Research from hyperexponential, a pricing platform for global re/insurers, has revealed significant concerns among insurance professionals about the role of artificial intelligence (AI) and the adequacy of current pricing technology.
The findings highlight a gap between the industry’s investment in AI and the technical skills, talent, and infrastructure needed to fully leverage the technology.
According to hyperexponential’s “State of Pricing 2024” report, 91% of insurance companies are either already investing in AI technology or plan to do so within the next five years. However, there is growing anxiety about the industry's readiness to adapt to AI-driven changes.
The report found that 80% of actuaries and 74% of underwriters are worried about not having the right technical skills for the future. Furthermore, 69% of underwriters and 67% of actuaries are concerned they could be replaced by AI in the next five years.
The survey found that 47% of respondents struggle to price optimally due to difficulties in integrating new and legacy systems, and 51% believe their current technology does not meet the needs of an evolving risk environment.
Additionally, only 19% of insurers are automatically incorporating external data into their pricing models, pointing to a gap in the use of available resources to enhance pricing accuracy.
Amrit Santhirasenan (pictured above), CEO and co-founder of hyperexponential, commented on the findings, stating that while technology has the potential to bring positive changes to the insurance sector, the industry must be intentional in using AI to create practical, long-lasting solutions.
“Far from being replaced, actuaries and underwriters can add significantly more value by embracing and leveraging AI, allowing them to analyse complex data, communicate more effectively and build new tools that would have been impossible five years ago,” Santhirasenan said.
He also added that while AI is not a cure-all for the sector’s issues, it has the capacity to improve productivity and make the industry more attractive to a new generation of technically skilled professionals.
The report also revealed broader concerns about the future of work within the insurance sector. A significant proportion of actuaries (68%) and underwriters (79%) expressed fears about burnout over the next five years, underscoring the potential for AI to alleviate the burden of routine tasks and enable professionals to focus on more strategic activities.
Additionally, 80% of actuaries are concerned about the need to learn multiple coding languages, with 48% anticipating this will become an urgent requirement within the next two years. For underwriters, 81% are apprehensive about the shift from risk underwriting to portfolio underwriting, with nearly half expecting it to become a pressing issue within the next year.
On the technology side, earlier results from the report indicate that 96% of underwriters and actuaries believe their current pricing technology requires improvement, up from 84% in 2023. While the use of traditional spreadsheets or Excel for pricing has decreased, with only 8% of insurers still relying on them, the adoption of modern pricing platforms has not fully addressed the challenges of modernisation, integration, and implementation.
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