Capgemini has published its most recent World Report Series 2024, Property and Casualty Insurance: Become an underwriting trailblazer, which examines insurance leadership’s optimism about artificial intelligence (AI) and machine learning (ML) and underwriters’ reticence to regularly accept automated recommendations from predictive analytics tools.
Citing concerns about complexity and data integrity, just 43 per cent of underwriters surveyed globally by the business and technology transformation firm in their annual survey of 201 underwriters said they regularly accept automated recommendations, while 62 per cent of the 294 senior insurance executives surveyed say AI and ML is elevating underwriting quality and reducing fraud.
AI-driven insights
Just eight per cent of all companies surveyed were identified as being “trailblazers” by the firm. These, they say, leverage AI-driven insights and automation to make decisions. “These industry frontrunners drive greater collaboration and customer transparency by keeping underwriters at the heart of all decisions,” they state.
Among insurance executives, the Capgemini research shows that 54 per cent say they lack sufficient data to delight customers, legacy systems hindered the same for 51 per cent of respondents and a lack of skilled talent was identified as a customer delight barrier by 47 per cent of those surveyed.
Precarious environment
“Today’s insurer is operating in one of the most precarious environments in recent memory. The industry must react to this volatility by rethinking the underwriting tool book,” says Adam Denninger, global insurance industry leader at Capgemini. “Embracing AI-driven insights and automation is crucial for the industry.”
Among the report’s findings, Capgemini says 83 per cent of property and casualty (P&C) insurance executives believe predictive models are critical for underwriting’s future but only 27 per cent say their firm has advanced capabilities. For example, they say 49 per cent of underwriters value drone data imagery, but very few insurers are equipped to analyze it; one in two underwriters want data from connected devices for real-time information about commercial assets but only 12 per cent of insurers capture such data effectively.
Breaking free from legacy models
“What are trailblazers doing differently? They’re breaking free from legacy models, attracting the right talent and fostering a culture of innovation,” the report states. They add that the industry reported a global P&C combined ratio of 103 per cent in 2022, the third year of losses in four years. “This reveals the limitation of outdated models and suggests that carriers can’t compete only with base rate increases but also require more sophisticated risk analysis.”
This lack of “data mastery,” they add, can also hurt an insurers’ core business: Incomplete risk evaluation hurts 77 per cent of insurers, 73 per cent say they grapple with pricing and 70 per cent say inconsistent underwriting decisions “are a prevailing headache.”
Fragmented input
“Without the ability to collect and analyze varied data, insurers will struggle because critical functions – risk selection, pricing integrity and reserving – rely on fragmented input, which invites adverse selection. Insurers that build an environment where data is ethically, transparently and securely managed, shared and utilized can overcome underwriting challenges.”
