Insurance leaders optimistic about AI’s impact on underwriting quality and fraud reduction but underwriter confidence lags

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Insurance leaders optimistic about AI’s impact on underwriting quality and fraud reduction but underwriter confidence lags

• 62% of insurance executives recognize artificial intelligence/machine learning technology (AI/ML) as elevating underwriting quality and reducing fraud
• 43% of underwriters trust and regularly accept automated recommendations from predictive analytics tools but many still have concerns around complexity and data integrity

Paris, April 17, 2024 – The Capgemini Research Institute’s World Property and Casualty Insurance Report 2024, published today, reveals the underwriting capabilities of insurers are being restricted by organizational constraints. According to the report, only 8% of property and casualty (P&C) insurers are regarded as underwriting “trailblazers” who are consistently outperforming mainstream carriers by leveraging AI-driven insights and automation to make informed decisions and accurate risk assessments with efficiency. These industry frontrunners drive greater collaboration and customer transparency by keeping underwriters at the heart of all decisions.

Challenges mount for P&C insurers
As inflationary pressures hit policyholders’ pockets, there is increased demand for affordability, simplicity, and transparency from their carrier. According to the report, 42% of policyholders find the current underwriting process complex and lengthy. Additionally, 27% of policyholders switched providers in the last two years in search of lower premiums (60%) and better coverage (53%).

While premiums have increased, underwriting practices have struggled as combined ratios breached 100% sparked by natural catastrophe events, evolving risks due to technology innovation such as cyber threats and emergence of generative AI, and regulatory complexity. Capgemini research shows industry executives cite significant organizational barriers affecting their ability to delight the customer: insufficient access to data (54%), legacy systems (51%), and a lack of skilled talent (47%).

“Today’s insurer is operating in one of the most precarious environments in recent memory. The industry must react to this volatility by rethinking the underwriting rule book,” said Adam Denninger, Global Insurance Industry Leader at Capgemini. “It requires shifting away from legacy models by modernizing core systems and deploying advanced technologies that drive better outcomes and transparency. Embracing AI-driven insights and automation is crucial for the industry to drive a competitive path towards underwriting profitability that adapts to evolving risk dynamics and policyholder behaviors.”