NAIC survey reveals continued growth of AI within life insurance industry

As analytics and artificial intelligence (AI) continue to transform the insurance sector, a contingent of insurance specialists from Baker Tilly recently attended the National Association of Insurance Commissioners (NAIC) big data and AI meeting, which discussed growing trends in life insurance. 

The meeting highlighted key results of NAIC’s AI/ML surveys report that examined life insurance companies across 14 states using the following criteria: 

• Life insurance products only, not annuities
• At least $250 million national life insurance premium in 2021 
• Covered at least 10,000 lives by issuing term insurance in 2021, or InsurTech company 

Examining the results 

Of the 161 life insurance companies that responded to the survey, 58% use, plan to use, or plan to explore the use of AI/ML. Of note, this was significantly lower than the percentage of auto insurers (88%) and home insurers (70%) who answered similarly when those surveys were conducted over the past year. 

The life insurance respondents who already have used or plan to explore AI/ML models are primarily using it for marketing (36%) and underwriting (34%), followed by pricing (18%) and risk management (11%). Within those four categories, AI/ML models are generally being used to augment marketing services, whereas AI/ML is typically being used for automation in underwriting, pricing and risk management.

Within marketing specifically, AI/ML most commonly is being used in connection with themes such as demographics, online media and public records. In the pricing and underwriting space, AI/ML’s most common usages are in areas such as medical data, demographics, driving behavior and credit-based insurance scores. 

Of the companies that are already using AI/ML models, more than half used third parties such as LexisNexis, Milliman, TransUnion and Choreograph to develop their models.