For decades, the insurance industry has been known for its cautious approach to embracing technological change. While other sectors raced ahead with digital innovation, insurance remained rooted in traditional practices, often slow to evolve. However, with the inexorable rise of artificial intelligence, insurers now have an opportunity to break free from this legacy and transform their operations.

The real question isn't whether AI can revolutionize insurance – it can. The question is how we can leverage this transformative technology without losing the essence of what makes insurance truly valuable: the human touch.

AI must serve to amplify the personal connections that customers rely on, not replace them. The future of insurance lies in finding the delicate balance between embracing technology while preserving the trust and empathy that define meaningful customer relationships.

Meeting Rising Customer Expectations: Speed vs. Personalization

Strides have already been made in the industry with the advent of online claims processing in the last decade. AI will take this to the next level, automating repetitive tasks and enabling claims to be processed far faster. This speed is no longer just a luxury – it's the baseline. Yet, while efficiency is critical, it's only part of the equation.

Modern customers expect more than fast service; they demand personalization. In a landscape where pricing is transparent and standardized, the ability to tailor products and interactions has become the ultimate competitive advantage.

Policyholders today want solutions that reflect their unique circumstances. They want recommendations designed with them in mind and interactions that make them feel seen and valued. Insurers must integrate this ethos into every touchpoint, creating an experience that feels both efficient and personal. AI, therefore, must also enable deeper and more meaningful connections.

Chatbots Must Augment the Agent Relationship, Not Replace It

Chatbots are the most obvious first application of AI in the insurance industry, and with good reason. They excel at handling routine inquiries, such as retrieving policy numbers or answering basic questions, and are well-received by customers – 87% of consumers rate their interactions with bots as neutral or positive.

But insurance is built on trust, and trust requires a human connection. While chatbots are invaluable for efficiency, they cannot replace the empathy and expertise of a human agent.

For repetitive tasks, such as processing straightforward claims, chatbots come into their own. Imagine a customer drops their phone and submits a photo of the damage via a chatbot, and the AI processes the claim for a cracked screen in seconds. This level of automation will be a key driver of customer satisfaction.

However, complex scenarios – such as disputed claims or a breach of personal data – demand a human touch. In these cases, AI can gather initial details and seamlessly hand the case off to a human agent. This ensures that customers receive personalized guidance and support when it matters most.

The ideal approach is a partnership between AI and human agents. Chatbots handle the routine, freeing human agents to focus on high-value interactions that require empathy and expertise. It's not about replacing people; it's about empowering them to deliver exceptional service at scale.

How AI Can Drive Even Greater Personalization

While AI is transforming operational efficiency, its real potential lies in delivering hyper-personalized customer experiences. Achieving this requires insurers to think beyond claims history and harness data from a variety of sources.

The true power of AI lies in its ability to turn vast amounts of data into insights that enhance every touchpoint of the customer journey. The future of insurance is moving beyond reactive claim processing to proactive risk mitigation. This personalized approach ensures that customers are neither undercharged nor overcharged based on each specific need. Imagine leveraging data from Internet of Things devices in a customer's home to alert them about potential water damage risks. Or, for mobile phones, AI will be able to analyze usage patterns, environmental factors and customer behavior to offer personalized protection plans.

AI-driven predictive analytics will allow companies to anticipate their customers' needs before they even realize them themselves. It allows customers to consider moving beyond the standard insurance policies that have become ingrained into society. By providing predictive analysis to customers, AI will allow them to see that their mobile phone or household appliances should also be insured specifically. This shift from a transactional relationship to a consultative partnership is where the real value lies.

Looking forward, AI has the potential to reshape the entire customer journey – from identifying risks to designing policies and providing real-time support. It has the potential to take insurance from something customers just have, to a holistic support system for a customer's time in need.

The future belongs to insurers that can achieve this balance, leveraging AI to deliver efficiency while strengthening trust and empathy at every interaction. By blending the precision of technology with the all-important human connection, the insurance industry can create experiences that are both innovative and deeply personal.

Artificial Intelligence (AI) is poised to fundamentally change the insurance industry, particularly in underwriting. The swift progress in AI technology is requiring insurers to reevaluate conventional methods and adopt a future characterized by speed, precision and personalization. This major change raises an important question: How will AI in insurance underwriting reshape processes, expanding possibilities beyond our previous expectations?

AI in Modern Insurance Underwriting

AI is changing how underwriting works faster than ever. Insurers now use real-time data from Internet of Things (IoT) devices to look at driving habits, property conditions and environmental factors. This helps them build risk profiles that are always up to date. Take telematics in cars. Insurers can keep an eye on how people drive and adjust premiums based on what they actually do instead of relying on old models.

AI is also shaking up claims processing. It automates responses and uses data from IoT sensors to quickly assess incidents. If there's a car accident, real-time information goes straight to insurers, cutting the time needed for manual assessments.

These innovations will redefine underwriting and change the insurance world altogether. The blend of AI and IoT isn't just a minor upgrade; it's an overhaul of how insurers work, leading them toward a future where efficiency and accuracy take center stage.

See also: Automated Underwriting: A New Era of Work

Advantages of AI-Powered Underwriting Systems

AI-driven underwriting systems are introducing significant advantages that change the way insurers connect with their customers. A key aspect is hyper-personalization, where AI evaluates large datasets to create customized policies suited to individual preferences and lifestyles. This method enables insurers to implement dynamic pricing models that can adjust in real time based on data from IoT devices.

Furthermore, generative AI improves customer interactions by enabling personalized communication that aligns closely with client needs. For example, insurers can produce tailored video content that explains policy options in a manner specific to each customer's circumstances, enhancing comprehension and satisfaction.

