’Insurance providers will have no option but to collaborate with insurtechs delivering AI solutions,’ says chief executive
Artificial Intelligence (AI) is “essentially the next industrial revolution” and will be a ”key theme for 2024”, according to motor insurtech PeppercornAI’s chief executive and founder Nigel Lombard.
AI technology has been booming in the insurance sector, with many firms deploying it to overhaul claims, underwriting and streamline administrative processes.
Lombard told Insurance Times: “Insurance providers will have no option but to collaborate with insurtechs delivering AI solutions because their own transformation programmes are slow to implement and can be prohibitively expensive.
”However, a challenge for insurance providers is the speed at which AI is developing.
“The usual, lengthy procurement process cannot be applied to a technology as rapidly changing as AI. Chief executives of insurance providers will need to get on the front foot, or they will lag behind the competition.”
Ethical and understood
For Lombard, another key theme for the year will be demonstrating that AI is being applied in a way that is ethical and understood.
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He explained: “This is essential because the technology will need to be forwardly compatible with inevitable regulation under development.
“AI must be applied as a force for good and transparently so. How, where and why data is used is more important than ever.”
Finally for the year ahead, Lombard said that “understanding how AI can improve the combined operating ratio (COR)” would also be important.
COR is a measure of general insurance underwriting profitability that compares claims, costs and expenses to premiums earned. If costs are higher than the premiums earned and the ratio moves above 100%, then the underwriting is unprofitable.
“This is the difference between insurtech 1.0 and insurtech 2.0 and it ultimately comes down to having teams that understand the specific nuances of insurance. Demonstrating this will be key, particularly for encouraging investment in the sector,” Lombard added.
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