5 Ways AI is Transforming Insurance

Many insurers are already feeling the disruptive effects, but by embracing the possibilities of AI there are enormous benefits to be realized for carriers and their customers.

High quality 3D render of a robot hand touching a human hand, representing the relationship between human and artificial intelligence. Bright blue overcast sky, lens flare for dramatic effect.

(Image credit: Adobe Stock.)

The potential for artificial intelligence to change the world is unbounded. Coupled with robotics and the Internet of Things (IoT), we’ll see automation on a previously undreamed of scale. But it’s not just about driverless cars and drones used for roof inspections. Combining the rapid pace of human-directed machine learning with the vast volumes of data we’re now collecting is already beginning to deliver new insights.

No industry will remain untouched by the AI revolution, least of all insurance. When 550 insurance executives across 31 countries were surveyed by Accenture recently, 75 percent said that they believe that AI will either significantly alter or completely transform the overall insurance industry in the next three years. Let’s take a closer look at some of the major ways AI is already having an impact on insurance.

Data analysis is improving risk awareness

The sheer volume of data that’s easily accessible nowadays is enormous. Traditional data collection from mail and phone calls is being heavily supplemented by website portals, email, and social media. Partnerships with device manufacturers are folding the IoT into the mix with data from wearable fitness devices, smart smoke alarms, and all kinds of other sensors.

Employing AI and machine learning to process all that data is driving the discovery of important patterns. It’s highlighting risks and likely outcomes from various behaviors that enable us to take steps to mitigate those risks and improve safety. The more accurately insurers can predict probable losses, the easier it becomes to plan accordingly.

Customer engagement and retention

The importance of an omnichannel, online presence that’s responsive can’t be overstated. Consider that 79 percent of consumers said they will use a digital channel for insurance interactions, according to Bain & Company research. To engage customers and retain them, that online experience must be positive, and that often means fast responses with accurate information that’s tailored to the customer.

There’s a lot of room for improvement here. When Eptica compared expectations with performance it found that just 28 percent of queries were answered through digital channels, with 14 percent of insurers failing to answer on either email, web, Twitter, Facebook or chat. Consider, for example, that 71 percent of people expected a Twitter response within an hour, but only 29 percent of insurers met that target.

AI, in the form of virtual agents and chatbots, can be used to quickly respond to customer requests. An automated system can guide them through simple processes and provide personalized service in a timely manner, often without the need for any manual intervention.

Coverage and cost

There’s a very fine balance between coverage and cost. Finding the sweet spot for customers is the path to sales, cross-selling and retention. AI can be employed to analyze customer coverage, or assess prospective new customers, and suggest the right products for them. By entering some basic details into a web portal, it should be possible for customers to get an automated quote and some personalized coverage options.

Efficient claims processing

The way that a claim is handled is very important to customer satisfaction. The range of factors that creates an ideal customer experience is complex and sophisticated, but speed, ease of communication, and transparency all weigh heavily, according to McKinsey.

This is an area where AI can work wonders. Imagine processing a claim automatically, where the customer submits online, and then the AI reviews it, cross-references the policy, runs an anti-fraud check, then approves the claim and instructs the bank to pay. Well, you don’t have to imagine because a startup insurer named Lemonade was able to do exactly that and process a claim in just three seconds.

Not only does this boost customer satisfaction, it also reduces the case load for claims advisors, enabling them to be more productive and making best use of their expertise.

Customer profiling

It’s important to remember that the factors we’re looking at here are not isolated. The ability to leverage more accurate and detailed customer profiling underpins everything we’ve looked at. Insurers gain a deeper understanding of the risk factors involved in insuring different people. Customer satisfaction gets a boost from speedy, transparent service, and it’s possible to offer personalized coverage that meets customer needs. Fraud detection is also vastly improved, making it easier and faster to process claims.

Ready or not, AI is transforming the insurance industry. Many insurers are already feeling the disruptive effects, but by embracing the possibilities of AI there are enormous potential benefits to be realized for carriers and their customers.

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Joel Makhluf // Joel Makhluf is a Vice President at Enservio and the director of the Property Innovation Summit insurance industry thought leadership conference. Enservio is a provider of contents claim management software, payments solutions, inventory and valuation services for property insurers. Contact Joel at jmakhluf@enservio.com.

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