Beyond Human: AI's Impact on Insurance Underwriting

The insurance industry is undergoing a seismic shift. No longer confined to actuarial tables and manual processes, it's embracing a future driven by data and artificial intelligence. Your next underwriting colleague might be an AI agent, capable of outperforming human counterparts in speed, accuracy, and efficiency.

AI Agents: The New Underwriting Powerhouse

AI agents are transforming the underwriting process in several key areas:

• Enhanced Risk Assessment: Leveraging advanced algorithms, AI agents can analyze vast datasets, including historical claims data, weather patterns, and emerging risks, to provide more accurate risk assessments. This empowers insurers to price policies precisely and competitively.
• Fraud Detection: AI's ability to identify patterns and anomalies in claims data makes it a formidable tool in combating insurance fraud. By detecting suspicious activities early on, insurers can protect their bottom line and maintain customer trust.
• Streamlined Operations: Routine tasks like data entry, policy generation, and document verification can be efficiently handled by AI agents, freeing up underwriters to focus on complex cases and strategic initiatives.
• Personalized Customer Experience: AI-powered chatbots and virtual assistants can provide instant responses to customer inquiries, improving satisfaction and loyalty.
• Product Innovation: By analyzing customer data and market trends, AI can help develop innovative insurance products tailored to specific customer segments.

The Future of Underwriting: Humans and AI Collaboration

While AI brings immense potential, human expertise remains indispensable. The future of underwriting lies in a collaborative model where humans and AI complement each other's strengths. Underwriters will leverage AI insights to make informed decisions, build strong customer relationships, and drive business growth.

Challenges for Insurance Leaders

Embracing AI in underwriting comes with its own set of challenges:

• Data Quality: Ensuring the accuracy and completeness of data is crucial for AI models to deliver reliable results.
• Model Explainability: Understanding how AI arrives at its conclusions is essential for building trust and complying with regulations.
• Talent Acquisition and Development: Building a workforce with the skills to effectively collaborate with AI requires investment in training and development.
• Ethical Considerations: Implementing AI in a way that is fair, unbiased, and transparent is paramount to maintaining trust with customers and regulators.
• Cybersecurity: Protecting sensitive customer data from cyber threats is a top priority in an AI-driven environment.

By addressing these challenges and embracing AI, insurance leaders can position their organizations for long-term success. The future of underwriting is bright, and those who harness the power of AI will be at the forefront of industry innovation.

Are you ready to transform your underwriting operations with AI? [Include a call-to-action, such as inviting readers to attend a webinar or download a whitepaper on AI in underwriting]

As financial institutions race to improve operational efficiencies, robotic process automation (RPA) has emerged in recent years as a way to help financial institutions reach a new level of operational excellence.

RPA disrupts the existing business model by modifying existing systems to automate manual tasks, transactions, and business processes that are typically done manually. Another way of looking at RPA is that it’s a virtual employee.

RPA can help a financial institution realize its full potential and maximize its resources for peak operating performance. A Center Of Excellence develops the blueprint for the RPA strategy with deliverables, KPIs, and contingency plans for needed adjustments along the way.

In this report, we outline the ten tips for establishing an effective Center Of Excellence (COE).

Perform Testing And Initial Assessment

The initial phase will center around researching RPA benefits and the costs as it applies to your business. A cost/benefit analysis and the results one could expect in improvements in operational efficiencies should be performed. ROI reporting should include costs of implementation such as training, hiring consultants, technology upgrades, and ongoing monitoring. ROI should also clearly lay out process improvements, such as fewer errors from manual entries and any savings as a result of RPA implementation.

Seek External Assistance

Given the rapid technological advances in recent years, it’s unlikely your financial institution currently has all the necessary pieces for establishing an effective RPA strategy. Although IT will play a critical role, expect to bring in outside subject matter experts (SMEs) to provide a thorough assessment of how the technology could be implemented, the savings realized, and the costs you’re likely to incur.

Establish An RPA COE Advisory Council

Developing a COE RPA team or board can help financial executives see the forest from the trees. The team will include IT professionals and department SMEs as well as those who can view the process from a holistic level to determine how the RPA strategy impacts every division involved. It’s critical that improvement to one specific division is not at the expense of another. On a holistic level, the RPA process should be mutually beneficial, albeit perhaps not equally beneficial. The board is charged with monitoring the implementation and quantifying the results from each division on an enterprise-wide level.

Create A Blueprint Of The RPA Capacity Plan

With the cost/benefit analysis and the quantifiable results from the initial testing now available, actionable steps can be outlined for the integration strategy of RPA. However, any financial gains, operational improvements, and the associated costs of the RPA strategy for each division and the COE should be outlined as well.

