Insurers and policyholders at odds over AI in underwriting, claims

Data from Insurity’s 2024 AI in Insurance Report show consumers are against AI in underwriting and claims management.

“Understanding consumer attitudes toward AI is critical for insurance organizations as they plan their AI strategy,” said Chris Lafond, chief executive officer at Insurity, in a press release. “(The finding) signals a need for a balanced approach to be mindful of areas where human oversight remains preferred. Incorporating AI to complement human judgment rather than replace it will be key to fostering trust and acceptance among consumers.” (Credit: Song_about_summer/Adobe Stock)

Consumers are getting more comfortable using AI as it’s integrated into their everyday experiences, from a chatbot for customer service to ChatGPT for coding assistance or language translation. However, many consumers take issue with AI’s use in decision-making roles, especially policyholders.

The 2024 AI in Insurance Report by Insurity found that 50% of respondents are against AI in claims management, and 45% don’t want it used in underwriting either. But insurers have a different mindset on using AI in these ways and believe it streamlines claims and helps make underwriting decisions faster to offer better services to policyholders.

“As AI technology progresses, its future in the insurance industry depends on our ability to build consumer trust, especially in underwriting and claims processing,” said Sylvester Mathis, chief insurance officer at Insurity, in a press release. “Insurers have a significant opportunity to clarify AI’s role and demonstrate its benefits in improving accuracy and efficiency. By transparently communicating how AI complements human expertise, ensuring data privacy, and showing its positive impact on claim resolutions and policy pricing, insurers can gradually increase consumer comfort and trust in AI’s capabilities. The journey ahead will require a thoughtful approach to integrating AI, where consumer confidence is as much a priority as technological advancement.”

Consumer fears

The Insurity report suggests consumers welcome the convenience of AI in some areas but don’t want the technology to make impactful decisions about their insurance coverage. Consumers are concerned using AI in underwriting policies and claims management could lose the human aspect, a crucial part of making these financial decisions.

AI can’t replace human judgment honed through years of experience as an underwriter. But insurers could overcome consumer caution through transparency in how AI improves the underwriting process. Policyholders may not realize many underwriters use AI to fast-track claims and applications with ample data and send more complicated cases straight to the underwriter.

“They [AI systems] sort of triage applications that come in — those that come in that are relatively clean and straightforward from the underwriting perspective… those will get processed very quickly,” said Scott Hawkins, head of insurance research and managing director at Conning. “It is the ones where the data is not as available, or there might be a higher risk… that will get kicked out of the automated systems and then sent to an actual underwriter for a more full evaluation. So, it’s using the human underwriter to focus on those policies or risks that have the greatest exposure for the company.”

A balancing act

AI can lower wait times and speed up the underwriting and claims processes, sifting through data to find client information instantly, but it can’t replace an underwriter’s intuition, says Sathish Kumar Manimuthu, chief technology officer at NeuralMetrics. Insurers must find a symbiotic way to work with AI in these departments and build consumer trust and acceptance. Placing AI “agents” or systems in decision-making roles requires a balanced, honest approach.

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