As artificial intelligence (AI) continues to transform the insurance underwriting process and the value chain by boosting efficiency and improving accuracy, it’s also creating potential for insurers to further improve productivity and minimize, if not eliminate, human touch points, according to a new AM Best report.
In its Best’s Commentary, titled, “Recent Layoffs by Insurers Alone Do Not Signal Rating Pressure,” AM Best notes that even as hiring levels decline and layoffs appear to be rising across the insurance industry, it is too soon to cite AI as the leading cause of the job losses, at least at this nascent stage. The recent layoffs would more likely fall into the cyclical, rather than the structural, category.
“Personal lines writers, including auto and homeowners’ insurers, are the most affected by the current layoffs,” said Sridhar Manyem, senior director, industry research and analytics, AM Best. “Carriers’ loss ratios and underwriting margins are being pressured by loss cost inflation, reinsurance capacity and pricing, and rising climate risk.”
The report cites the potential for lower premiums and greater flexibility in coverage limits may help reduce costs and generate savings for both insurers and customers. Other parts of the insurance value chain, such as customer service, policy generation, claims handling, and areas that use document and image processing, could also be enhanced by the advent of large language models.
“As AI capabilities broaden and insurance companies become more comfortable using AI for business processes, either through their own efforts or by outsourcing, automation will impact industry employment levels and a much wider set of occupations,” said Edin Imsirovic, director, AM Best.
The report also discusses the potential for Generative AI to impact several applications, including writing code, creating marketing content, analyzing legal documents, and providing customer service. However, given that this technology is still in its early stages, having human expertise available in the near term is critical.
AI can help insurers gain deeper insight into their customers through data-driven sets that are impossible through traditional underwriting. By analyzing large volumes of data such as customer demographics and preferences, AI can help companies identify trends in risk profiles and develop tailored solutions for each customer.
To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=337735.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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