For example, the blueprint should layout the divisions involved in the rollout, and how the process will unfold. What technological investments are needed, additional staff, outside consultants, and employee training are all just a few of the deliverables that should be spelled out in the blueprint. Employees should have clarity surrounding their role in the overall RPA strategy and the expected benefits. Since it’s often believed that technology replaces human beings, it’ll be critical to empower your employees by including them in the process and seeking their feedback.

Create Scalable Technology

Involve IT early on and coordinate their efforts with the outside consultants and SMEs to establish the robotic automation configuration needed to complete the project. Ensure your institution has the resources available to scale the automation process properly. Establish proper IT support and identify any connectivity issues at the onset.

Coordination between the COE leadership, the SMEs, and IT is crucial in preventing technology concerns later on. Also, defining roles and responsibilities will improve governance once the RPA strategy is expanded to the entire organization.

Pilot RPA With One Division Or Line Of Business

Communicate the RPA strategy with the LOB execs and their staff. The message should include an outline of the plan, the benefits to their operational processes, and their role in the implementation. Bring in consultants and SMEs to facilitate the process and overall execution of the RPA strategy for the test division. Provide detailed tracking and reporting of the successes and obstacles faced in execution of the strategy. From there, establish best practices and lessons learned before rolling out the automation plan enterprise-wide.

Scaling The RPA Strategy

Following the completion of the pilot program, the COE should have useful data and report on the efficacy of the program and any challenges that are likely to occur. Scaling the automation strategy while simultaneously monitoring its progress will be crucial to its success.

Governance

COE governance will include implementing the best practices from the pilot program and ongoing reporting of the results, challenges, and any necessary strategy adjustments. This will also involve prioritizing the rollout of automation, identifying and solving change-management issues that might arise during the process.

Progress reports via a management dashboard will demonstrate how each division is performing relative to the KPIs established at the onset. The dashboard might also include how each division is performing relative to others, the vendors involved, the challenges faced, and deliverables.

Integration framework will be needed containing a set of standards that connect legacy systems and RPA throughout the institution to measure the process from end-to-end. From there the COE can identify lessons learned, highlight areas of business improvement and process adjustments to be integrated seamlessly into all the divisions within the organization.

Robust Communication Strategy

Implementing and managing change can be difficult. And with any change on a corporate level, employees are likely to feel stress from the process. Open communication channels in an ongoing effort to keep everyone on the same page. Think of this as a sales pitch. You’re selling the RPA strategy to the board and shareholders to convince them of the savings from operational improvements, FTEs, etc. But also, you must sell it to your employees, so they too see the benefits to their division, reduce fear and empower them to be part of the revolutionary change happening within. Employees need to know that they’re an integral part of the implementation but also in helping identify improvements to the RPA strategy, once in place.

For example, sharing success stories about how two divisions worked together on an RPA solution to solve a problem with specific examples, and quantifiable results.

Be Adaptable

As technological advances come about in the future, your COE should be fluid, stay up to date on new trends, and stand ready to integrate any new technologies. The RPA strategy should reflect any new automation advances as well as be able to overcome any future obstacles.

Takeaways

There are a myriad of factors that go into creating a successful Center Of Excellence. With proper planning and partnering with outside SMEs, financial executives can develop customized solutions for their LOB’s. Measuring the various outcomes and performances allows you to allocate resources where needed to build an RPA strategy that benefits the entire organization.

Breana Patel Founder & CEO Bonova Advisory

Breana is a thought leader with expertise in driving large scale transformations with disruptive technology, Regulatory Reform Advisory, and Enterprise Risk Management.

About Bonova Advisory

Bonova Advisory is a boutique management consulting firm providing thought leadership to financial services and government agencies for navigating today’s complex regulatory, risk and operational environment.

We offer the expertise and experience of exclusively senior-level consultants – the same advisory firms turn to for particularly complex initiatives – combined with the advantages of boutique personal service.

Bonova Advisory Inc.
support@bonova.net |www.bonova.net | 222 Broadway FL 19, New York, NY

When I was in college, buying used textbooks had two benefits.  It was a way to save a few dollars.  Even better, if you could find one that was previously owned by a very good student, it may already have been accurately pre-highlighted, providing even stronger study assistance.

Wouldn’t it be nice if the specific regulations that applied to your business were highlighted?  And maybe even sorted by country, by service, by deadline, by any number of variables you could select?

