Cyber Risk in Reinsurance
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Technology is the common denominator which generally creates a huge impact on almost all industries. Big data and artificial intelligence are the latest buzzwords in technology. They are impacting almost every industry. Since reinsurance is basically an industry that supports other industries, all these technological changes are impacting reinsurance as well.
In this article, we will have a closer look at how the reinsurance industry is getting impacted by underlying technological changes.
Earlier factory workers were mostly human. However, now it is common to find robots and drones to operate factory floors. The existence of such technologically advanced equipment creates a completely different risk profile. For instance, there is no risk that drones will become sick or disabled. However, there is a chance that the drone may cause an increase in workplace accidents causing an increase in compensation claims.
Similarly, the automobile industry is going through a sea of change. It is expected that in the next decade, artificial intelligence will enable most cars to have self-driving features. This may be a welcome change from the customer’s point of view. However, when it comes to the reinsurance company, this opens up a whole new can of worms.
For instance, if there is a car accident, who should be held liable? Is it the customer who was in the car? Is it the company that manufactured the car? Or is it the component provider who has developed the self-driving algorithm based on which the car operates? Right now, there is a lot of ambiguity about these issues.
The artificial intelligence industry is creating tectonic shifts in the risk assessment and risk management processes of reinsurance companies. These companies need to ensure that they act fast in order to be able to manage risks better.
For instance, it is possible to find out how much a car is driven and whether it is driven safely. Also, it is possible to obtain data about the fitness of an individual using fitness bands. Insurance companies are now facing the problem of an abundance of data.
Artificial intelligence has been responsible for creating this boom in the availability of data. It is also likely to be responsible for creating ways and means to manage it. Insurance companies have an urgent need to leverage big data technology to collate information and extract meaningful insights from the same.
In the recent past, many reinsurance companies have created systems that help them process mundane claims automatically, and only claims which need special attention are processed by humans. This is leading to an increase in the accuracy with which these claims are processed. It is also helping reinsurance companies to reduce turnaround times.
There are other uses for artificial intelligence as well. For instance, chatbot technology is being deployed by many reinsurance companies to automatically share documents and provide basic information about the policy.
There are many places in the world where insurance customers are unhappy about exorbitant premiums. The use of technology and related cost reduction will help rationalize the premiums and increase the number of people who have access to reinsurance.
The bottom line is that artificial intelligence and big data are already impacting the reinsurance industry in a huge way. This trend is only likely to increase in the near future and reinsurance companies need to accept this trend and adapt to it as soon as possible.
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