As these technological advancements are adopted, AI serves not only as a tool for improving efficiency but encourages insurers to reevaluate their strategies and product offerings in a competitive marketplace.

Machine Learning Models in Risk Prediction

Machine learning (ML) is increasingly becoming a crucial tool. A notable development in this field is federated learning, which allows insurers to refine their risk assessment models while maintaining the confidentiality of customer information. This method facilitates collaboration among various organizations to enhance ML algorithms without the need to exchange sensitive data, transforming risk evaluation across different demographics.

Additionally, ML is proficient at identifying macroeconomic risks that can influence specific sectors within the insurance industry. By examining extensive datasets related to factors such as inflation and climate change, ML models can predict how these elements might affect claims and underwriting processes. This forward-thinking approach empowers insurers to modify their policies and pricing strategies proactively, rather than simply responding after issues arise.

AI and ML App Development for Insurers

AI and ML are changing the game in app development for insurance underwriting. New apps aim to build a system that improves decision-making and keeps customers engaged. Picture underwriting apps that let insurers monitor claims in real time. They can see how claims progress and act quickly, speeding the process and helping manage risks before they become problems.

Also, AI chatbots can boost customer service. They answer questions right away, guide applicants through tricky steps and give underwriters useful insights from large datasets.

Insurers need to team up with app developers to make this change happen. By joining forces with AI and ML development solutions providers, insurers can tap into what AI and ML offer to create tools that make underwriting smoother while adjusting to what the market needs.

See also: Cautionary Tales on AI

Enhancing Customer Experience With AI

AI is revolutionizing how we think about customer experiences, creating models that can accurately predict what each person needs. By using sophisticated algorithms, insurance companies can foresee changes in customer requirements and suggest policy updates before clients even realize they need different coverage. For example, if a customer's data shows they've landed a new job that involves commuting, AI can swiftly recommend adjustments to their auto insurance.

Another breakthrough fueled by AI is the removal of bias in underwriting processes. By applying contextual algorithms that sift through various datasets, insurers focus only on the relevant details for assessing risk. This approach moves past outdated factors like age and gender, which often skew results unfairly. Instead, the algorithms ensure that every applicant is judged on their unique risk profile.

As these technologies continue to advance, hyper-personalization becomes more achievable. Insurers are now able to design tailored policies that align with individual preferences while also reflecting larger societal trends. By tapping into AI's predictive power, insurance companies can create experiences that truly resonate with customers—leading to greater satisfaction and loyalty all around.

Data Integration and AI

The convergence of real-time data analytics and artificial intelligence is poised to transform insurance underwriting by facilitating real-time modifications to risk assessment models. The use of live data will be fundamental to this transformation.

Geospatial Insights:

Insurers will leverage geospatial insights for precise risk evaluations, allowing them to respond proactively to shifts in environmental factors. For instance, real-time satellite imagery can provide timely information regarding natural disasters, enabling insurers to revise policies based on current risk assessments.

Decision-Making Efficiency:

Underwriters can make prompt and informed decisions, ensuring that coverage remains applicable as conditions change.

Future Developments:

The emergence of decentralized data ecosystems is anticipated to further refine underwriting methods. Such networks would enable secure sharing of information among key stakeholders—insurers, regulators and customers—while maintaining privacy standards.

See also: The Underwriter 2.0, in the Era of AI

Challenges in Adopting AI in Underwriting

Tackling the hurdles of AI in underwriting calls for a forward-thinking strategy that blends creativity with a strong sense of ethics. Protecting data privacy is crucial as insurers manage sensitive information, all while following important regulations like the General Data Protection Regulation and California Consumer Privacy Act. To build trust, companies must be open about how they use data and ensure their security measures are top-notch.

One practical approach is to boost AI knowledge within organizations. By teaching employees about AI's potential, companies can ease worries about job loss and spark innovation—much like learning a new language, where understanding opens doors instead of closing them.

Using regulatory sandboxes gives insurers the chance to experiment with AI solutions in safe settings, allowing them to stay compliant while testing new ideas without facing immediate consequences—similar to pilot programs that refine processes before rolling them out on a larger scale.

Future-Proofing Insurance Underwriting for 2025

The future of AI-enabled insurance underwriting promises remarkable advancements with quantum computing on the horizon. This technology will revolutionize risk modeling by enabling insurers to analyze complex datasets at unprecedented speeds—imagine algorithms processing vast amounts of information within seconds for real-time adjustments based on evolving risks.

Additionally, autonomous AI systems could transform underwriting processes by making decisions almost instantaneously—picture an AI evaluating an application, assessing risks and determining pricing within moments while continuously learning from new data inputs.

As insurers collaborate with tech innovators harnessing these capabilities, smarter and more responsive underwriting systems become a reality.

The insurance industry is on the brink of a major shift, driven by advancements in quantum computing, smart systems and AI in insurance underwriting, enabling rapid decision-making. These new technologies promise to deliver incredibly precise risk evaluations that we could only dream about before. Plus, they'll help companies operate more efficiently and keep customers happier.

As 2024 winds down, and as most executives are excited (and obligated) to do, I’m looking ahead to see what the future has in store for the industry. Here at insured.io, we’re all about enhancing the customer experience—and we’re also big on listening to what customers want. This year, we conducted a major survey to find out how customer expectations have changed, and, to quote me from 2023, “CX matters more than ever.” We see many of our anticipated trends from 2024 come to fruition, chief among them being the continued rise of the mobile device as the preferred way to interact with their insurance policy, with 80% of people wanting to use their device for routine tasks. In an ever-evolving industry (if you attend Insuretech Connect every year, you know), continuing to pay attention to the evolution of customer expectations is increasingly vital.

