AI and Underwriting: Yes, They Are Better Together

Online applications, consumer-completed applications, accelerated underwriting, algorithmic underwriting — it doesn’t matter what you call it, the goal is the same:

Instant gratification for your digital customers that feeds the bottom line.

Companies are rapidly transitioning their user experiences online to provide competitive customer experiences, which increasingly consist of accelerated underwriting. While these are necessary changes, the switch to accelerated underwriting has led to a bumpy road when it comes to preventing insurance fraud  — a part of underwriting that proved to be a challenge even before the faceless internet. 

When combined, AI and Underwriting helps insurance companies reduce bias, human error, and boost their bottom line. In today’s article, we’re unpacking why they’re better together. 

From Underwriting to Claims Management, Artificial Intelligence Will Transform the Insurance Industry

If you’ve been in the insurance industry for more than a day, you understand that underwriting isn’t changing; it has already changed. Insurance companies are opting for online processes to keep up with modern consumers who are accustomed to immediate gratification. 

Gone are the days of mailing in an application to then waiting for weeks to get a quote. No — modern consumers do not want to wait for a callback. Instead, top insurers provide results within minutes of a completed online application. 

So how can you satisfy the customer’s fast-paced expectations while ensuring risk management? AI and machine learning. 

Only by combining AI and underwriting can both you and the customer benefit. Simply put, you gain safeguards to predict fraud while they get an answer/quote/policy back sooner. 

Who doesn’t love having your cake and eating it too?

Smarter Risk Assessment, Smarter Underwriting

Smarter risk assessments mean smarter underwriting. AI is great at analyzing loads of data from different systems and teasing out the most important information. Carriers are using this to paint clearer pictures of customer risk profiles and tailor pricing to the individual. 

Another example is using 1st party behavioral data to dive even deeper into the risk profile of an applicant. Check out a recent case study where a large carrier used ForMotiv’s AI for Underwriting solution to do just that. After just 25 days using ForMotiv’s behavioral science platform, the client had access to over 2.2 billion data points (first-party intent data that they owned) and a 10% increase in their fraud prediction models. Oh, and did we mention ForMotiv also was able to predict, with 94% accuracy, the likelihood of an application actually submitting a quote, in real-time. That was just for extra credit. 

This client is one of many that shifted smarter risk assessments into smarter underwriting. More efficient underwriting opens up valuable time for underwriters and employees to tackle other tasks. 

As they continue to increase the number of policies they are underwriting, they now call ForMotiv’s intent scores, real-time, to help determine which users are accelerated and which should be further qualified. 

More Accurate Risk Assessments

With more interactions online, it’s easier than ever for risky applicants to sneak past underwriting defenses. 

Another use case for AI in underwriting is that of the “digital polygraph” to analyze user behavior to predict risk and fraudulent applications. The great part about a solution like this is that, just like an actual polygraph, they happen in real-time so underwriters are not stuck looking at policies in hindsight. 

Here’s an example of risk assessment in real-time:

Let’s say the system detects high-risk behavior displayed by an active user. Carriers can automatically pass the flagged user over to their call center rep to review the policy before approval and determine if additional tests are necessary. They can then intervene, in real-time, and a risky applicant will likely tap out looking for easier fish to fry.

But instead of risky behavior, let’s say the user shows genuine behavioral responses. The system will drive them through the automated underwriting process. Again, your company reacts in real-time and closes the deal with a satisfied customer — a true win-win.

Reduce Human Error with AI and Underwriting

Errors in the insurance industry lead to financial consequences, and unfortunately, humans make a lot of them. Manual underwriting is no exception. 

The biggest mistakes that threaten the underwriting process stem from prejudice, partiality, and invisible bias. These three facets of discrimination formed over an employee’s lifetime are tough to resolve during employee training. 

For instance, when observing underwriters in a study at an insurance company, researchers found a 55% difference of opinion when the same case was assessed for risk. As flawed humans tend to do, different judgments bring different, unreliable errors.

Assuming carriers are practicing ethical AI, intrinsic bias can be drastically reduced. Companies like ForMotiv, who collect zero PII, help reduce the bias burner even further.

End Bias and Accelerate the Application Process

In conclusion, ForMotiv helps carriers expand opportunities for accelerated underwriting and straight-through-processing by predicting user intent — in real-time — to add or remove friction accordingly.

AI and Underwriting are better together, and they’re already rapidly changing the insurance industry.

It’s time to embrace the change. Schedule a call to see how ForMotiv will work for you.