Viewpoint: Underwriting at an Inflection Point – The AI Advantage
The U.S. commercial insurance market is demonstrating clear signs of rate fatigue and an overall softening. Since 2017, the industry has experienced increased loss pressures from climate events, social inflation in legal judgments, and loss inflation from economic, political, and other factors.
To address this, insurance carriers have used significant year-over-year rate increases to remain profitable. We are now seeing signs that customers are becoming more resistant to these changes.
In Q2 2024, the broad, ongoing rate increases that had been seen in the commercial P/C market since 2017 broke, with commercial property rates declining by 0.94% – their first decline. Since this initial indication, broader trends have emerged, indicating that the market is at the beginning to soften.
According to Alera Group and CIAB research, average premium increases across all account sizes fell from 4.2% in Q1 2025 and to 3.7% in Q2 2025. Large account premiums rose by only 2.9%, a 45% decline from Q1 2025, while property premiums for Q2 2025 increased just 1.9%, reflecting an approximate 70% reduction compared to prior quarters.
Shifting Paradigm
The skills needed to succeed in a softening market are different from those required when rate increases are more readily available. To remain profitable, carriers need to focus tightly on expenses and more importantly improve the quality and discipline of their underwriting.
Historical approaches have focused on process reengineering, offshoring, and underwriting training. But in this softening market, with the advances in artificial intelligence (AI), gen AI and agentic AI, underwriting has the need and opportunity to think differently. The winners will be those who employ these tools to drive underwriting discipline and efficiency.
From Legacy to Cutting Edge
The traditional underwriting function, despite its evolution, remains largely unchanged. It still relies heavily on manual data collection, administrative tasks, and historical actuarial models.
This legacy approach hinders innovation and limits the potential for data-driven decision-making. To remain competitive, insurers must embrace AI and gen AI to enhance data ingestion, generate better insights, and enable more consistent and accurate pricing.
It’s not just about modernizing; it’s about blending the best of old and new school underwriting. Old school precision underwriting, powered by AI, can help insurers navigate this inflection point and stay ahead of the curve.
From Experimentation to Implementation
While the industry has been experimenting with AI for the past few years, adoption has been patchy and incremental. However, Accenture’s recent survey of 430 senior insurance underwriting executives across life, commercial property/casualty (P/C), and personal P/C insurance in 11 countries shows growing optimism. According to the data, AI and gen AI adoption in underwriting is expected to jump from 14% today to 70% in the next three years.
Automating Non-Core Tasks
One of the key benefits of AI is its ability to automate non-core tasks, allowing underwriters to focus on high-value activities. For instance, AI can handle data collection and ingestion, data synthesis, and even provide advice for underwriting. Significant improvements can be found by breaking down underwriting into a series of key decisions and using AI to help support the underwriter in making these decisions consistently and effectively.
Other applications such as data ingestion, can significantly reduce the time underwriters spend on administrative tasks, which currently account for more than a third of their time. By automating these processes, underwriters can focus on more strategic and analytical work, such as risk evaluation and pricing.
For instance, QBE Insurance Group, a multinational insurance company, has already seen the benefits of AI-powered underwriting solutions. With these tools, QBE can process 100% of the submissions it receives from brokers, greatly accelerating market response time. This is just one example of how AI can make a tangible difference in underwriting.
AI Is Game-Changer
AI and gen AI are not just buzzwords; they represent a significant opportunity for insurers to transform underwriting and stay competitive. By addressing the challenges of rising costs, environmental risks, and regulatory scrutiny, insurers can create a more efficient and accurate underwriting process.
In a rapidly changing market with ever-evolving cost pressures, and where environmental exposures continue to complicate risk assessment, AI is a game-changer. It’s not just about automation; it’s about creating a more resilient and adaptive underwriting function that can thrive in any environment.
By following these steps, insurers can navigate the inflection point and emerge stronger and more resilient. The future of underwriting is bright, and AI is the key to unlocking its full potential.