It’s crunch time for P&C. Investment yields are declining while combined ratios are holding up in the 97% range
. This has P&C insurers wondering: “What can we change in our operations to improve our economics?
Conclusive answers are now coming from the field of cognitive technology, the variety of artificial intelligence that deals with knowledge and textual information.
In this post series, I want to share three areas where cognitive is delivering unprecedented productivity gains and insight, and leading to deep changes in how P&C insurers do business.
Why cognitive technology is a great match for P&C
P&C insurance is particularly people- and paperwork-intensive. Both underwriting and claims management revolve around the production or retrieval of information from documents – a policy or a claim package - that capture the specifics of the insured’s case. These are particularly time-consuming tasks that up to now have entirely fallen into the lap of human operators and typically represent 20% of the combined ratio.
What cognitive technology brings to this picture is its ability to read documents much in the same way humans do, in a fraction of the time. It automatically harvests a case’s characteristic pieces of information and reasons on them. This reduces the time operators need to spend on such tasks from hours to seconds. As a result, insurance professionals can focus on the highest-value areas of their jobs, such as decision-making, rather than the more time-consuming, menial tasks. And it takes significantly less time to service a case.
See also: P&C Insurers: Come Out of the Dark Ages
As a first example, let’s look at how this plays out in claims.
- Automate claim routing
- Summarize key claim characteristics
- Suggest claim valuation
- Focus claim handlers on high value activities
Because claims workflows critically depend on proper information flows, grooming even ancillary information may take up a disproportionate share of claims handlers’ time. Cognitive technology alleviates a large part of this issue.
When dealing with automotive claims, for example, it can review claim packages automatically to evaluate their complexity and route them accordingly, recover essential aspects of accident descriptions to support liability determination and suggest an appropriate settlement value based on the facts of the case, such as which injuries were incurred, what medical tests or treatments were applied, what the medical history is and how the prognosis looks. Overall, this accelerates the claims workflow and helps claims handlers focus on the highest value part of their work: decision making.
A second area where cognitive plays well is underwriting.
- Consistently grade risk and flag exposure
- Accelerate quotes
- Optimize risk engineers’ time
An essential part of underwriters’ jobs is to evaluate the risk profile of the customer they will be insuring. In commercial property insurance, for example, this involves analyzing third-party risk reports that describe the facilities to be insured, their particular risk factors (such as building combustibility, presence of flammable materials …) and mitigators (smoke detectors, sprinklers, fire extinguishers, site surveillance …).
Cognitive technology quickly and consistently extracts each of these indicators and reports an overall, evidence-based, risk grade to the facilities. This means risk engineers can allocate more of their time to direct verification of the most complex cases, and underwriters can turn around quotes on new policies faster.
When applied to the review of existing policies, cognitive can analyze clauses and compare them to reference policies to flag misalignments and excessive exposure. This means underwriters can more easily prioritize which clauses of a policy they may need to renegotiate in the future.
See also: P&C Core Systems: Beyond the First Wave
That's it for today, but in part 2 of this series we’ll look at a third area
where cognitive can help, as well as some ideas on how you can start building a business case for applying cognitive to your own business. If the suspense is too hard to bear, you can also download the full white paper here
Let's discuss it!
My co-author Pamela Negosanti
and I are curious for your
insights. If you're involved in applying cognitive to insurance, we'd love to know how you see it from your vantage point -- so please share your thoughts below and let's connect