Insurance risk managers must embrace technology disruption

The accessibility of sophisticated artificial intelligence (AI) and machine learning (ML) algorithms, enabled by the high-performance capabilities of cloud-based data centres, mean insurers can more readily embrace a culture of innovation when it comes to their traditional approaches to business processes.

Of course, the rising number of insurtechs, and evolving customer demands, have contributed to the creation of a disruptive environment that can capitalise on digitally driven solutions. Whether through partnering with insurtechs or looking at more effective ways of modernising their existing processes and systems, insurers are well-positioned to capitalise on global changes in the industry that have been accelerated with the onset of the COVID-19 pandemic.

AI and ML introduce a level of automation in data analysis and the decision process that was not possible before. It is especially in underwriting, claim decisioning and product development that these technologies prove to be invaluable. Consider the potential of underwriting or making claims decisions by machine thanks to injecting AI into processes that can now learn from and replicate decisions from experienced consultants. This sees machines capable of making decisions just as their human counterparts would have done, but at a faster rate, with absolute consistency and 24/7 availability. And then there are the opportunities for developing products based on changes in risk and customer life stages at an individual level to provide dynamic pricing. No longer does insurance simply have to be an off-the-shelf solution, but one that reflects the unique risks and preferences of individuals.

Confluence of technology and partnerships

With numerous insurtechs providing specialised data, service or product offerings, it becomes increasingly important for insurers to look outward to these new providers for integrated solutions. These solutions should combine credit, health and fraud risk views on business decisions, overlaid with AI and ML capabilities to minimise manual, inefficient interventions.

To scale and remain relevant, insurers need to embrace these new technologies and partnerships. Their policy holders demand modern user interfaces with real-time decisioning and service and the only way to achieve this is through automation, driven by intelligent risk processes. 

Managing change

There are two ways that technologies like AI and ML can be integrated into the insurance process. Firstly, there is the outside-in approach. This focuses on strategy development that reads and responds to market dynamics, customer insights and emerging technologies to create differentiated value. Secondly is inside-out. This is an approach to strategy development that is internally focused, leveraging the insurer’s capabilities and strengths as a primary point of departure to create differentiated value.

Both these strategies account for how technology use within insurers is evolving and how the insurer can potentially future-proof themselves against ongoing external market changes. Even so, risk managers must embrace the implications that innovation can unlock inside the insurer. To do so requires a mindset shift towards one that actively seeks AI, ML and insurtech partnerships as enablers for growth. Once this is done, one of the biggest obstacles to providing agility within traditional processes is removed.