Cyber risk is unlike most other insurance risks. That’s why the most successful cyber insurance providers rely on cutting-edge technology and trusted cybersecurity tools.

As an insurtech, innovative technologies are critical to our business model. It should come as no surprise that we embraced artificial intelligence (AI) early on to improve operations and enhance our customer experience. Given our role in the cybersecurity and cyber insurance spaces, we’ve also remained vigilant about the risks that accompany this revolutionary technology. Striking the right balance is essential in our commitment to protecting the unprotected.

AI presents a tremendous opportunity for the insurance industry and, in particular, cyber insurance providers. Yet, the promise of more efficient services, democratized information, and previously unimaginable scale are nested right next to concerns of unpredictability, accountability, and unforeseen bias.

Below, we’ll explore why Coalition believes there are clear benefits to employing AI in aspects of the cyber insurance transaction, especially underwriting and insurance operations, and how companies can mitigate potential risks.

Speed, efficiency, and automation

There’s no denying that AI can be used for bad. We know that threat actors are already using generative AI tools to launch more sophisticated cyber attacks and to exact larger amounts of money from their victims. But this technology also has huge potential to supercharge cyber insurance

At its core, AI enables speed, efficiency, and automation of manual tasks. Its application in cyber insurance has the ability to bolster risk assessments, expedite claims handling, and personalize customer experiences.

Earlier this year, we announced CoalitionAI, an initiative to deploy generative AI and large language models (LLMs) to help brokers and businesses address cyber risk. Since then, we’ve integrated AI across our different platforms to improve the fidelity of our underwriting, be more precise about risk segmentation, and enhance our quality of service.

Training AI models to act like underwriters

Underwriting teams receive hundreds, even thousands, of cyber insurance submission email submissions every day. A typical submission includes attachments, notes, and requests — valuable pieces of information awaiting review from a well-trained eye.

This kind of volume can easily turn into a backlog, but employing AI tools gives us the ability to apply human-level cognition to massive amounts of data at scale. When these email submissions are fed into Coalition’s generative AI model, the model can ask questions that aren’t addressed in applications and verify critical data points.

“AI-powered underwriting stands to accelerate a cyber insurance provider’s ability to make accurate decisions,” said John Coletti, Head of Underwriting at Coalition. “It also has the potential to enhance data verification and cut down on human-introduced errors.”

AI can be trained to act like an underwriter, but humans are always making the final decisions. AI possesses the power to not only accurately parse both structured and unstructured data, but also analyze an applicant’s reported security controls, all in a fraction of the time of the traditional underwriting process.

Perhaps more impressive, these models are built to improve over time through repetition of underwriting decisions and human input. In this way, using an AI model gives human underwriters the best of both worlds: the ability to manage more submissions while increasing the level of underwriting expertise across each account.

“AI-powered underwriting stands to accelerate a cyber insurance provider’s ability to make accurate decisions. It also has the potential to enhance data verification and cut down on human-introduced errors.” — John Coletti, Head of Underwriting at Coalition

Using AI to improve pricing and risk segmentation

Coalition has long touted the value of using cybersecurity data and insights to price and segment cyber risk. As a successful cyber insurance provider, we must be able to keep pace with the ever-changing cyber risk landscape. While traditional insurance companies continue to base pricing decisions solely on a business’ industry and revenue, Coalition is leveraging AI to further advance our underwriting approach and enable deeper insights into an already bespoke process.

“AI can help us understand more granularly what role an asset plays in an organization and how important it can be. It can also help us classify new vulnerabilities to reduce the burden on our security engineering teams,” said Tiago Henriques, VP of Security Research at Coalition. “These factors paint a more accurate picture of a business’ cyber risk and help us price and segment risk more appropriately.”

Coalition uses AI to efficiently complete the profile of an organization prior to issuing a quote. With access to publicly available information, like domain names or website content, we have increased our underwriting edge by using LLMs to drive efficiency and enhance data accuracy when evaluating an organization’s risk.

Businesses using Coalition Control™ can access the CoalitionAI Security Copilot, which delivers customized, actionable instructions on how to fix critical vulnerabilities. In this way, AI helps us create and distribute knowledge to current and prospective policyholders about the technology or business system decisions they've made and how those decisions impact their cyber risk exposure.

Importantly, these risk factors are not immutable: If we make businesses aware of the cybersecurity risks, they can address those risks and improve their security posture. And the better we get at giving them valuable information, the more we can influence their ability to mitigate cyber risk.

“AI can help us understand more granularly what role an asset plays in an organization and how important it can be.” — Tiago Henriques, VP of Security Research at Coalition.

Leveraging AI to make brokers’ jobs easier

Democratizing information has been a popular application of generative AI. Cyber insurance providers have incorporated AI-driven chatbots into their platforms to help answer questions about both insurance coverage and cybersecurity, but this is just the tip of the iceberg.

Underwriting efficiency and pricing precision translate to better, faster quotes for brokers. AI expedites the data-gathering process and reduces the number of questions a cyber insurance provider needs to ask on an application.

“Speed is essential for brokers, and AI tools make us faster,” Henriques said. “Whether it’s about specific policy language or general security controls, we can help brokers find the answers they need to make well-informed decisions.”

The strategic use of AI allows us to create a more customized sales process, which, in turn, can help brokers meet their clients’ insurance needs. It’s also capable of alerting providers to data inaccuracies in the application process.

“We frequently see things like misclassified or overly broad industry selections during the application process, which can make it considerably more difficult to underwrite an account in an automated way,” added Coletti. “The CoalitionAI Broker Copilot can suggest an industry classification to brokers based on business activity.”

Embracing an AI-powered future

Given the complexity of cyber and technological risk, cyber insurance providers should champion technology to accurately predict and quantify these digital risks.

In less than one year, AI has emerged as a fundamental aspect of Coalition’s Active Insurance:

• Active Risk Assessment: Underwriting, quoting, and digital risk scores powered by AI and real-time data

• Active Protection: Cyber risk monitoring and alerts to policyholders bolstered by AI to identify and prevent risk before it strikes

• Active Response: In-house resources and AI-powered workflows that accelerate a claims response if an incident occurs

We know everyone won’t agree on how AI is used in the insurance sector. There will always be naysayers who point to AI as being a digital risk in and of itself. But to disrupt the status quo, we must be willing to look to innovative technology solutions — and AI presents just that. Coalition’s use of AI to enhance Active Insurance distinguishes it from other insurance products that offer little to no value to a policyholder until something bad happens.

Today’s digital risk requires an active approach. Being active means embracing an AI-powered future.

This article originally appeared in the November 2023 edition of the Cyber Savvy Broker Newsletter. Subscribe to the newsletter to receive future editions directly in your inbox as we explore the most up-to-date and noteworthy topics in cyber insurance.

This communication is not a proposal of insurance. This communication is designed to provide general information on the topic presented and is not intended to construe or the rendering of legal or other professional services of any kind. If legal or other professional advice is required, the services of a professional should be sought. The views and opinions expressed as part of this communication do not necessarily state or reflect those of Coalition. Neither Coalition nor any of its employees make any warranty of any kind, express or implied, or assume any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, product or process disclosed. Any action you take upon the information contained herein is strictly at your own risk. Coalition will not be liable for any losses and damages in connection with your use or reliance upon the information. Copyright © 2023. All rights reserved. Coalition and the Coalition logo are trademarks of Coalition, Inc.