//Automated Underwriting using Artificial Intelligence – Will this be the next big change in Insurance?

Automated Underwriting using Artificial Intelligence – Will this be the next big change in Insurance?

The world is dynamically changing at a fast clip and businesses are trying hard to keep up with the changes. Rapid digitization is changing the way that businesses function and how key activities are performed. The year 2020 saw the havoc wreaked by the Covid-19 pandemic that changed the way humans lived, worked and did business. The need for life insurance was felt more than ever before. Insurance Companies have been trying to adapt to the new reality and develop new business processes and ways of working. The underwriting process which is so crucial to the Life Insurance Industry has always been based on human decisions. It involves the customer filling up long questionnaires detailing their medical history and lifestyle based on which the risk is assessed and the premium calculated. It also involves medical tests to ascertain that the risk is under control. Millennials who have gotten used to a fast-paced world have no time to spend on such long processes when everything around them is moving so rapidly. They tend to expect a faster and cleaner experience when they need to buy insurance. So how does the Insurance industry propose to deal with this problem?

Well, recent studies show that insurers are switching to AI-based automated underwriting which can considerably speed up the process while providing a far smoother customer experience.

So what are the goals that Augmented Automated Underwriting hopes to achieve?

  • Delighting the customer

The main goal of using automated underwriting with Artificial Intelligence is delighting the customer by improving the overall customer experience. Millennials who are used to a fast-paced world find the entire traditional process of buying life insurance very messy. The process is paper-based and slow, involving several requirements like blood samples and medical tests. In today’s world, potential policy buyers wish to buy insurance by pressing a tab, not by getting a jab. The automated underwriting process using AI has transformed the customer experience by removing some of the steps involved, replacing it with the output of predictive analytics. Insurers are seeking to guide life insurance customers through a smooth online process. The focus should be on an attractive user interface as well as an improved underwriting decision process.

  • Revamping the underwriting process

Augmented automated underwriting is expected to be the next big change in the Insurance industry. It involves replacing human decisions with Artificial Intelligence and allows predictive data analytics to underwrite life insurance policies accurately. The advent of automated underwriting using artificial intelligence is expected to be facilitated by advanced algorithms and data analysis. The global value of insurance premiums underwritten by augmented automated underwriting is expected to cross a staggering $ 20 billion in the next five years. AAU helps insurers to recognize patterns and connections that are invisible to the human eye or take a long time to be identified while using human-assisted processes. AAU can spot the subtle differences and nuances and use the data to underwrite policies more accurately. This translates into faster turnaround time as it eliminates medical tests and repetitive questions and generates a faster quote after taking into account all the available data. Going forward, this would improve the way risk is calculated and managed. Decision making can continue to be controlled by underwriters instead of IT departments and they can set up and adjust the rules, parameters and decision tools based on their business model.

  • Cost savings by reducing manual intervention

The purpose behind augmented automated underwriting is to achieve overall cost savings by reducing human intervention resulting in considerable time saving. Automating the underwriting process using artificial intelligence is expected to improve the turnaround time leading to greater operational efficiency.

  • Expediting the turnaround time

Millennials are used to a fast-paced environment. They expect to be served quickly and efficiently. The turnaround time in traditional life insurance processes is very high and frustrates the new age customer who wants a quote as soon as he/she presses the button. AAU is expected to address this gap in customer expectation and speed up the process. Today’s customer is willing to share personal details if it results in faster processing and lower premiums.

  • Improving STP rates

One of the methods followed to improve operational efficiency is to use straight-through processing (STP) which involves seamless automation of workflow to minimize human intervention. This ensures that the application is processed faster with the system completing the back end verification while the AAU uses analytics to work out the accurate premium for the policy.

  • Reducing the number of questions

The normal life insurance process involves long questionnaires covering numerous questions in great detail. This tends to be tedious and time-consuming and puts off new-age customers who are averse to paperwork. AAU can use past data to populate most of the information thus cutting down the customer time and reducing the number of questions to be answered. This provides a smoother experience for the customer.

  • Identifying cyber frauds

 In the traditional process, the information provided by customers is manually checked and verified by humans. This is not only time consuming but also an inefficient process that is prone to human bias and errors. AAU ensures that the patterns are recognized and the dots connected well in advance to prevent such frauds from taking place.

  • Moving towards up-selling and cross-selling products

Switching to augmented automated underwriting would expedite the process, releasing valuable time to sales personnel to focus on cross-selling insurance products to the right customer. Advanced Analytics helps to identify which other policies would be useful for a certain customer. Selling more policies per customer helps to build customer loyalty and ensures better retention of customers.

Insurers need to adopt augmented automated underwriting to reap the benefits of operational efficiencies and improve customer experience. It has the potential to attract more first time customers as the process becomes simpler and more user friendly. This will lead to a win-win situation for both the customer and the insurer. Leveraging AI in underwriting insurance allows insurers to calculate a potential customer’s risk in advance and reduce customer onboarding barriers. It ends up saving a lot of labour, time and medical evidence costs.

In conclusion, it can be said that the Concept of Augmented Automated Underwriting evolves from a combination of technology, data analytics and insurance expertise. It will be vital for insurers to pick the right technology partners, providers and software developers to achieve success in the implementation of the new technology. Long term sustainability of this model will depend on the faith of the insurers in the underwriting algorithms and the digital roadmaps that have been designed using artificial intelligence. A successful implementation will help insurance companies to unlock more business value.

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