Commercial Underwriting Needs Humans and AI
On May 11, 1997, history was made. Deep Blue, the IBM Artificial Intelligence (AI) supercomputer, defeated Gary Kasparov, a world champion chess master, in a six-game match. This was the first time a machine ever defeated a world champion in chess and marked the beginning of a new era. However today, there are many cases where AI and humans are working together to achieve better results. As an example, an AI-enabled sous-chef called Chef Watson from IBM, is able to create recipes that help their human partners in the kitchen. This shows that AI and humans can work together to accomplish more. On a similar note, in the realm of commercial underwriting, until there are major changes in the modern world, human underwriters have a great opportunity to use AI to produce the best results.
May 11, 1997, Gary Kasparov was defeated by Deep Blue, marking the beginning of a new era.
In a survey done by Ernest & Young (EY) and the Chartered Property Casualty Underwriters (CPCU) Society in 2016, it was found that underwriters, whose primary activities were previously manual data collection, analysis, risk selection and pricing, are now leveraging technology to evolve their role to other areas and activities. These include sales, data science, customer advocacy and innovation.
Over the two years since that survey was released, we've seen the role of the underwriter continue to evolve. While the traditional functions of relationship management, customer service and analysis remain - how they are done and the quality with which they are delivered have drastically improved.
More data is available freely online now than ever before. In addition to local, state and federal government data being accessible in digital formats, an increasing number of small and medium businesses (SMBs) have a website. Per SmallBusiness.com, 71% of SMBs currently have a website and 92% will have a website by the end of 2018. The information on these websites is gold for commercial underwriting.
In addition to the vast public availability of 3rd party data, technologies such as AI can be used to collect and analyze this data. Armed with these tools, commercial underwriters are better equipped to provide more accurate information and faster service to their agents and clients.
Per the recent article, “How Underwriting will Change with Machine Learning by Mary Kotch,” machine learning has allowed underwriters to analyze risk, prioritize submissions and price insurance in a superior way. As a result of this combined AI and human underwriting effort, administrative tasks are virtually eliminated, chances for human error are greatly reduced, and most importantly risk mitigation and premiums are better managed and calculated. This leads to an improved customer experience while reducing the insurer’s expense and loss ratios.
Human Thinking + Artificial Intelligence = Optimal Results
As the world continues to rapidly change, it is clear that commercial underwriters will continue to become more empowered by AI technologies. The commercial underwriting role will continue to shift from admin work and manual analysis to being able to focus more on key decisions, strategy, relationship-building and innovation. AI-powered data collection and underwriting analysis capabilities now provide the insights an underwriter needs in near real-time, which frees underwriters up to...underwrite.
Sure, there may come a day where AI can best humans in every aspect of commercial underwriting, just like what happened to Gary Kasparov in chess. But at that point, we may be in such a drastically different world that the very nature of risk management will have likely changed. Until that time, the optimal path is to empower commercial underwriters with AI to improve performance today.
Where do you see the biggest opportunity for AI in commercial underwriting?