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Hiscox has created an artificial intelligence model in collaboration with Google that can automate the core underwriting process for specialist risks, hailing it as a first for London’s insurance market.
The UK insurer, which plans to start using the tool next year, conducted a trial to automate the underwriting of a property sabotage and terrorism policy where it would be acting as a lead underwriter, it said on Tuesday. It would be the first time such activity had been automated, Hiscox added.
The AI tools would reduce the time spent on drawing up a quote to a few minutes rather than days and would free staff to underwrite more complicated risks, Hiscox said.
“It will allow the underwriters also to do more from a sales perspective, to travel more,” said Kate Markham, chief executive of Hiscox’s London market division. Asked about any impact on underwriter numbers, she said the business was “still hiring and planning to grow”.
Hiscox was likely to go live with the model in the second half of 2024, she said.
“The big question for us is: do we go [with] one line of business or do we try and drop this capability across multiple lines of business — which I think is our preference,” she added.
AI has already been used in the sector, for example in analysing claims, but the negotiation of specialist commercial insurance contracts — where underwriters provide policies covering against everything from cyber attacks to oil spills — has remained dependent on person-to-person trading.
The lead underwriter is the key insurer in negotiating terms and taking the first tranche of potential losses, with the rest shared with other firms.
The platform, developed by a joint Hiscox-Google team, uses a mixture of Google’s generative artificial intelligence and Hiscox’s digital technologies to extract data from email submissions provided by insurance brokers and automate everything from analysis to quote.
The AI digests the draft contract provided by the broker and any accompanying words and data. The decision on whether the risk falls within Hiscox’s appetite is determined by its own system. The AI tool also plays a role at the end, drafting a reply email to the broker, summarising what Hiscox has agreed to insure. The human underwriter reviews the summary before sending.
“We don’t want to remove the human in the chain at the moment,” said Markham. “We want to keep the underwriter so they can confirm that the models are behaving.”
Automation has crept into the so-called “follow” market at Lloyd’s, which is when insurers take a later tranche of the risk on a particular policy. In 2021, Lloyd’s insurer Brit launched Ki, which provides automated “follow”-only cover, after working with Google and University College London. But Ki has not moved into lead underwriting.
Google has been battling for dominance with other big tech firms in generative AI since Microsoft-backed OpenAI launched ChatGPT last year. Google, Microsoft and Meta have this year released products to help businesses develop their own bespoke applications for the technology through access to their foundation models, which power generative AI.
However, many businesses, especially in heavily regulated industries like finance, have been slow to adopt the rapidly advancing technology until there is more clarity on the regulatory environment.
On Saturday, the EU agreed on the terms for landmark legislation, the AI Act — one of the world’s first comprehensive regimes for policing artificial intelligence.
The UK has emphasised it will not be creating specific AI legislation in the short term for fear it could hamper innovation. Instead, it will look to existing regulators to oversee the technology.
