The rise of AI Reinsurance

Everything is being automated today, that is the way of the future. But if you’re not careful, this automation will eventually lead to little bit of unemployment.

In this part of our discussion, we’re going to take a look at the new age of AI solutions, and how they’ll likely impact the reinsurance industry in the near future. One of the main trends you’ll likely be seeing is the rise of AI reinsurance.

What is AI Reinsurance?

AI reinsurance technology is essentially another type of system meant to place claims. As we saw with the technology brought forth by systems like Wallis — it involves an AI system that steers various reinsurance segments into delivering a transaction to the reinsurance broker for a claim type.

Recently we have seen AI technology being explored in a number of reinsurance niches including credit risk, long tail reinsurance, and catastrophe reinsurance. In general terms, the reinsurance companies can start with reinsurance programs, such as an ISO MCS extension, and then once they do bring in a database to administer and set procedures for these reinsurance programs, AI will facilitate the actuarial process for setting up their policies for such claims types.

How Will This Work

A large part of what AI reinsurance technology consists of is the visual recognition capabilities of the risk categories for risk types (and even some non-risk categories as well). The data that is mapped for the policy terms and conditions is then associated with the definition for the risk factors for each potential policy type. The data is then given a probability for which element is the most likely reason for each loss. Then the default element is determined and with that held as the content of the claim.

A first hurdle you’ll see with AI reinsurance is when you go to file a claim. Here is where some of the automation occurs. Rather than having the claim form-filing representatives — who are very much human — generate a claim, this is done by the system via algorithms.

The AI system will generate the policy form for a quote. The claims software or a custom system that is provided by the company through which the claim is filed will then come up with a settlement figure. This will be the settlement amount that will be paid to the insured, and there may be some coding errors on the claim itself as well.

The system will then apply a profit factor to what the submission is supposed to end up at, i.e. the profit caused by the claim is added, increasing the effective rebate rate as a result.

How Will It Impact The Reinsurance Industry?

As we have seen with a number of other areas of the insurance industry, an automated process that is not under the control of the human overseers will be extremely efficient. If the cost of filing an insurance claim is taken away from the claims representatives then it simply does not make sense for the claims representatives to be there. Reinsurance companies are under pressure to be efficient and effective in their business. This will become more common as time goes on.

So, it seems that not only will insurers save time by not having to have human hands on each claim, but they will also save money by not having to have people support the submission process.

We have already seen instances where systems have removed claim handling workers from the equation entirely, and even their replacement with computers has been very effective.