It’s not like banks aren’t throwing a lot of money at the problem.  They’re spending about $100 billion a year on compliance efforts.  And they’re paying more than $150 billion a year on fines and penalties when their efforts come up short because something was missed, misinterpreted or ignored.

The problem is that traditional technology is not well designed to understand and manage regulatory compliance.  With regulatory guidance being completely unstructured (free form text in documents), it falls to people to painstakingly read and review countless documents in search of meaningful sections or passages.  And as we know, human behavior, interpretation and concentration are variable.

Now, however, IBM is applying new technology to the field of regulatory compliance that can highlight critical information faster than any human.  We call it cognitive compliance.

Cognitive compliance is based on cognitive computing, which gained prominence in 2011 when IBM’s Watson computer defeated the top human contestants on the televised quiz show, Jeopardy.

A cognitive computing system is based on four key principles:

• It interacts using natural language, context and reason
• It uses subject matter experts to collate and curate human intelligence, for rapid reuse or decision support
• It learns and improves with each new piece of information
• It builds speed and scale by using machine learning to handle complex, repetitive tasks

The technology behind Watson is showing real promise in the field of compliance.

To begin, in September of 2016, IBM announced it was acquiring Promontory Financial Group, a consultancy with a high percentage of former regulators.  Now that the acquisition is completed, these subject-matter experts have already begun playing the critical role of training Watson in the science, art and language of regulatory compliance.

With the ability to ingest new regulations as they are created, and to review up to 800 million pages of text per second, Watson can provide decision support on compliance issues as diverse as regulatory reporting requirements for derivatives to consumer protection for mortgages.  And a cognitive system can learn to alert the proper department if a new regulation applies to its business or mission.

In addition, proposed regulations also can be reviewed much earlier to ascertain their potential impacts on bank operations, allowing faster response time to engage in lobbying for or against a specific proposal.

Cognitive compliance can dramatically streamline the time and effort it takes to understand the potential obligations driven by constantly changing regulations, and enable banks to be better prepared to put in place the controls required to address those obligations. This will reduce risks and drive significant savings, which can enable banks to focus investments where it best serves any organization: driving client-focused innovation that increases business value.

That’s a highlight anyone can use.

Yes, consumers are still writing checks

It might surprise you to learn that although the use of paper checks is declining in the U.S., checks still account for a large portion of the total number of payment transactions, particularly in business-to-business (B2B) dealings. More than 12 billion checks were written in the U.S. in 2015, and one-third of all payment transactions in the U.S. in that year were based on checks.^[1]  The number in the U.K. is lower, but still significant: 546 million checks were used to make payments in 2015, and approximately 237 million checks are expected to be used to make payments in 2025.^[2]

However, since there is an overall decline in the number of checks in circulation, there must be fewer instances of check fraud, right? Unfortunately, no.  Consider that in the U.S. alone, the number of check fraud cases jumped by 19% between 2012 and 2014.

The surge in mobile check deposits only complicates the situation. Existing systems often have trouble detecting counterfeit and altered checks or forged signatures from scanned images. Currently, two-thirds of losses still originate from over-the-counter items. However, remote deposit capture already accounts for 12% of losses due to fraud, and as banks continue to see customers adopt mobile-friendly applications, losses attributed to remote deposit capture can be expected to grow.^[3]

Checks—a path of least resistance for fraudsters

With so many still in circulation, checks continue to be the payment method most targeted for fraud.^[4]  A recent survey concluded that there are more than 1,500 cases of check fraud in the U.S. every day.^[5]  On an annual basis, the U.K. is seeing fewer cases of check fraud compared to the U.S. (approximately 5,746 versus 565,303 cases per year) 6^{, 7}, but is experiencing higher average losses per item. Counterfeits were the major source of fraud losses for U.K. banks in 2015, with a significant 41% increase compared to 2014.⁸ And although many U.K. banks have strong check fraud detection systems in place, the number of cases is expected to rise when the U.K. introduces mobile deposits on a broader scale in 2017, which will challenge these defense lines.⁹

Some banks have focused on tightening their security around other payment forms, like credit cards, but many haven’t paid much attention to checks because they were hoping that check usage would decline much faster than it has. This has left many banks vulnerable and weakened consumers’ trust in the security of payment processing. They expect quick access to their funds, so banks must be able to identify suspected fraud immediately and put non-suspicious items on the fast track for payment.

Key line of defense against fraud—take a holistic approach

So what should you look for when evaluating a check fraud solution that will protect you from losses and keep your customers happy?

First, here’s what not to do: many banks use simple processing rules (high-dollar threshold, etc.) and behavioral pattern monitoring, along with a team of visual inspection processors, or fraud analysts. These methods tend to produce a high number of false positives and, in most cases, don’t reduce fraud loss to an acceptable level.

