Findings from the recent report by the Capgemini Research Institute highlight that although 62% of insurance executives recognize the positive impact of AI/ML on underwriting quality and fraud reduction, many P&C underwriters remain sceptical about automated recommendations from predictive analytics tools.
The report underscores the increasing demands from policyholders for affordability, simplicity, and transparency as inflation rises.
However, underwriting practices have encountered challenges, with combined ratios surpassing 100% due to factors such as natural disasters, emerging risks like cyber threats and generative AI, and regulatory complexities.
In response, Adam Denninger, Global Insurance Industry Leader at Capgemini, emphasises the need for insurers to adapt to this volatile environment by rethinking traditional underwriting approaches.
Denninger states, “It requires shifting away from legacy models by modernising core systems and deploying advanced technologies that drive better outcomes and transparency. Embracing AI-driven insights and automation is crucial for the industry to drive a competitive path towards underwriting profitability that adapts to evolving risk dynamics and policyholder behaviours.”
According to Capgemini’s research, only 8% of property and casualty (P&C) insurers are recognised as underwriting “trailblazers,” consistently outperforming mainstream carriers by harnessing AI-driven insights and automation for informed decision-making and precise risk assessments with efficiency.
These industry leaders foster enhanced collaboration and customer transparency by ensuring underwriters remain central to decision-making processes.
The report reveals that a staggering 83% of P&C insurance executives acknowledge the crucial role of predictive models in underwriting’s future, yet only 27% report possessing advanced capabilities.
The reluctance to adopt AI/ML technology among underwriters stems from concerns over perceived complexity (67%) and apprehensions regarding data integrity (59%).
Nevertheless, the report suggests that insurers can overcome this reluctance “by engaging underwriters early on to secure buy-in, retain the all-important “human in the loop” to ensure the AI/ML models are explainable and appropriately transparent, and continually assess progress.” Building trust among underwriters is pivotal to realising the benefits of trailblazing practices.
Overall, equipped with advanced underwriting capabilities, trailblazers can anticipate improvements in efficiency, accuracy, and customer experience.
