Chapter 10:
Higher Levels of AI Investment and Adoption
There are varying degrees of AI within Insurtech solutions. In the last chapter, we discussed how companies across the property insurance ecosphere can make lower-level investments in AI.
Cotality solutions contain varying degrees and levels AI so that organizations across the property insurance ecosphere have a wide spectrum of innovative options. Cotality's goal for innovation is to integrate AI-powered features that are broadly impactful, yet specific enough to meet each organization's unique requirements.
What Is a Higher Degree of AI?
Higher degrees of AI adoption correlate directly with a more profound impact on customers. Higher levels of AI technology impact customers more immediately.
The highest level of AI integration often involves systems where humans are "out-of-the-loop" (HOOTL). With these advanced forms of AI, human operators neither constantly monitor the machine nor possess the ability to directly override the technology's decisions in real-time. Instead, the system functions as an automated closed loop, empowered to "make every decision, and the human intervenes only by setting new constraints and objectives."[25]
High frequency trading systems leverage HOOTL AI, analyzing the market in real-time and making quick autonomous decisions and taking immediate action.
More common higher-risk AI models, though, operate somewhere between "human-in-the-loop" and "human-out-of-the-loop." They are considered "human-on-the-loop" (HOOTL) models, with the software designed to make most of the decisions, but still creating space for humans to interrupt the loop. With HOTL models, users can interrupt the workflow when they disagree with the machine's decision, or if the AI has failed.
Examples of HOTL AI systems are fraud detection and flagging software, as well as underwriting risk scoring models. Human users stop the loop when the machine indicates certain results.
Even though human intervention is possible—and often required by companies for consistent oversight—these “human-on-the-loop” AI models involve a level of risk that lighter-degree AI models do not. And for a company to produce any fail-proof system using a "human-on-the loop" AI tool, humans must pay constant attention to the operations. Achieving consistent vigilance can be a challenge.
[25] https://hbr.org/2021/11/managing-ai-decision-making-tools
Leveraging AI to a Higher Degree in the Property Insurance World
Technology with higher degrees of AI will not involve as much human interaction as lower-degree AI technologies. It can make determinations and decisions on its own. As a result, it is important for programmers teach the AI with an unbiased, comprehensive set of data. In turn, AI will come as close as possible to making objective decisions based on all the right criteria.
Still, it is impossible for any AI to be perfect and accurate 100% of the time.
In the property insurance industry, where the regulatory environment is complex, companies that leverage AI should involve humans in the decision-making process—even companies that leverage technology with higher degrees of AI. When AI makes a determination, a human should monitor the effects at a macrolevel and have the processes and capacity to intervene when adjustments need to be made. And remember: AI cannot replace process where legal and regulatory requirements are in effect.
The Value of High AI Adoption
More risk, more reward potential. The higher the degree of AI—or investment in the technology—the greater the potential for future-proofing an organization at a transformational level.
With successful higher degrees of AI adoption, companies exponentially increase their capacity. When you incorporate sophisticated forms of AI into your workflows, business planning is no longer limited to solvency; instead, it is about increasing high-quality, effectual output at a time when that’s needed by more policyholders than ever before.
With high-level adoption, then, AI becomes more than serving your existing customers with the highest quality of service and empowers you to take on more policyholders and deliver personalized, omnichannel experiences in their greatest times of need.
A Responsible Approach to Higher Degrees of AI Adoption
Working with the right vendors and partners alleviates the pressures that come with higher investments in technology and organizational change. When implementing AI, it is essential to work with a vendor you can trust to establish ethical AI.
A partner like Cotality, that keeps ethical AI as part of its innovation mission, is ideal for operators in the property insurance ecosphere member.
Keeping humans "on the AI loop" is critical in an industry where human engagement is so profound.
The key to success with any degree of AI is working with partners prepared to individually determine the right blend of the technology in each proces and workflow. Your company must choose partners—vendor, implementation, and others—that are constantly finding answers to the question, “What adjustments can we make to this ecosystem to make it better while remaining ethical?”