Here are my top 7 predictions for the next year:

User Experience Matters More Than Your Brand

We’ve known for a while that user experience (UX) is increasingly important to the average consumer. As people spend more time with top-tier apps that prioritize UX, expectations shift—even in the insurance world. Sure, coverage and price still top the list, but our survey shows that UX now ranks nearly equal to brand in how consumers pick their carrier. Customers aren’t just choosing based on the premium or a recognizable logo—they’re actively seeking insurers that deliver a top-notch digital experience. Expect your brand to take a back seat to experience in 2025, which is aligning itself in importance with price as consumer expectations continue to change.

Mobile Reigns Supreme, All Hail Mobile

With half a million registered users on our platform across all lines of business, we’re pretty confident that the desktop is going the way of the dinosaur. A full 86% of our users accessed their policy from a mobile device, trending up from 2023, meaning if you’re not delivering an exceptional mobile experience, you’re missing the mark. Millennials often prefer making “big purchases” on a desktop, but insurance clearly isn’t in that category. Over 80% of our survey respondents said they’d rather manage their policy from their phone. The exception to this, of course, is claims. Keep reading.

The Claims Experience Gets a Facelift

Here’s the reality: your Google and Yelp reviews don’t reflect how good your underwriting is. The impression of your company is primarily driven by the quality of your claims experience. The claims process is stressful and confusing for many people, which is why fewer than half prefer submitting claims on a mobile device. So far, most companies haven’t optimized claims for today’s mobile-savvy user, and it shows. Simple updates—like notifying customers of their claim status, a service even Domino’s can handle for pizza orders—are in high demand. Nearly 60% of respondents said they’d switch companies to get real-time claim updates. It’s past time for a claims overhaul, and carriers know it. In 2025, expect a renewed focus on simplifying the intake experience—making it more automated, less stressful, and more user-friendly. Keeping customers informed and in the loop will be a top priority.

Tech-Enabled Carriers Get a Big Boost

Earlier this year, we predicted that major insurers pulling out of states like California would create a golden opportunity for mid-tier carriers. Not only were we right, but the growth has been even more dramatic than expected. We’ve seen a serious expansion in 2024 from carriers prepared to take on the wave of newly available business—and those ready to step up have reaped the rewards. Expect this to continue in 2025, as larger carriers remain cautious in certain geographic areas and smaller, UX-savvy carriers continue to fill the void. 

Embedded Insurance is a Game-Changer

Interest in embedded insurance surged this year. Customers want more options and flexibility in buying insurance, fueling a wave of unique, micro-focused products tailored to their needs. These mini-policies are starting to find their way into workflows we wouldn’t have imagined a few years ago, and it’s only the beginning. We predicted Insurance Shopping Platforms would become more relevant, and in this case, many more non-insurance platforms in 2025 will begin to embed insurance directly within their workflows. In fact, in a survey by Adacta, nearly 94% of survey respondents view embedded insurance as a critical part of their future strategy.

IVR is Making a Comeback In a Big Way

With the resurgence of voice as an engagement channel, insurance organizations should examine IVR's relevance more closely. Emerging advances in AI, customer behavior analysis, and cloud-based telephony solutions will soon be able to solve many of the legacy challenges, making IVR systems relevant, highly engaging, and more efficient. Generative AI (GenAI) has the potential to completely reinvent the customer experience (CX) across the board, but most dramatically for voice. By eliminating the dependency on static scripts and harnessing the power of natural language processing (NLP), GenAI will usher in a new era of personalized, efficient, and intelligent IVR systems.

AI is Poised to Take… The Passenger Seat 

This might be my hottest take. Despite the hype, the “Rise of AI” hasn’t exactly overtaken the industry as predicted. Yes, people are using AI (our new IVR voice, Ivy, is AI-generated), and plenty of folks are running their emails through ChatGPT for a quick polish. But a full AI revolution? Not quite yet. In fact, according to IDC Worldwide, only 68% of GenAI proof of concepts met KPIs, and an even smaller amount made it into production. For now, it’s more a helpful sidekick than a replacement for core operations. Carriers are starting to see AI for what it is: a powerful tool, not a one-stop solution. In 2025, we’ll see AI used more as a timesaver, efficiency booster, and experience enhancer, allowing carriers to improve what they already excel at, rather than as a catch-all fix. In 2026, however, all bets are off. 

About the author

Steve Johnson is the Co-Founder and Chief Product Officer at insured.io, a company focused on improving the customer journey and accelerating digital transformation for insurance organizations. Steve has led the charge in building insured.io’s unique and powerful platform, maintaining overall responsibility for the organization’s product, design, development, analytics, and marketing. Steve exhaustively reviews performance metrics, user behavior, and business needs to continuously innovate and deploy high-quality solutions. He is also an evangelist for the customer experience and believes thoughtful, unique, and personalized attention to the insured’s needs is paramount for carrier acquisition and retention.

Sponsored by: ITL Partner: insured.io

The auto world is in upheaval. It's making great progress on radically new technologies in electric and autonomous vehicles, but that progress is unsteady, and there is lots of uncertainty ahead on regulation, incentives, and tariffs as the second Trump administration takes shape.

In the midst of that upheaval, a key fact often gets overlooked: that much of the industrialized world — the U.S., Europe, Japan, and South Korea — appears to have reached "peak auto." In other words, the total of new car sales has crested and will decline from here, at least for years.

That change, highlighted in a recent report by a global group of auto executives, reflects significant changes in who's driving, how much they're driving, and the age of the cars they're driving. 