For the most comprehensive fraud protection, choose a solution that considers a number of weighted factors, including comparing the handwritten check signature to the reference signature on file, leveraging information from external systems, identifying discrepancies in check stock, determining whether or not an item is pre-authorized, and verifying the payee is on a bank-specified white or black list. You can then use a “combined risk score” to assess the level of risk and make a pay/no pay decision.

5-step approach for reducing your risk of fraud

Don’t leave a gap—or worse, a gaping hole—in your check fraud detection system. Look for a holistic solution that takes a multi-step approach for operational risk mitigation.

Below is a commonly used and successful approach:

1. Build up customer profiles; fully automate them, if possible.
2. Use image-based detection engines that fit actual fraud exposure, including automatic signature verification.
3. Combine all information from these image engines, and then plug in external scoring data and parallel data analysis into the “combined risk scoring” engine.
4. Create and maintain fraud rules, ideally in a Combined Risk Score editor, to match concentrated information with current exposure patterns.
5. Retrofit fraud findings and good customer behavior patterns back into the profiles.

To learn more about check fraud detection and signature verification, we invite you to view a recording of a recent American Banker webinar Defend against check fraud with e-signatures and signature verification.

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• Plaid fashion axe semiotics skateboard
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• Gleams steal into the inner sanctuary grow
• Like these sweet mornings of spring which

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Throw myself down teems with vapour around me, and the meridian sun strikes the upper surface of the impenetrable foliage of my trees, and but a few stray gleams steal into the inner sanctuary grow familiar with the countless indescribable forms of the insects and flies, then I feel the presence of the Almighty, who formed us in his own image, and the breath

Lo-fi cred gastropub, brunch aliquip stumptown culpa. Banh mi eiusmod tattooed, freegan Schlitz master cleanse pug. Eu 8-bit id PBR Pinterest taxidermy, swag church-key Echo Park commodo yr. Adipisicing leggings enim laboris wayfarers, cliche Carles placeat typewriter mixtape cold-pressed. Etsy Pitchfork Austin, selvage beard reprehenderit ea ugh.

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When, while the lovely valley teems with vapour around me, and the meridian sun strikes.

Art party photo booth deserunt exercitation plaid squid. Minim Austin 3 wolf moon scenester aesthetic, umami odio pariatur bitters. Pop-up occaecat taxidermy street art, tattooed beard literally duis photo booth Thundercats shabby chic. Velit non seitan, tilde art party minim Thundercats viral.

• Plaid fashion axe semiotics skateboard
• Mixtape fap Intelligentsia small batch placeat labore
• Gleams steal into the inner sanctuary grow
• Like these sweet mornings of spring which

High Life tempor retro Truffaut. Tofu mixtape twee, assumenda quinoa flexitarian aesthetic artisan vinyl pug. Chambray et Carles Thundercats cardigan actually, magna bicycle rights. Plaid fashion axe semiotics skateboard, try-hard food truck aesthetic biodiesel exercitation. Accusamus VHS Wes Anderson Banksy food truck vero. Farm-to-table selfies labore, leggings cupidatat sunt taxidermy umami fanny pack typewriter hoodie art party voluptate cardigan banjo. Listicle meditation paleo, drinking vinegar sint direct trade vegan 3 wolf moon.

Throw myself down teems with vapour around me, and the meridian sun strikes the upper surface of the impenetrable foliage of my trees, and but a few stray gleams steal into the inner sanctuary grow familiar with the countless indescribable forms of the insects and flies, then I feel the presence of the Almighty, who formed us in his own image, and the breath

A wonderful serenity has taken possession of my entire soul, like these sweet mornings of spring which I enjoy with my whole heart. I am alone and feel the charm of existence.

Lo-fi cred gastropub, brunch aliquip stumptown culpa. Banh mi eiusmod tattooed, freegan Schlitz master cleanse pug. Eu 8-bit id PBR Pinterest taxidermy, swag church-key Echo Park commodo yr. Adipisicing leggings enim laboris wayfarers, cliche Carles placeat typewriter mixtape cold-pressed. Etsy Pitchfork Austin, selvage beard reprehenderit ea ugh.

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When, while the lovely valley teems with vapour around me, and the meridian sun strikes.

Art party photo booth deserunt exercitation plaid squid. Minim Austin 3 wolf moon scenester aesthetic, umami odio pariatur bitters. Pop-up occaecat taxidermy street art, tattooed beard literally duis photo booth Thundercats shabby chic. Velit non seitan, tilde art party minim Thundercats viral.

