The insurance sector, like the legal sector, is no longer immune to innovation. Ever-increasing amounts of data, steepening competition between firms, tightening client budgets and, in recent months, the Covid-19 pandemic, has catapulted insurance firms into the digital age. AI-powered technology is now being used for anything from insurance underwriting to data protection compliance, to the identification of insurance fraud and even as a tool to help create and develop new insurance policies. In this blog, I look at why Luminance is at the forefront of this tech revolution.

Spotlight on the W&I market: the data explosion and increasing competition in the insurance industry

The world is now producing enormous amounts of data, with IBM estimating that 90% of the world’s data was produced in the last two years alone. Indeed, it is estimated that insurers are only able to process around 10-15% of the data they receive, making it a practical impossibility to have ‘eyes on’ every document they encounter. If we take the Warranty and Indemnity (W&I) insurance market, otherwise known as reps and warranties, as an example, the sheer scale of the data sets these insurers must analyse within many legal due diligence reports has meant manual investigations are too costly and time-consuming. Indeed, without the aid of technology, insurers may only have the time and resources to look at a sample of the document set, increasing the possibility that key information will be missed within the unsampled documents.

Further compounding this issue is an increasingly complex and competitive market. In particular, the W&I insurance market has seen tremendous growth in recent years and has now evolved to include both buy side and the original sell side policies. Nonetheless, as W&I becomes a more commercially viable option for organisations, this has resulted in steep competition in the market, with customers increasingly demanding efficient and effective legal advice at the most competitive cost.

Luminance, insurance and the transition to the digital era

In order to drive efficiency, reduce costs and deliver value-added advice to clients, insurance firms - from global organisations to boutique firms - are turning to Luminance to expedite their legal review processes. Powered by a unique blend of supervised and unsupervised machine learning, Luminance actively reads and forms an understand of legal documentation, no matter how vast. The platform is then able to immediately surface to the reviewer crucial datapoints, clauses and anomalies on a graphic, visual display.

For instance, when conducting an insurance underwriting review, Luminance is able to instantly surface critical clauses such as Change of Control, Limitation of Liability and Representation and Warranties, drastically increasing the speed of the review and greatly enhancing the insight of the analysis. Furthermore, with Luminance, underwriters can cut through the admin-heavy, repetitive work and focus their time on areas of potential risk or opportunity, resulting in the upmost confidence when issuing the insurance. Luminance’s supervised machine learning is then able to learn from the reviewer to generate additional insight, becoming increasingly bespoke with continuing use.

In an industry that has seen a 27% rise in false insurance claims, Luminance has also become a critical tool for investigating whether an insurance claim is genuine or fraudulent. Underpinning this trend is Luminance’s Automatic Document and Clause Compliance functionality, which allows users to select ‘model’ documents and clauses against which all others are compared. Luminance can then quickly highlight the ways in which previous agreements comply and deviate from a user’s chosen version or standard, helping them to determine whether everything has been fully disclosed and whether a firm needs to pay out or not.

Moreover, at a time when data privacy regulations are more complicated than ever before, insurance firms must ensure that they are compliant with provisions such as the GDPR (General Data Protection Regulation) and the CCPA (California Consumer Privacy Act). Those firms that are not compliant not only run the risk of financial ramifications through fines, but also put their brand reputation on the line. Luminance is therefore being used by insurance firms when reviewing third party agreements to immediately understand which clauses or documents deviate from the ‘model’ clause.

The future of the industry

As rapid technological advances reshape the insurance landscape, insurers are turning to cutting-edge machine learning to remain competitive, drive operational excellence and boost growth. More fundamentally, by adopting AI technology like Luminance, the insurance industry will change from its current state of “detect and repair” to “predict and prevent”, driving transformative change at every level of its business model.

If you want to find out more about Luminance and what it can do for your firm, please contact [email protected]