I think the report is worth a look.

The report, the first issued publicly in the 74-year history of the Global Leadership Conference, is meant to provide a wake-up call for national governments about the inroads being made by Chinese car makers and about recommended policy changes. The report says, for instance, that Chinese companies have a 35% cost advantage on electric vehicles (EVs), largely because of state subsidies both for the car makers and for the inventors and manufacturers of the batteries that are the vehicles' most expensive parts. In terms of all types of vehicle sales, the report cautions:

"Over the last five years, the Detroit Three automakers lost 6.6 points of global market share to Chinese automakers and EV startups.... Japanese automakers have lost 3.4 points of share, the Germans one point, while the Koreans have not lost any. China gained 8.2 points, and the EV startups—mainly Tesla—gained 2.1 points."

But who makes the cars matters less to auto insurers than the declaration of "peak auto." The report says the phenomenon "is particularly worrisome in the U.S., where new car sales are lower than they were a decade ago, even though the population of the country increased by more than 30 million people."

The cresting of new car sales reflects a number of trends. For one, fewer young people feel the need to drive. The Wall Street Journal reports: "The percentage of 19-year-olds [in the U.S.] with a driver’s license dropped steadily from 87% in 1983 to 69% in 2022, according to the most recent data from the Federal Highway Administration." The change reduces the frequency of accidents among inexperienced drivers but also likely means a long-term decline in the number of those who buy personal auto insurance, as they rely on ride-sharing and public transportation, instead.

Miles driven in the U.S. have increased only 5% since 2008, even as the population has grown 13%, again suggesting a long-term decline in the need for auto insurance. 

As car prices have climbed, people have been holding on to their vehicles longer. The age of the passenger car fleet in the U.S. has soared from roughly 12 years in 2017 to 14 years in 2024. The change in the composition of the fleet doesn't directly affect the amount of insurance needed but certainly changes what sorts of protection are needed and the kinds of claims that will be made.

If you're half as much of a business process geek as I am, you'll find plenty of other things in the GLC report interesting, maybe even maddening. For instance, it says that U.S. companies are still building expensive features into EVs that only matter in cars with internal combustion engines — including structural supports to dampen the vibrations from the movement of the (now-nonexistent) pistons and sealants to keep (the now-nonexistent) carbon monoxide from leaking into the passenger space through the trunk. 

But I really just wanted to note that we've reached "peak auto" and must confront that reality even as we deal with all the other upheaval in the vehicle world.

Cheers,

Paul

P.S. Two other milestones in the auto world reported in the past week:

• A universal EV charger is coming next year. That's a big deal because "range anxiety" and other concerns related to being able to charge have held back adoption. Having access to every EV makers' stations will reduce concerns. 
• Waymo just keeps expanding service for its autonomous robotaxis. In this case, it announced that it will start operating in Miami, with plans to have fully autonomous, paid service available by 2026. 

Insurers: Welcome to the departure lounge. Our destination is the North Star of superior customer experience, typified by rising Net Promoter Scores, deepening brand loyalty and enhanced customer lifetime value.

If you have been with us so far, we previously described our North Star as the manifestation of "concierge" insurance service, a concept where agents form lasting customer relationships based on intimate knowledge of customer needs, leading to exceptional service at critical moments of truth, such as sales, underwriting and claims. We also discussed the technology pillars of AI, analytics and data management as the foundations for success.

Today, we will examine six guiding principles to follow along the way, each considered to accelerate progress and avoid missteps.

1. No need to digitize everything

We all know the way forward is not a paper trail, but a digital highway. However, it's easy to stumble in the race to digitize everything. Avoid this trap. First, rationalize your process. Insurance is a maze of structured and unstructured forms. Strive for straight-through processing. Identify where the bottlenecks are – claims processing, correspondence, manual tasks – then digitize those choke points. Focus on the front office, where customers come in contact, and let the back office catch up, if need be. You'll get best results when you streamline the areas where humans play a role first.

See also: How Cloud Tech Improves Customer Experiences

2. Leverage data analytics and AI for innovation

If you followed our advice on the importance of AI, analytics and data management, you will be in position to rapidly advance your agent interactions toward hyper personalization. To know your customer better, leverage data analytics and AI to avoid bias, spot trends and gain insights. Automate routine administrative tasks so your people can perform at their peak. Use your data smartly, to inform and justify your decisions. And ensure appropriate testing and governance to maintain an ethical stance.

3. Commit to a customer-first approach

According to Forbes, 86% of customers are willing to pay more for a great experience. Why not give it to them? Use your platform to enhance attention, trust and engagement. Simplify intake, especially in claims, where customers are already in a state of stress. Use technology to amplify human interactions, to inject empathy and to offer ancillary services in times of need (i.e., daycare, short-term rentals, alternate financing, etc.). Start with a minimum viable product, then test and learn as you go. Nothing will take you further faster than focusing on your customer.

4. Pay attention to shifting mindsets and culture

Evolving times call for adaptation and transformation. Be willing to embrace change from the top. Challenge the status quo as you consider modern customer needs. Give your people the tools they require to interact with a tech-savvy population. Take your cues from the insurtech movement. Disruption is on the way. Adopt a disruptive mindset.

5. Seek and keep quality partners

As the population ages, newer perspectives emerge. Are you building your talent base and peripheral resources around an ecosystem that's up for the challenge? True customer intimacy should be your main mission. Seek partnerships to promote a best-of-breed experience. Technology will only get you so far. You will need bright, innovative people to maintain the pace.

