Do underwriters trust artificial intelligence?

Report examines underwriter confidence

Do underwriters trust artificial intelligence?


By Terry Gangcuangco

The Capgemini Research Institute has published its World Property and Casualty Insurance Report 2024, which examined, among other things, underwriters’ confidence when it comes to the use of artificial intelligence or machine learning technology (AI/ML).

Here are some of the key findings from the report, the scope of which spans Australia, Belgium, Brazil, Canada, France, Germany, Hong Kong, India, Italy, Japan, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, the UK, and the US:

  • 42% of policyholders find the current underwriting process complex and lengthy;
  • 43% of underwriters regularly accept automated recommendations from predictive analytics tools;
  • 83% of P&C insurance executives believe predictive models are critical for underwriting’s future; and
  • 27% say their firm has advanced capabilities.

As indicated, less than half of underwriters trust decision-support tools, with perceived overcomplexity (67%) and concerns over data integrity (59%) cited as among the reasons for underwriters’ reluctance. This comes even as 62% of executives think AI/ML boosts underwriting quality and fraud mitigation.

According to the report, one of the things that insurers can do to overcome the hesitation is engage underwriters early on to secure buy-in. AI/ML models also need to be explainable and appropriately transparent while ensuring that progress is continually assessed.

Meanwhile, Capgemini noted: “Forty-nine percent (49%) of underwriters value drone image data yet very few insurers are equipped to support and analyze them effectively. Similarly, one-in-two underwriters want data from connected devices for real-time information about personal and commercial assets, although only 12% of insurers can capture such data effectively.”

It was highlighted that incomplete risk evaluation impacts 77% of insurers, while 73% are facing limited pricing accuracy as a result of weak data resources.

Adam Denninger, global insurance industry leader at Capgemini, said: “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 rule book.

“It requires shifting away from legacy models by modernizing 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.”

Capgemini’s report was based on the views of 294 insurance executives, 201 insurance underwriters, and 3,323 policyholders.

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