by applying predetermined models and methods, which provides personnel with actionable insights. 
• Addressing unstructured data challenges. A fair share of data comes to the underwriting solution in an unstructured form, making up a disparate collection of numbers, names, locations, and various specific terms from workflow documents. Thanks to AI, which performs data segmentation and arrangement in text mining and information retrieval, underwriters obtain a cohesive data framework where the necessary records can be found quickly and easily. 
• Fair pricing. Since all risk profiles are assessed automatically, AI ushers in a more equitable price-setting system and eliminates all biases that may otherwise appear. Besides, AI’s capability to assemble data from multiple sources allows agents to get a 360-degree view of the customer and thus identify their risk profile more accurately, contributing to fairer premium rate estimation. 
• Mitigating risks. The more data AI mechanisms analyze, the more complete picture of the potential client they provide. Consequently, insurers who leverage, for instance, AI in life insurance underwriting can pinpoint high-risk customers leading unhealthy lifestyles, predict their behavior, and forestall financial loss by avoiding cooperation with them. 
• Preventing fraud and cyber threats. Like any finance-oriented domain, the insurance sector is notorious for numerous scam attempts. By integrating AI-driven insurance risk management systems into underwriting solutions, companies can detect fraud or credit default threats and take proactive measures to ward off negative scenarios. Plus, the exclusive security of such software reinforces the protection contour of the enterprise’s IT infrastructure and ensures its inviolability against cyber attacks that target both insurance companies and their clientele. 
• Boosting operational efficiency. With all redundant and repetitive processes delegated to machines, the insurance workflows are streamlined and facilitated. All stages of the underwriting pipeline are handled promptly and competently, which essentially augments customer experience. 
• Expanding the enterprise’s IT ecosystem. Underwriting solutions seldom function as standalone products. Instead, they become elements of a comprehensive infrastructure that unites all of an insurance organization’s high-tech resources into a single system. By being integrated into this infrastructure, an underwriting tool receives access to the core database and other IT environment components, which increases its power manifold.  
• Enhancing customer satisfaction. AI mechanisms can analyze people’s behavior and preferences, providing data-driven insights used to personalize insurers’ methods of leverage, policy terms they offer, and pricing strategies they apply. Such tailored approaches, in combination with the high quality and speed of services, pave the way for the growth of satisfaction across the clientele and foster brand loyalty.  
• Increasing revenue. All the described assets of AI-driven underwriting combine to translate into more conversions, strong customer retention, lower loss ratios, greater productivity, and optimal resource utilization. As a result, the insurance company receives higher ROI and more profits.  

Given the specifics of the niche, you can make the most of the AI-driven underwriting software only if you hire a competent vendor to develop and implement it. DICEUS has profound industry competence and technical skills to deliver a high-end AI underwriting product of any scope and complexity. Contact us to revolutionize your underwriting routine and take one more step towards digitalizing your insurance business.  

Related article: “How to build insurance policy management software: 5 key tips” 

To sum it up

Artificial intelligence in insurance industry has become a powerful driver of revolutionary transformations that are going on at a tremendous pace. Among the numerous use cases this technology has in the realm, employing it for the development of underwriting software is one of the mainstream trends nowadays.  

When performed manually, underwriting was a complex and time-consuming process that required enormous personnel effort. However, errors, inaccuracies, and fraudulent activities could not be avoided, resulting in financial loss and customer churn.  

Artificial intelligence allows insurers to minimize mistakes, solve unstructured data problems, mitigate potential risks, prevent fraud, improve operational efficiency, optimize price setting, and augment customer satisfaction. You can enjoy these boons by commissioning a bespoke AI-driven underwriting tool from a seasoned high-tech vendor with profound niche expertise. 

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