See also: 3 Steps for Insurers to Keep the Human Touch

6. Fearlessly fail forward

The future of insurance is no place for the complacent. You must make bold moves to avoid getting lost in the shuffle. Call your shots. Choose your openings. Then act. By balancing the present to architect the future, you will always have a base on which to improve. Remember, innovation comes from taking calculated risks. Don't let your past deter your vision for the future.

Keep these principles in mind as you streamline processes to eliminate routine tasks, amplify experience and enhance agent productivity. Expand your experience one step at a time, keeping your eyes fixed on your North Star. Leverage the expertise of wise partners, to avoid the pitfalls of doing it all yourself.

In our last article, we discussed the concept of "concierge" insurance. Just as in the hospitality industry, the concierge is the focal point for everything required to form a positive and lasting customer experience. In insurance, the best agents do this. They form a relationship with the customer, understand their needs, then over-deliver in the moments that matter.

The only problem is that getting to know a customer well enough to strike the right chord takes time. People are living longer, and insurance is a complex product. Without the help of technology, time alone would prevent agents from making inroads with customers.

The good news is technology exists to collapse the timeframe. Let's look at three foundational ingredients firms need to quickly get to the heart of customer needs and step beyond face value to create enduring value—the kind that only comes after forming deep, personal relationships.

See also: Digitization and Enablement of Agents

Ingredient #1: AI-Led Operations

The modern world has become a cosmos of clicks, swipes, likes and purchases, congealed into unique data fingerprints we all unconsciously carry with us wherever we go. You get married and have a kid, and suddenly, realtors, wealth managers and insurance agents have your number, ready to sell you something.

What makes this possible are the artificial intelligence capabilities many providers of goods and services have available to spot emerging opportunities. AI, and more recently, generative AI, has the ability to augment agent encounters for hyper-personalization; as AI monitors the data cosmos surrounding customers and prospects, it flags life events based on relevant data and serves up the useful information.

Generative AI, when modeled on quality data, can create fleshed-out customer narratives, manifested in ready-to-access formats, that accelerate agent reaction time and speed back-end processes from contact to close. Generative AI works for sales and underwriting, as well as it does for claims and collections. If firms build their operations around AI, they will be well on their way to creating super agents.

Ingredient #2: Automation and Robotics

If firms are going to compress the time it takes to get to know someone personally, it makes sense to compress the time it takes to service their needs efficiently. Automation and, to a growing extent, robotics, will help accomplish this goal. Integrating technology stacks for digitalized operations and knocking down silos that prevent one process from fluidly leading to the next are crucial steps.

Removing manual processes altogether is essential. People are the most valuable asset, and they should be free to engage in more important tasks than pushing paper from one stack to the next.

Digitalized operations have the power to strip costs, time and effort from every corner of an enterprise and set the stage for exceptional customer experiences. This is central to acquiring the modern architecture needed to turn a business into a welcoming respite for customer and employee alike.

Ingredient #3: Clean, Streamlined Data

The data cosmos mentioned above is truly more than any human, or group of humans, can handle in a given moment—those moments that matter in the life of an insurance customer. We are literally surrounded by data points, structured and unstructured, internal and external, proprietary and public, on platforms and applications, housed on-premises and off, in every corner of the organization.

According to a 2024 IBM survey of global insurance executives and their customers, 52% of executives cite inadequate, inaccessible, incomplete and otherwise unusable data as major constraints to swiftly meeting market demands. To overcome this, firms must modernize their data ecosystems to not only openly share data on demand but also support an AI-based analytics engine ready to sort the information and serve up accurate, relevant insights in real time.

We've all heard the adage, "data is the oil that runs the machine." If firms want to truly know their customers, they need clean, streamlined data fueling their customer analysis.

See also: Underwriters' Productivity Can Double

Moving Forward

Without a solid foundation, no house can stand. Without the core ingredients of AI, automation and data to stand on, super-agent, "concierge" insurance can't happen.

Next up, we'll examine six principles to bear in mind as firms transform for over-the-top customer service.

Claim reviews are an essential task in the world of property and casualty insurance. However, in an era marked by rapidly evolving risks and advancing technologies, the claim review process has not evolved much over time. Most claim reviews today bear a striking resemblance to those conducted in the 1990s or even the 1980s.

Before a single review takes place, the claims professional has much to do, including a line-by-line audit of each claim in the client's caseload. This labor-intensive process creates capacity constraints on adjusters, who already have an assigned caseload with claims to investigate, evaluate and resolve. The preparation for these claim reviews can take many hours and even days. It is typical for an experienced adjuster to prepare for and attend multiple claim reviews each month. It is common for brokers, MGAs, policyholders, self-insureds and carriers to request monthly, quarterly, annual and even some ad hoc claim reviews.

The insurers want to stay informed on new claims, pending claims, reopened claims, claim financials, emerging risks, litigation involvement and any other insights into their risks/book of business and obtain a deeper understanding about the cause of loss on the individual claims. Each claim is discussed in detail to assess if the claim is compensable, if the insured has committed negligence, if there is the potential for a nuclear verdict or if there is an affirmative defense in that venue. The alleged injuries/damages of the claim are reviewed along with the claim timeline to develop an agreed-upon approach to resolve the claim in good faith. For many years, the burden of preparing for the claim reviews has rested primarily with the claims professionals. Claim reviews are and will remain part of the claims ecosystem.

See also: AI's Role in Modern Claims Management

Is There a Better Way?

Yes, artificial intelligence can dramatically improve and speed up the process of claim review preparation. Claims organizations can benefit from AI by choosing tools designed to remove friction and simplify processes.

