With an economy facing the headwinds of inflation and growing predictions of a recession, underwriters are looking to adapt to the situation by becoming more efficient.
They are doing this by relying on new technologies and new sources of data.
According to some consultants, inflation may increase losses by some $30 billion for some of the core PC lines. In addition, actions taken by the federal government to bring inflation under control could also reduce demand and profitability in some lines.
Inflation is also exposing flaws in companies’ data collection. Without the ability to get claims data more than once a month, it’s difficult to operate effectively. Inflation is also expected to cut into profitability because of higher transactional costs.
Automation as a Solution to Inflation in the Insurance Industry
To handle these economic trends, carriers are putting an increased emphasis on technology and automation. With premiums likely to increase, companies are shifting from a focus on innovation toward operational efficiency.
The key to handling the situation and helping underwriters work in the current market is leveraging data. But there is no one-size-fits-all with automation when various segments and lines differ a great deal depending on state regulations.
The cloud has become an important weapon in underwriters’ arsenal when dealing with economic uncertainty. It gives him the agility and flexibility to make quick decisions.
But implementing these cloud-based processes is an ongoing process. For example, because each state has different regulations, the same AI models cannot be used across the board. To work in different markets, companies are choosing different vendors who specialize in certain areas and who provide the technology needed, rather than trying to find one technology platform that will only imperfectly fit all of their needs.
With artificial intelligence, some industry officials predict changes in the way small and middle commercial lines are underwritten. Automated data will enable carriers to develop more uniformity in the way underwriters handle risk exposures. AI will enable underwriters working in complex commercial lines to access immense amounts of information to help them in writing a policy or determining the amount of premium to charge.
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