Experts Highlight Synthetic Data's Transformation of the Insurance Sector

Synthetic data is transforming the insurance industry, with AI-driven applications in risk modeling, pricing, and product development. Experts highlight its rapid adoption and benefits for efficiency and privacy, while also cautioning about reliability and potential bias concerns.

The insurance industry is currently experiencing a notable shift due to the rising utilization of synthetic data driven by artificial intelligence (AI). Prominent figures in the sector convened at a recent forum to discuss the impact of this technology on operational processes, product innovation, and risk evaluation.

Uday Keith, the Vice President of Portfolio Steering (Data Science) at Swiss Re Global Solutions, emphasized the significant increase in the utilization of synthetic data. Citing Gartner, he pointed out that just one percent of AI models incorporated synthetic data in 2021, a figure projected to surge to 60 percent in the coming years. Keith further noted that around 40 percent of data employed in the insurance sector is currently synthetic.

Pranshu Diwan, who holds the position of Chief Business Officer in the Insurance division at Paytm Insurance Broking, clarified that synthetic data is generated artificially to enhance the efficiency of model training. Vaishali Tiwari, serving as a Director at Flipkart, highlighted the significance of synthetic data in establishing pricing boundaries and offering discounts, particularly in cases where the modeling with real data approaches its limitations.

Synthetic data offers more than just efficiency gains. In a statement by Hari Singh, Senior Vice President at Marsh India, he emphasized the advantages of synthetic data in terms of data privacy and scenario analysis. Singh described synthetic data as carefully crafted data that mimics real data characteristics while safeguarding data privacy.

Nevertheless, technology does pose certain hurdles. Raution Jaiswal, the Chief Executive Officer and creator of InsuredMine, has expressed apprehensions regarding the possibility of partiality and unjust benefits that may arise from utilizing customer data, especially within the brokerage sector.

Despite the obstacles faced, the range of potential uses is extensive. Singh highlighted its utilization in risk assessment, comparison analysis, product innovation, claims processing, and fraud prevention. Sunanda Pal, an Associate Partner specializing in the insurance industry at IBM, likened it to well-established uses of artificial data in various sectors like music creation and aviation simulations.

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With the ongoing evolution of the insurance sector, synthetic data is anticipated to have a significant impact on fostering creativity and streamlining processes. Nevertheless, experts emphasize the importance of addressing concerns related to dependability, confidentiality, and equity as this tool gains prominence.