While general-purpose AI tools like ChatGPT, Gemini or even earlier versions of Siri have gained widespread recognition, finding the right fit for your industry and profession is essential. Many of today's more advanced AI tools are not trained on insurance claims data, nor are they designed to generate intelligence that would be helpful in a claim review.

Document Intelligence for the Modern Claim Review

Advanced document intelligence tools are revolutionizing the claim review process. These cutting-edge solutions augment the traditional approach by visually organizing and presenting comprehensive claim summaries, risk trends and insights, claim financials and treatment timelines with both the structured claim data and claim documents. The goal of document intelligence is to provide a tailored, trained knowledge base, which is then used to inform the claims professional and augment manual tasks like claim reviews.

Using document intelligence to understand claims documents is helpful, but is it what you really need? The most effective solutions are those trained specifically on claims data, enabling them to provide nuanced insights and support that align closely with the needs of insurance professionals. The ideal tool is one trained in claims data that synthesizes the art (decision-making) and science (data) of what you do. This combination of specialized knowledge and advanced analytics capabilities creates a powerful tool that enhances human expertise rather than attempting to replace it. That's what we call augmented intelligence.

As first published in Insurance Innovation Reporter.

Dynamic pricing in insurance represents a paradigm shift from traditional pricing strategies to real-time, data-driven risk assessment and pricing optimization. By leveraging advanced analytics, artificial intelligence, Internet of Things sensors and telematics, insurers can now dynamically adjust premiums based on market conditions and behavioral patterns. This transformation enables personalized coverage and incentives for positive behavior and creates a virtuous cycle of risk reduction to deliver business value to policyholders and shareholders.

In 2023-24, as the insurance industry grappled with unprecedented climate-related catastrophes and geopolitical tensions, traditional actuarial pricing models faced challenges. When Hurricane Idalia struck Florida in August 2023, causing $3.6 billion in damages, insurers witnessed claim patterns that defied historical models. It was the strongest hurricane to hit Florida's Big Bend region in more than 125 years. Similarly, the Red Sea shipping crisis in early 2024 triggered a cascade of marine and cargo insurance disruptions, with premium rates surging. The "Change Healthcare" attack in February 2024 is an example of third-party ransomware exposure, where an insured company is affected by an attack on one of its service providers.

These events highlight limitations in traditional pricing strategy, which relies heavily on historical data, static risk factors, generalized linear models and experience rating. Also, changing risk exposures, customer behaviors, market conditions and increased competition necessitate the need for sophisticated pricing mechanisms to stay relevant and be perpetually adaptable to dynamic needs.

Current state and limitations

In the digital world, where risk postures and behaviors are changing dynamically and new risks are emerging, actuaries are facing twin objectives: to ensure profitability of the insurer and meet the obligations to insured through pricing strategies and technical provisions or reserving for payouts, respectively, in a competitive and regulated landscape. Today's pricing is anchored on generalized linear models (GLMs), historical claims data and catastrophic modeling. These traditional GLMs may not be able to handle very large or high-dimensional data sets and unstructured data (telematics, sensors, images, etc.), limiting their accuracy or effectiveness to capture behavioral changes and outliers, forecast claim cost trends and revise their assumptions that affect agility for rate revisions.

These methodologies operate on prolonged cycles such as annual rate reviews, quarterly loss development analysis and monthly exposure updates. The foundation of these relies on predetermined risk classifications, processed through batch systems with fixed rating engines and rigid schema requirements. With the emergence of dynamic risk exposures, as seen in Hurricane Idalia, geopolitical events and climate crisis, compounded by regulatory constraints requiring 60- to 90-day rate filing periods and growing demand for real-time pricing from digital distribution channels, the industry needs to evolve and adapt to new realities.

See also: How AI is Redefining Insurance Pricing Strategies

Dynamic pricing with reinforcement learning

Reinforcement learning (RL) transforms insurance pricing strategy from a static, retrospective process into a dynamic, forward-looking one. Unlike traditional methods, RL agents continuously learn from every pricing decision, interaction and claims outcome. It offers a solution by treating pricing as a sequential decision-making process where each pricing decision influences future customer behavior and market dynamics.

The RL approach to dynamic pricing involves the following components:

State Space (S) Engine:

• Demographics component to handle customer segmentation and risk profiling
• Claims analysis engine to process historical claims and identify patterns
• Market monitor to track the dynamics of competition and market conditions
• Portfolio tracker to monitor and maintain the book of business

Action Space (A) Controller:

• Price adjustment engine to manage premium modifications
• Discount manager to orchestrate incentives and promotion pricing
• Coverage modifier to handle policy/contract terms and conditions

Reward Function (R) Engine:

• Cost analyzer to monitor expenses such as acquisition costs and claims
• Revenue calculator to track income streams such as premium
• Performance metrics to measure business impact such as improvement in customer lifetime value, customer retention and profitability

It comprises a core engine, which includes:

• Environment simulator to generate hypotheses and synthetic scenarios to model customer behavior, claims and competitor responses to market conditions
• RL agent to implement the learning algorithm and employ dual learning approach, which includes active learning of customer behavior patterns, competitive response adaptation, etc., and offline learning via market scenario simulations

Data and Integration Layer:

• Real-time and batch data ingestion, processing and transforming data for RL models
• Feature store to maintain model inputs
• API gateway to manage external communications
• Service mesh component for microservices and interoperability

Decision Engine and Experience Layer:

• Policy network to determine optimal actions and pricing decisions
• Value network to evaluate state-action pairs and outcome prediction
• Experience layer to monitor and incorporate the feedback loop and improve the outcome
   

Figure 1: Dynamic Pricing Mind Map powered by RL

See also: How AI Could Set Premiums in Real Time

Value creation

Dynamic pricing empowers insurers to implement sophisticated premium adjustment frameworks that reflect dynamic risk profiles. In property and casualty insurance, telematics-based behavioral scoring models enable dynamic risk segmentation, incentives and improved loss ratios with engaged insureds. Similarly, wearable-based continuous monitoring creates opportunities for dynamic medical underwriting, risk prevention strategies and potentially reducing claims frequency and rewarding positive behavior change.