• Plaid fashion axe semiotics skateboard
• Mixtape fap Intelligentsia small batch placeat labore
• Gleams steal into the inner sanctuary grow
• Like these sweet mornings of spring which

High Life tempor retro Truffaut. Tofu mixtape twee, assumenda quinoa flexitarian aesthetic artisan vinyl pug. Chambray et Carles Thundercats cardigan actually, magna bicycle rights. Plaid fashion axe semiotics skateboard, try-hard food truck aesthetic biodiesel exercitation. Accusamus VHS Wes Anderson Banksy food truck vero. Farm-to-table selfies labore, leggings cupidatat sunt taxidermy umami fanny pack typewriter hoodie art party voluptate cardigan banjo. Listicle meditation paleo, drinking vinegar sint direct trade vegan 3 wolf moon.

Increasingly protracted, complex and costly processes associated with Know Your Customer (KYC) compliance and record-keeping underscore the challenges expressed by equally-sized pools of about 1,100 financial institutions and their corporate customers in response to the latest pair of independently-conducted Thomson Reuters surveys. As was the case in 2016, while financial firms have continued to invest significant resources in KYC, the compliance issues and concerns both they and their clients face appear to be rising.

According to the survey, financial institutions with $10 billion or more in revenue have seen their average spend on KYC-related procedures increase to $150 million this year from $142 million in 2016, while their number of deployed employees has skyrocketed to an average of 307 KYC compliance professionals in 2017 from 68. Despite this rise in headcount, just over a third of firms reported that scarce resources remain their biggest challenge in conducting KYC and customer due diligence (CDD) processes.

Looking at the process of on-boarding, corporations’ expectation that their customer on-boarding time would rise this year were borne out -- with the average increasing to 32 days from 28 in 2016. On the other side, despite their ongoing investment, banks claim that it now takes 26 days on average to onboard a new client, up from 24 days a year ago. Both groups surveyed expect on-boarding times will rise again in 2018, with financial firms anticipating a 12 percent increase, while their corporate clients contrastingly view that on-boarding times will increase by 24 percent in the next 12 months. Underlying this differing perception is a more notable disconnect: banks say they contact their clients on average four times during an on-boarding process whereas corporations report being contacted on eight occasions by their bank representatives.

For financial firms, documenting and maintaining current KYC records to keep compliant remains difficult, with just 18 percent of banks surveyed only taking action when an event occurs to trigger a KYC review. And in 2017, less than one third (30 percent) of corporate respondents make their banks aware of all material changes involving KYC and CDD. Among financial institutions, just 8 percent think their clients are proactive when reporting material changes, down from 14 percent in 2016.

Financial firms and corporations cited the impact of continuing KYC regulatory change worldwide in 2017 as being the biggest driver affecting their compliance processes. Nearly three-fourths of all banks say changes in legislation and regulation are motivating them the most to explore KYC program adjustments, while changes in KYC regulation mean they need to constantly refresh their customer records to stay compliant. This correspondingly is causing corporations to allocate added resources to supply more detail to their banks, with the average corporation spending 26 days a year to provide additional KYC regulatory information, up from 23 days in the 2016 Thomson Reuters survey.

“While our global surveys show compliance challenges remain significant for banks and corporations, those that take a proactive approach to the regulatory environment by using available technology to streamline KYC processes can put themselves ahead of the curve for competitive advantage,” said Dominic Mac, global head of KYC Industry Solutions at Thomson Reuters. “Financial firms are being pressured to focus both on current compliance and prepare for upcoming changes. This year’s survey reveals a change in the dynamics of KYC, with large firms spending $150 million in 2017, up from $142 million in 2016, and expecting their CDD and KYC outlays to rise a further 13 percent over the next 12 months. For corporations, the ability to standardize and securely share KYC information is crucial to overcoming such problems, and digitization is a key enabler. At Thomson Reuters, we remain committed to working with corporations and financial institutions to help them streamline the process by uploading and maintaining one set of KYC documents from a more secure central location, eliminating the need to keep responding to uneven, duplicative or sporadic requests from their banks.” For more on the 2017 findings, view this interview: https://youtu.be/pJnntDDKec8.

The surveys – administered in April and May 2017 to an evenly proportioned set of respondents in leading regional markets in Europe (UK, France and Germany), the U.S., South Africa, Singapore, Hong Kong and Australia -- involved 1,023 respondents at financial institutions and 1,122 respondents at corporations. All were engaged within their organizations in KYC-related compliance activities, encompassing processing of and adherence to client on-boarding and CDD.