Demonstrating the value of AI to the insured will be key to its success – Cytora CEO

Perhaps the biggest sea change to hit the world economy in recent years is the advent of artificial intelligence (AI). The implications of AI are already being felt, and the insurance industry is no outlier.

GR spoke with Richard Hartley (pictured), CEO of software firm Cytora, which provides underwriting services for commercial insurers.

Its platform seeks to help insurers to underwrite more accurately, but also to reduce what he calls “frictional” costs.

Hartley sees AI helping in claims processing and across commercial underwriting.

The technology will not only streamline and automate existing processes, but help insurers more actively through with better data, improving execution, informing risk selection and pricing decisions before losses occur.

“If you look at insurance companies today, you’re hearing CEOs talk about how they want to have 75% of all transactions go straight through to a quote,” he said.

“The World Economic Forum’s report this year said it was the underwriter’s job that would be most augmented by AI. There’s a more concrete manifestation around the application of AI and its benefits.”

Hartley added: “Over the last two decades, the insurance industry has been trying to become more efficient and more automated so that it can scale human judgment over a higher volume of risk. That’s been the direction for a while, but it’s only in the last two years that we’ve seen that concretely happening.”

Hartley predicted that the next two years will see the predominant volume of in-force renewals being executed digitally end-to-end with little human intervention except for policies where risk has materially changed.

This, he said, will lead to more insurers move into what he called a “preventative space”, due to having better data to understand what can be done before the loss happens. The trend is already in evidence, he suggested, such as in motor insurance telematics, analysing driving behaviours before a crash occurs.

However, there are challenges ahead. Prominent among these is that insurers will need to be able to explain to customers how all their data and its collection will translate into value for them.

“It’s quite new,” said Hartley. “It’s possible to say on the one hand that reinsurers and insurers need better, more-granular data. But the response is going to be, ‘Well, sure. But what are you going to do with that? Why is it valuable for me to give you that data? Are we going to get a better insurance product and better service?’

“The outstanding question, is how the insurer is going to use that data to provide a more valuable proposition,” he added.