In commercial lines, integration of industrial sensor data enables dynamic exposure rating, as compared with static class rating. Also, analyzing insurance product/rate filings submitted by competitors to state regulators, using AI and large language models enables insurers to understand the proposed rate changes and objections raised by regulators. This granular approach to risk quantification not only optimizes technical pricing but also enables innovative product solutions driven by parametric triggers and usage-based insurance, leading to responsive risk management.

The Way Forward

As the industry evolves toward real-time risk assessment, dynamic pricing stands as a critical competitive differentiator. Insurers need to embrace an integrated ecosystem of data-driven pricing capabilities, which demands investment in robust data architecture, advanced analytics capabilities, seamless data exchange and personalization. The insurers that can effectively balance technical sophistication with market responsiveness, while maintaining pricing transparency and customer trust, will lead the frontier.

Advanced technologies like artificial intelligence (AI) and machine learning (ML) are reshaping processes, enhancing efficiency, and reducing costs as the insurance industry continues to evolve to take advantage of technological advancements. At least one key area, however, still requires human expertise – language interpretation and translation. This article explores how insurance companies can find the right balance between technology and the human touch.

The Complexity of Language in Insurance

Individuals with limited English proficiency (LEP) represent a large market for the auto, home, and health insurance sectors. More than 26 million LEP individuals in the U.S. speak more than 350 languages. Approximately 68 million people in the U.S. speak a language other than English at home, according to the U.S. Census Bureau. Insurers need accurate policies and translations of other insurance documents to continue capturing this market. To service this market, insurers need accurate real-time interpretation to answer policyholder questions and process claims.

The complexity of insurance documentation and the nuance of the legal language required means that translation from English to other languages is challenging for AI and other machine translation tools. Similarly, interpretation of the often complex and nuanced conversation around policyholder questions and claims processing is also exceedingly difficult for these AI/MT tools. Let's explore both challenges and solutions that can ensure accuracy, create positive interactions with policyholders, and avoid increased liability and associated costs.

See also: Insurance: An Industry Embracing AI

Interpretation: Bridging Real-Time Communication Gaps

Interpretation involves real-time communication between two parties with the help of a multilingual mediator. In the insurance industry, interpreters play a crucial role during interactions with LEP individuals, enabling numerous activities such as reporting accidents, inquiring about coverage, or navigating the claims process.

Interpreters must traverse complex linguistic and cultural landscapes to ensure that all parties fully understand each other. This task requires language proficiency and a deep understanding of cultural nuances. For example, when interpreting for Spanish-speaking LEP individuals from different regions, an interpreter must be aware that the word "carro" means "car" in most Spanish-speaking countries, but in some regions, "carro" can also mean "cart." Misunderstanding this nuance could lead to significant confusion during an insurance claim discussion. Understanding these and other subtleties is vital for accurate interpretation and appropriate claim settlements.

Translation: Ensuring Accuracy in Written Documents

Translation refers to converting written text from one language to another. In the insurance sector, accurate translations of documents like policies, claims, and communications are essential to ensure LEP individuals fully understand their insurance coverage and the claims process.

AI and ML can assist with initial translations, providing a rough draft that can speed up the process. However, these translations often lack the precision needed for complex insurance documents. Human translators are indispensable for reviewing and refining these drafts to ensure they are accurate and culturally relevant. For instance, in Arabic, the word 'يد' (yad) typically means "hand" but can also imply "control" or "ownership," depending on the context. Such ambiguities can lead to misunderstandings if not properly addressed by a skilled human translator.

The Silent Threat Inside 25% of Insurance Claims

A staggering 10% to 25% of insurance records may be unreliable due to cultural and language nuances that elude direct translation. These subtleties can complicate claims processing, increase premiums, and delay settlements. Words in different languages can carry multiple meanings based on context, and misinterpretation can lead to significant misunderstandings with legal liability implications.

These misunderstandings can lead to significant negative outcomes:

• Claims Denials or Underpayments: Incorrect translations can result in claims being denied or underpaid due to misinterpreted policy terms or accident details. For example, if a term describing an injury is mistranslated, the insurance company might reject the claim or offer a lower settlement than deserved.
• Legal Disputes: Misinterpretations can lead to disputes between policyholders and insurers. Policyholders may feel they are not receiving the promised coverage, leading to lawsuits and legal battles, which increase costs for both parties.
• Increased Premiums: Insurers may increase premiums across the board to cover potential losses from misinterpreted claims. This affects all policyholders, including those whose claims are accurately processed.
• Delayed Settlements: Misunderstandings can delay the settlement process as additional time and resources are required to clarify and correct the information. This can be particularly burdensome for policyholders relying on timely payouts to cover damages or medical expenses.

Insurance claims' cultural and linguistic nuances are not merely minor inconveniences—they can have significant financial and legal implications. Ensuring accurate interpretation and translation is essential to maintaining the integrity of the claims process, upholding customer trust, and avoiding unnecessary legal complications.

