Improving the quality of decision-making with access to data and automation
In our previous article, we explored how Noise—random unwanted variability in judgements—can detrimentally impact decision-making in the insurance industry. By reducing the impact of Noise, even just partially, insurance organisations can improve the consistency and accuracy of their decisions, enhance customer satisfaction, and drive business success.
In this continuation, we explore practical solutions for addressing and mitigating the effects of Noise and aspects to consider when leveraging technology.
Automating Routine and Simple Judgements
According to Kahneman and his team, we must accept that “where there is judgement, there is Noise.” Simply put, to reduce Noise, you need to remove judgement.
Automating simple tasks through process automation is an effective way to achieve this. By digitising processes and implementing basic business automation rules, we can reduce the instances of human error and increase efficiency. This is because automation liberates employees from mundane, low-value decisions, allowing them to concentrate on more important, complex and nuanced decisions that have significant consequences.
By removing the cognitive burden of lower-value routine judgements from staff, we grant them much-needed time and space to consider all the evidence before them in a contextualised and structured way, thereby reducing the influence of Noise affecting their decision-making process.
But What About Complex Judgements?
Simple rules alone cannot resolve the more complex judgements that insurance staff make on a daily basis. The decision-making process relies on human judgement. Underwriters and claims adjusters are quite rightly very proud of the judgements they make on behalf of their firms. After all, their reputations and careers depend and are built on a track record of sound judgement.
While there may not always be enough data available to train algorithms to make decisions autonomously, there is an opportunity to train AI safely and securely with ‘human in the loop’ to provide valuable insights and actions that significantly enhance the ability of underwriters and claims adjusters to make more accurate decisions without the distractions of Noise.
Leveraging Technology to Reduce Noise and Support Your Staff
Technology is critical in reducing Noise and influencing human behaviours to ensure positive commercial outcomes. Consider these three essential aspects:
Rules-based Process Automation for Simple Judgments
Intelligent software can enable rules-based decision-making to remove simple human judgement where possible. This is the lowest-hanging fruit and represents the quickest way of reducing Noise out of all the ideas put forward by the authors. It immediately impacts staff, reducing their cognitive burden. Here, we are delegating work to software that these staff members should not and do not want to be doing.
Optimisation: Control Over Workflows and Business Process Design
A configurable software platform allows greater control over business processes and workflow orchestration. It is an effective tool for structuring a decision-making process so that staff can make judgements independently on each decision element before reaching a conclusion. This flexibility and control over workflows means organisations can build solutions in such a way that staff have the contextual data and the user experience required for them to make relative (comparative judgements) as opposed to absolute judgements (gut feeling or instinct). This way we can construct workflows that prevent other stakeholders from ‘contaminating’ a decision-maker’s independent judgement too early in the decision-making process.
Reducing Stress and Cognitive Burden, Augmenting and Assisting Staff to Work More Effectively
AI-powered software is vital for augmenting staff to work more effectively and reduce Noise. By structuring the decision to delay the ‘internal signal of judgement completion’ (that warm fuzzy feeling we get when we reach a decision that ‘feels’ right), we can ensure that all evidence is objectively assessed and considered equally and on its own merit, without the influence of irrelevant information, low-value and frustrating tasks, or other distractions. This is critical to ensuring good Decision Hygiene in time-pressured and data-rich environments.
In Summary
In these articles, we’ve explored how Noise impacts decision-making in the insurance industry and discussed practical ways to reduce it. Reducing Noise isn’t just about efficiency—it’s about making more consistent, unbiased choices that lead to business success. As you reflect on these insights, consider how you can start applying these ideas in your own organisation. How can technology help you create a decision-making environment less contaminated by bias, Noise and consequently unwanted pricing variability?
My aim is to raise awareness of the significant challenges Noise poses in the insurance sector and to highlight the importance of taking these findings seriously. The research shows striking results that underscore the need for immediate action. We have a responsibility to equip insurance professionals with the tools they need to minimise Noise and make the best possible decisions every day.
For those looking to delve deeper into these issues, I strongly encourage you to read more about these concepts in the book “Noise: A Flaw in Human Judgment” written by Daniel Kahneman, Olivier Sibony, and Cass R. Sunstein. Each step you take towards reducing Noise can lead to meaningful improvements in your operations and overall success.
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