How Client-Driven AI Adoption Will Transform Insurance Underwriting

The annual Consumer Electronics Show (CES) did not disappoint with innovations that ranged from a robotic vacuum to a car that converts into a flying drone. This broad spectrum of technology is reshaping the way the insurance industry is thinking about coverage.

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AI Is Changing the Inside and Outside of the Car?

AI is at the heart of mobility and is the future of the automotive industry—this was on display at CES. The good news is that recent advancements center on safety and creating better experiences and outcomes for drivers.???

• Outside the car, there were compelling demonstrations of enhanced computer vision that addresses issues facing the autonomous vehicle platforms including innovations in computer vision related to weather, lighting, and unexpected objects. There were also new advances in light detection and ranging (LiDar) where the primary value proposition is reduced vehicle accidents and improved insurance costs for consumers.
• Inside the car, there were multiple examples of how sensors can help provide safer driving experiences for human drivers. This includes monitoring distraction and impairment as well as detecting the activity of passengers—adults, children, and pets.?
• Underwriting will likely evolve to consider the safety benefits and not just the cost of the technology in the vehicle. Over the coming decades, as these smarter cars become more common, the industry will need adjust on how it prices and underwrites risk. It will also need to rethink claim and repair time. Labor constraints can be an issue as these technologies are deployed and vehicles have multiple software systems.?

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Identifying and Addressing Technology Risks

?There are some risks that these new technologies bring to the fore. First, original equipment manufacturers (OEMs) are now systems integrators and are likely to start to bear the risk of the decisions or recommendations by these smarter vehicles. This raises the question of how can OEMs protect themselves with commercial insurance products. For example, are these risks covered by current product liability coverage or are new tech errors and omissions (E&O) and cyber policies needed?

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CES 2024 highlighted some significant advances in heavy industry equipment for farming, construction, and mining. The show also highlighted new autonomous construction and mining equipment—these machines raise real questions about liability and risk on job sites. They also challenge our assumptions about a contractor’s liability and performance. For example, if machines do a large share of the work without people, who is responsible for an issue or accident?

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With all of these innovations powered by AI and many connected via the cloud, clients’ cybersecurity risk is another pressing challenge for insurers in industries from automotive to health.

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How to Embrace Change

?So what should insurers do?

?Take the time to understand how new technologies will impact your current book. This includes rethinking underwriting and considering what needs to change in claims processing.

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Be a technology leader. AI and other new technologies create a real opportunity for the insurance industry to innovate. What new products can you create to address the new and emerging risks and opportunities?

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Stay alert and up to date. AI is a transversal technology that will change every industry. For some industries, this change will be dramatic. The insurance industry underpins so much of the global economy, and insurers must be ready to support and meet their clients as they embrace this change.

By: Nadine Moore

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