When older workers retire, they take years of knowledge and experience with them

One of the primary concerns of industry execs is that as older workers retire, knowledge will be lost – potentially years and years of risk analysis and claims processing experience - and the price tag associated with such losses can be high. 

Sometimes, organizations don’t know what they’ve lost until after the expert leaves —and by then, it may be difficult to recover. Harvard Business Review calls this a loss of “deep smarts” and gave the example of one organization whose anticipated wave of 700 retirements would mean the loss of over 27,000 combined years of experience.⁵

Here's where artificial intelligence comes in

There’s no doubt that AI and Machine Learning are having a seismic impact on the insurance industry. In fact, in a 2022 Accenture survey, 80% of insurance executives said that AI technologies can bring more value to their organization, and 65% say they plan to invest more than $10 million into AI in the next three years.⁶

How does AI bring value to a P&C insurance organization? By way of a simple illustration, a new underwriter gets better at predicting the cost of a new policy by seeing more policy applications, evaluating them, pricing them, and then seeing whether the price quoted results in a favorable or unfavorable loss ratio at the end of the policy term. Similarly, a new claims manager gets better at identifying and managing high-cost claims by seeing more new claims, triaging them, managing them, and then seeing whether the ultimate incurred is more or less than the amount of the reserve set. AI leverages this concept of repetitive practice leading to improved performance. 

In essence, AI replicates the kind of human learning the underwriter and claims manager can handle, but an AI model can “learn” from far more policies and claims than any person could ever hope to. Where an experienced underwriter might see thousands of applications in a career, an AI model can consider tens of millions of expired policies and the closed claims made against those policies. 

Further, the AI model can “remember” every fact in every one of those policies and claims and can compare those facts to every fact in every other policy and claim it has “seen.” 

This training process provides the model with the “knowledge” it needs to assess new underwriting applications and claims going forward, providing an insurance organization with powerful capabilities to enhance its traditional operating practices. 

Insurers who are leveraging AI are improving loss ratios and profitability by predicting underwriting and claim risks with greater accuracy, as well as reducing quote turnaround times and claim expenses through intelligent automation. When AI is brought into the point of decision – whether in underwriting or claims – that’s where it has a significant impact.

Leveraging AI to bridge the talent gap

In the case of the industry worker shortage discussed in the webinar, insurers are also leveraging AI to bridge the talent gap, capturing institutional knowledge, and transferring it to less experienced employees, and reducing training time. AI allows a transfer of knowledge in a way that hasn’t been seen before.

In the webinar, Ken Bunn explained that at Builders Mutual, “previously, new adjusters would have to sit beside an experienced adjuster for years to observe how they were handling claims. Now, thanks to integrated AI solutions, our newest adjusters can learn quickly and have guardrails in place as they are making decisions. It’s this ability for AI to capture all that experience that could walk out the door and be lost, that delivers an unexpected but compelling strategic benefit to organizations adopting AI. Now, instead, there's an organizational memory of it - it's captured in the model and retained for generations of new adjusters to learn from.”

Conclusion

In addition to the role artificial intelligence can play in solving the talent gap, improved human resource policies are also important.

In the webinar, Jeff Rieder spoke about how forward-thinking organizations are building agility and resilience to recruit and retain top talent by focusing on things like: flexible working (actively shaping where and how their people can work), well-being (adjusting their plans to address physical, emotional, social, financial, and work-related issues), reskilling/upskilling (considering cost optimization, skills requirements, mobility and development initiatives), and diversity and inclusion (also known as DEI -looking at ways to address current and future gaps). 

With a growing percentage of insurance industry employees facing retirement in the coming years, issues related to recruiting and retaining top talent to develop the next generation of insurance industry leaders are critical. While these issues are not unique to the insurance industry, they are particularly acute given the demographics of this industry. 

By using artificial intelligence combined with smart human resources policies, insurers may be able to help bridge the talent gap in a 1000-year-old industry that is a critical part of the backbone of our modern economy.