Digital transformation has occurred in several industries in recent years, however, the threat insurance sector still stands out as an exception. As a consequence of its reliance on legacy systems that are difficult to eradicate, the insurance industry is playing catch up to many others. Despite this, insurance has made some progress toward digital transformation in its primary process of underwriting. As the industry embraces new technologies, the underwriting process has improved.

Let's look at how automation is changing the underwriting process and what the future of the insurance industry might look like.

What is Insurance Underwriting? 

In the insurance industry, underwriting is the process of determining the risk of offering coverage to a potential customer. At the end of the day, all insurance companies are for-profit businesses, and underwriting helps them determine whether or not providing coverage to a specific client is profitable. When insurance companies decide to provide coverage to a client, they must consider the amount of risk they are taking. They must also be aware of the possibility that something could go wrong and they would be responsible for paying the claim. In exchange for taking on the risk, insurance companies calculate insurance premiums based on the degree of risk involved.

Traditional Underwriting 

From a technological standpoint, underwriting has always been one of the most underserved areas in the insurance industry; underwriters have always had to manually wrangle data from disparate sources into spreadsheets to assess the risk that different clients and situations present and thus make appropriate coverage and pricing decisions. Traditional underwriting has always been inefficient due to the complexity of the various datasets that underwriters must access and integrate. The insurance sector has historically been conservative and slow to adopt new technologies. Several factors, including the prevalence of legacy systems, paper-based processes, risk aversion, and so on, have contributed to this slow adoption of technology. However, modern insurance companies have begun to recognise the critical role that AI can play in their operations.

Entering the Automated Underwriting Era

The process by which insurance companies use AI-driven expert systems to facilitate more efficient underwriting is known as automated insurance underwriting software. These widely used expert systems, which include thousands of hard-coded underwriting criteria, assess the risk involved in providing coverage to various individuals. These expert systems are becoming more sophisticated as technology advances, as they use machine learning algorithms to learn new patterns of risk information. Furthermore, insurance companies are leveraging big data to develop systems to deal with novel risk assessment problems. In the coming years, we may see a complete shift away from humans and toward machines in insurance underwriting. Human intervention in the underwriting process may become obsolete shortly.

Conclusion

As companies work to improve the customer experience, manual underwriting is being replaced by automated underwriting. Automating the insurance underwriting process will enable insurance companies to better assess risk and offer customers more dependable service. Amity Software provides fully automated insurance management software along with cutting-edge tools to help insurance companies manage customer relations, claims administration, policy administration, and underwriting efficiently.