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The future is now: How automation is changing the insurance industry

Jermaine Everett
August 26, 2022

Since the invention of the wheel, humans have been automating jobs in order to make their lives easier. In the late 1700’s, the Industrial Revolution changed business in profound ways, and set society on a course where machines now do the labor that humans previously accomplished. Fast forward 200 years, and machines are again reinventing the way people live and work.

Insurance automation features AI, artificial intelligence, where machines simulate human thoughts and actions. Companies use bots to do the work of humans, and these bots can learn and react in real time. This cognitive process automation is highly effective, both in terms of cost and output.  

What role does automation play in underwriting of insurance?

Automation plays a large role in underwriting insurance, because machines can easily do many of the jobs that are assigned to insurance agents, and this will allow the agents themselves time and energy to delve deeper into more arduous tasks and make more connections with the customers. Because of the non-glamorous nature of insurance, insurance companies are often short-staffed. There is always too much work and never enough time or manpower to do it. Using AI is an answer to this dilemma.

So how exactly is automation used in underwriting insurance? Underwriting is the system by which insurance companies analyze a person’s personal data to determine and ascertain the risks involved in insuring them, and at what price point the insurance risk is acceptable to take on.

In the past, manual underwriting was done by humans, which was a very difficult task. But new advanced technology uses AI and machine learning (ML) to evaluate risk, decide how much coverage the client should receive, and how much the client should pay for it.

With so many insurance companies to choose from, companies want their customers to experience stellar service. AI can lower costs, aid in efficiency, do certain tasks faster (such as fraud detection), protect data, and provide better outcomes for portfolios. In other words, the bots will do the automatic jobs of underwriting quickly and more cost-effectively, and leave the personal touch and human interactions to the humans.

In the article “Cognitive Advantage for the Insurance and Health Insurance industry in Switzerland,” Deloitte explains that automation can help insurance companies “optimize their processes by reallocating the employee to core added-value tasks and augment workforce capabilities, enabling their customer rep to handle with better quality their client specific queries and needs.”

The automation also helps achieve a 24/7 customer self-service approach so each customer can get what they need at any time virtually. In other words, the bots do the tedious tasks, the customers can use virtual tools to get feedback 24/7, and the human insurance adjusters will have the time and energy to do the more nuanced jobs.

AI technology streamlines the work for humans and gives customers better virtual access to accounts, but the bottom line is that AI will save the company money. There is the potential to save $1 trillion dollars across U.S. companies in insurance, investment management, and banking. This saving alone is enough to push companies into cognitive process automation.

The technology is already in use. Business Insider reports “Many of the top life insurance companies now use automated underwriting to accelerate the purchasing journey. For example, Prudential is taking advantage of digitally enabled, data-driven underwriting.”

AI technology is already changing the nature of the insurance business, and will continue to do so. Even if you wanted to stop it, AI is already powering many insurance companies. Currently “four of the top ten insurance companies in the U.S. are using some form of machine learning.

Over the next three years, more than 75 percent of insurance companies plan to implement some type of insurance automation to correct outdated processes.” Implementing automation sooner rather than later is smart because a business can use the money saved from the automation to power more innovation for the company.

Business Insider further explains, “With 55% of tech-savvy and 43% of non tech-savvy customers saying that personalized products and services influence their decision to stay with their insurer, automated underwriting will be key for any insurer looking to remain competitive in the industry.” If the bots do the busy work, the humans are free to personalize products and services.

The future is now, and automation will continue to be part of the insurance underwriting business. In fact, automation will soon take over the underwriting business entirely. “By 2030, manual underwriting will cease to exist for most personal and small-business products across life and property and casualty insurance.”

See also: 3 Ways Claims Automation Improves the Policyholder Experience

What is considered automation?

Automation, simply put, is when a machine does the job of a human. Whether an assembly line robot putting a car together, or a bot copying and pasting a client’s new address on a spreadsheet, automation makes the lives of humans easier. What insurance companies and health companies are starting to realize, is that using automation is more profitable too.

If employees get 4-6 hours of time back each week because bots are doing their work, they are free to show their human side to customers, and they also have more energy to innovate new products and services for the company.

What does AI already do for insurance? There are many ways AI helps with the tedious work of underwriting and insurance. In addition to crunching the numbers and showing how much risk the company can take on for each client, AI is also capable of scheduling meetings, generating common documents that need to be signed, updating addresses, copying and pasting from one form to another, and other similar tasks.

What are the risks of automation?

Although there are many benefits of automation, especially for insurance automation, like anything else, there are also some risks. As automation gets increasingly complex, the algorithms get more complicated as well. One little misfire could create a cascading problem that could effectively shut down the automation.

For instance, Deloitte describes one manufacturing company that completely automated their assembly line, but failed to change the quality controls for human assessment of the process; this led to reduced quality and increased costs. As machines take on more “human” tasks, the controls need to be adjusted to meet all of the new requirements, so that the checks and balances are in place correctly.

Finally, there is the relationship between the humans and the machine. For example, some people worry that if machines do increasingly more and more work, humans may be out of a job. That is simply not true. Although bots can take over some aspects of the insurance automation, there is always room for a human touch.

The humans and the bots can work within a symbiotic relationship. If bots work to their strengths of precise, error-free work that is very fast and efficient, then humans are free to build relationships with people and solve problems creatively and with teamwork.  

Is RPA or AI better?

Both RPA and AI have their place in automation. Robotic process automation, (RPA) can do simple tasks as long as there are no variations involved. RPA is perfect for mundane and repetitive tasks that don’t take any thinking or decision making. Intelligent automation, on the other hand, keeps getting better and more human-like as the technology continues to advance.

AI looks for patterns in data. AI can not only mine patterns in huge amounts of data, but also can interpret it and assess risks all on its own. This is a huge boon for the insurance industry, and other industries as well. With AI, companies use bots that can learn and adapt to variables in real time.

The future belongs to AI, and this cognitive process automation will continue to change the world of business. These algorithms feature bots that can learn and grow, and insurance adjusters think that someday AI will be able to analyze cars via machine learning and machine vision, to decide on the damage to a car that has just been in an accident, or they will be able to immediately auto-adjust life and car insurance premiums if an accident has been detected. If driverless cars ever take over, bots could offer insurance immediately in this situation as well. The sky’s the limit as to where AI can take the insurance world.

Insurance automation is already changing the way we live and work. In less than ten years, insurance agencies claim underwriting will be entirely automated, and in that time, cognitive process automation will be even more advanced.

The future is now, and companies that want to move ahead need to embrace AI and integrate it into their businesses in order to become more cost-effective and efficient. With bots “doing the dirty work,” insurance agents will be free to innovate, relate to customers, and build relationships. And with all the money and time saved, insurance companies can use their savings to build a better product.

The future is now, and without AI, your company just might be left behind.

See also: Insurance Rating Software vs Robotic Process Automation in Insurance

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