See also: The Future of CX: Synchronizing AI, Human Interaction

The Indispensable Human Element

Despite the advances in AI and ML, the need for human oversight in translation and interpretation remains critical. AI can provide a first-pass translation of documents, but human experts must review and refine these translations to ensure accuracy and cultural relevance. When LEP individuals report accidents, inquire about coverage, or navigate claims, human interpreters are essential to facilitate clear and accurate communication. In these instances, AI's "good" isn't good enough.

As the insurance industry continues to integrate advanced technologies, the balance between AI capabilities and human expertise will be vital to providing personalized, accurate, and responsive insurance services.

In the insurance industry, conference season is a year-round occurrence, with events and meetings frequently filling our calendars. These gatherings, often hosting hundreds or even thousands of attendees, require careful planning to ensure they run smoothly and safely. While insurance professionals are naturally attuned to the risks involved in hosting events — especially larger ones — clients may not always share that awareness. As we approach the busy holiday season, this is a good time to consider how we can help them navigate these challenges.

For breweries and wineries, overlooking event safety can have significant consequences. Wineries, for instance, often host weddings, family reunions, corporate events and seasonal celebrations, especially during harvest. Breweries are also kept busy with everything from hosting company parties to product launches and holiday parties, but these, too, carry inherent risks.

This isn't just a concern for the beverage industry; businesses across many sectors can encounter challenges when events don't go as planned. Agents and brokers have a vital role to play in helping clients identify potential risks, take appropriate precautions and determine whether additional coverage might be a wise choice.

See also: From Risk Transfer to Risk Prevention

Check in with your policyholders

One of the best places to start when it comes to understanding your client's events risk is with a visit or phone call at the beginning of the year. Agents should reach out to their clients to check if they have a calendar of events prepared. Some additional events may arise as the year goes on, but it's good practice to reach out early to help business owners and operators prepare as much as possible to host these events safely.

Before an event, agents can help their clients by not only reviewing their coverage but also helping ensure their client is set up for a successful event season. For instance, if a winery is hosting a wedding, having an event contract in place with the customer can be invaluable. A well-crafted contract can clarify responsibilities for both parties and help reduce liability exposure, providing an added layer of protection if something unexpected occurs.

Understand and relay the risks to your policyholders

When it comes to hosting events, there are certainly some risk exposures that are unique to wineries or breweries or whatever the venue may be, but many are more universal. When assessing event risk for a policyholder, consider the following risks and risk mitigation practices:

Liquor Liability: Managing liquor liability with increased foot traffic can be difficult, particularly at a small business, but a liquor liability loss can prove incredibly costly to an unprepared business. Businesses should implement ID checks, require wristbands at highly attended events to identify individuals who are legally able to drink and define protocols to handle intoxicated patrons. Staff members should be trained on this protocol well in advance of the event. Having water stations, snacks and nonalcoholic beverages available is also recommended.

Property Damage: Crowded events often come with the risk of unexpected damage. For instance, in small breweries hosting events, it's not uncommon for customers to wander into production areas, increasing the risk of liability and potential damage to expensive equipment. Simple measures like clear signs or roping off restricted areas can go a long way in reducing this exposure. Additionally, ensuring that event setups, such as stages and tents, are professionally installed can prevent collapses. Hiring private security can help manage crowds effectively and further minimize risks.

Bodily Injury: Large crowds often increase the risk of slips, trips and falls. At wineries, this is a common concern during events where vineyard tours are offered. These areas can be slippery or muddy, and with so many people navigating tight spaces, accidents are more likely. Another frequent hazard involves production areas, where hoses, lines and cords can pose significant risks. Not only can they cause trips and falls for employees, but they can endanger guests who wander through these spaces during tours.

During risk management inspections, hazards such as uneven flooring or loose boards that can amplify these risks have been identified. To help mitigate these issues, agents should encourage their clients to conduct a thorough inspection of the property before events. This process should include checking for any faulty flooring and establishing clear guidelines for areas that are off-limits to guests. Proactive steps like these can significantly reduce the likelihood of injuries and liability concerns.

Equipment Breakdown: Events can place additional strain on equipment. Business owners may overwork their equipment to ensure a smooth event, such as overusing HVAC systems or food service appliances to churn out small plates for guests. Then, when a breakdown occurs, they cannot return to normal business operations after the event. Conduct equipment inspections before any event and help insureds determine what equipment may need maintenance. Confirm their policy also adequately covers their equipment in the event of a breakdown.

Fire: With the increased load on equipment to manage significant crowds, clients have an increased fire exposure during an event. Ensure their fire extinguishers are up to date and in the right place and offer advice on fire safety practices in case a fire breaks out.

Theft and Vandalism: Large events are an opportunity for theft and vandalism. Agents should advise their clients to hire private security and install cameras and CCTV to keep track of any potential incidents.

Parking: More people often leads to an increased volume of vehicles, which increases the risk of auto accidents. Recommend clients hire parking attendants to help customers safely park and consider taking a walkthrough of your client's parking lots to inspect for potholes or other hazards.

See also: Navigating the Complexities of Venue Insurance

Be a valued adviser

To be a valued adviser, it's essential to think critically about the events your clients host and the potential risks. Certain activities — such as mixing alcohol with high-energy or physically demanding events — can pose significant safety concerns. In the winery space, for instance, activities like grape stomping may seem fun but can present risks to participants and the property. Advising your clients to carefully assess the safety of their events is key to protecting their customers, employees and operations.

Partnering with a specialty insurer can provide valuable insights into risks unique to your client's industry. Experts in winery insurance can help identify potential issues with specific events or offer tailored risk mitigation strategies. By leveraging the expertise of a specialty carrier, agents can enhance their own knowledge and provide well-informed guidance to their clients, strengthening relationships and ensuring comprehensive protection.