SCOR CEO: AI is a game changer for the sector
Developments in artificial intelligence (AI) and data collection stand to completely alter the asymmetry of information between insurers and insureds, representing a game changer for the re/insurance sector, SCOR CEO Denis Kessler suggested in an article.
Historically, the parties to an insurance contract – the insurer and the insured – have always had a different set of information, Kessler explained in a March article distributed by SCOR.
The asymmetry leads to strategic behaviours. The insurer will attempt to extract the maximum amount of data through questionnaires, observations and statistics, so as to infer how the insured will behave. The insured, for his or her part, may endeavour through strategic positioning to underestimate the risk, to maximize the value of the claim and to manipulate the price system to his or her advantage.
Developments in AI and data collection stand to completely alter this asymmetry by bringing comprehensive and dynamic observability to the insurance transaction, Kessler argues. Whereas information was previously incomplete, static, fragmentary and delayed, the new era of big data enables access to information that is comprehensive, accessible from multiple sources, ranked by quality and available on a real-time basis. Furthermore, the formerly high costs of obtaining information have been reduced to a minimal expense. Information is becoming a commodity, and AI will enable us to process all of it, Kessler said.
AI will enable the re/insurance industry to both improve the customer experience and to enhance efficiencies in underwriting, claims processing, risk analysis and product development. Tasks that once took months to finish can be completed in a matter of minutes, opening the gate for insurers to reap sizable cost savings. Further, in enabling re/ insurance professionals to focus on value-added tasks and by alleviating administrative and process-related burdens, AI will augment re/insurers’ capabilities to analyse risk and design new products.
As a result, re/insurers will know their customers and risks more thoroughly, price and underwrite more accurately, better identify fraudulent claims, and detect and monitor evolving risks. They will be able to tailor products and services to the exact needs of their customers, when and as those needs appear and evolve.
Although re/insurers might have an early advantage given that they have greater means and more tools and, for the time being, more data, AI will transform both sides of the insurance transaction in the long run. All parties to the insurance ecosystem, be they risk carriers, brokers, or even customers, will use AI tools, Kessler predicts.
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