Underwriting is one of the most complex business aspects for any insurance firm, and robust insurance underwriting software can facilitate it. By implementing such a system, a company can optimize and automate numerous underwriting processes, from application review and risk assessment to coverage determination and premium calculation, fostering its overall operational efficiency.
By adopting an insurance underwriting system complemented by artificial intelligence (AI), a company can further improve underwriting performance and embrace tangible business benefits. Sixty-two percent of insurance firm executives who participated in the 2024 World Property and Casualty Insurance survey from Capgemini say AI technology helps them enhance underwriting efficiency and quality.
This article highlights three business advantages firms can gain by implementing AI-powered insurance underwriting software.
Improved Underwriting Accuracy
An insurance underwriting system that AI complements can help a firm improve underwriting risk assessment and avoid many potential risks.
For example, AI algorithms embedded into insurance underwriting systems can collect both structured and unstructured data from documents submitted by applicants (birth certificates, medical reports, electricity bills, etc.) in different formats and process this data to bring it into a unified view.
Thereby, the software can help underwriters run more comprehensive and accurate risk assessments.
AI-enabled software systems can also facilitate the analysis of applicant data. AI algorithms can analyze the entire array of collected data to assess an applicant's risk profile, identify potential risks and provide recommendations to underwriters on whether the application should be accepted, according to the defined criteria. Given that AI can detect patterns in data and identify risks that might otherwise go unnoticed by humans, the technology can significantly contribute to overall risk assessment accuracy.
Fraud detection and prevention is another AI-enabled underwriting software capability that can be useful for firms. For instance, AI algorithms can identify fake information, misrepresentation or non-disclosure in potential insureds' applications much faster and more accurately than humans. An AI algorithm can flag a suspicious application, suggesting human operators examine it more thoroughly and potentially deny the application. In this context, it is no surprise that 59% of insurers that participated in the 2024 survey by Infosys are planning to increase their budgets for AI-powered fraud detection.
Enhanced Productivity of Underwriters
Underwriting software enhanced with AI capabilities enables insurance firms to improve underwriters' performance significantly. AI can automate both clerical and high-value underwriting tasks, including risk assessment and fraud detection. Compliance checks, premium calculation and record-keeping of insurance policies are other activities that can be automated with the help of AI.
Due to the automation of these and other activities, underwriters can operate much faster and accomplish more tasks – 90% of insurance specialists interviewed by KPMG in 2024 agreed that AI saves time. By reducing the load on human resources, insurance firms can achieve greater cost-efficiency and profitability. Moreover, AI-powered software enables underwriters to focus on complex customer issues and devote more time to insurance product personalization, enhancing customer satisfaction and loyalty.
Improved Business Competitiveness
Establishing accurate and competitive policy pricing is essential for any insurance firm, as price is one of the primary factors for customers to consider when choosing an insurance provider. However, setting competitive pricing for insurance premiums is a highly challenging task, especially in commercial lines. Nearly a third (32%) of all commercial lines underwriters surveyed by Capgemini in 2024 say building competitively priced policies is their major industry challenge.
An insurance underwriting system complemented with AI can help professionals streamline premium pricing activities. Specifically, after an underwriter has determined coverage for a customer, AI algorithms can calculate policy premiums based on personal information, including age, lifestyle, driving records, credit history and other data gathered from an insured and up-to-date market data related to competitors' prices (if the software is connected to third-party data sources via application programming interace, or API). Such a personalized approach to pricing can help an insurance firm foster its competitiveness in the insurance market and increase customer satisfaction.
Loop, a U.S.-based car insurance and insurtech startup, has implemented a suite of technologies, which includes telematics and artificial intelligence, to enable dynamic insurance price calculation for drivers. Instead of relying on credit scores to estimate the cost of auto insurance, AI algorithms calculate pricing based on three key factors - a customer's vehicle type, driving record and driving behavior. Loop claims its dynamic pricing approach has already helped customers save $6.3 million on insurance premiums and continues to save $1,360 per year for each customer.
Final Thoughts
Insurance underwriting software, helping businesses centralize and automate key underwriting processes, is essential for insurance firms. By implementing a system complemented with AI, a firm can enhance its underwriting workflows and leverage additional business benefits. Reduced underwriting risk, enhanced underwriters' productivity and improved business competitiveness are some notable ones.
Nonetheless, a firm can gain all these advantages only if it implements an AI-powered system successfully. Careful planning and execution are crucial for realizing the full potential of AI in insurance underwriting.
