AI in Insurance: Balancing Tech Innovations with Human Insight for Optimal Service

Insurance players who think they can replace independent agents with AI are likely getting in the way of greater growth. Instead, they should view AI as a tool that can augment human knowledge, making their relationships with expert agents even more powerful.

(Image credit: Dollar Photo Club.)

The insurance industry is going through a significant transformation driven by technological change, marketplace conditions and customer demands. Ultimately, this will result in a better insurance experience for everybody.

Technology has already reshaped how businesses and individuals get information and make purchasing decisions. Gen Z shoppers (and increasingly, most generations) expect to be able to shop online and quickly find products and solutions personalized to them—from electronics to prescription eyeglasses to insurance.

It won’t come as a big shock that few people or businesses want to spend a lot of time shopping for insurance—or even thinking about it. They’re looking for a quick way to get the protection they need at an affordable price and know they won’t be unprepared for unpleasant surprises in the future.

To meet these needs, InsurTech has risen in popularity year after year. In the Drake Star Global InsurTech Industry Report, 85 percent of insurance organizations saw digitalization as their top strategic priority. Also on the rise is nontraditional distribution like embedded insurance—which lets companies integrate cloud-based technology platforms directly into their customer experiences.

All of these tech advances have enabled agencies and companies to reduce costs while offering a seamless, on-demand shopping experience that still makes room for the expert human agents who can provide the guidance and reassurance that insurance shoppers need.

And now, with the surge of AI, InsurTech companies have the potential to create an even more efficient and cost-effective experience, as long as they don’t lose sight of the customer need for human expertise while purchasing a complex and often intimidating product.

Getting this right couldn’t come at a more critical time—just ask any insurance shopper.

Headwinds everywhere

Lately, it’s becoming harder for every customer who needs insurance to find the right coverage at an affordable price.

In personal lines, home insurance costs have been driven up by damages caused by extreme weather and supply chain problems that make repairs costlier. Auto insurance rates have been similarly impacted by weather, along with a rise in accidents, the higher costs of repairing high tech cars and steeper-than-ever legal and medical costs.

And because our heavily regulated industry limits the ability of carriers to raise rates, insurance markets are shrinking across the country. Some carriers in hard-hit states have either discontinued coverage, declined to take on new customers  or renewed policies but smuggled in higher deductibles, new limits or exclusions, or removed add-on services.

Commercial insurance customers are feeling anxious too. Today’s small business owners are concerned about threats that include extreme weather and natural disasters, unemployment claims, cyberattacks and health care costs. According to a 2023 Gallagher survey, a majority of business owners are worried that they don’t have the right insurance.

Given a mismatch between customer needs and market realities, can AI save the day? I would answer “Yes,” but only as part of a customer experience that dials up the benefits of human insight too.

AI: tech supercharged

Insurance professionals are very excited about identifying opportunities to unleash a better experience through AI.

  • AI-powered algorithms can now analyze large amounts of data to enhance risk assessment and underwriting. This is especially important as carrier risk tolerance and interest in underwriting certain individuals and businesses decreases. AI can help provide more context and determine whether something that seems risky actually is. It can also quickly weed out fraud.
  • Machine learning can accelerate claims processing and settling from weeks to hours, which keeps customers happy and removes costly friction in the process.
  • Generative AI has demonstrated how it can improve chatbots across industries. By providing quick, helpful answers to simple customer service queries, an insurance bot may free up insurance agents from laborious tasks and empower them to tackle higher-order problems.
  • Some insurance carriers who have relied on agencies for serving customers now see a path to transacting with them directly more often through AI.

 At the same time, we need to be mindful of the risks of AI. Industry watchdogs and customers alike are concerned that too much dependency on AI could lead to bias, inaccurate recommendations and misuse of personal information. And federal and local governments have a strong interest in pushing regulations that protect people from predatory or biased practices.

That’s why I’m pleased that the Ethical AI in Insurance Consortium, launched by InsurTechs, is working on industry-wide standards for the fair and transparent use of AI in the insurance industry.

Most of all, I want to make sure customers in uncertain times can have the protections they need—and know they have them. This requires keeping the human expert in the equation.

Tech disruption heightens, rather than diminishes, the importance of agents

Insurance players risk learning the wrong lesson if they think AI will diminish the need to invest in expert human advisors.

Nearly 70 percent of recent survey respondents said they wouldn’t be comfortable buying insurance from an AI, according to a 2023 GetSure study.

The dynamics that created the independent agent marketplace haven’t changed—those agents are usually the most knowledgeable about the complexities of carrier offerings, can better access multiple platforms and adjust AI-generated information based on their ample experience.

Insurance carriers who are hoping to drive more direct business with customers through AI may find they will also need to staff up customer service and actually increase operating costs.

And the rise of embedded insurance offered by non-licensed companies only heightens the importance of having knowledgeable agents at the end of the process who ensure the right coverage at the best price.

At Mylo, we’ve found that even customers who want to begin their shopping experience digitally prefer having a human expert at the moment of purchase who can assure them they’ve made the right choice.

In my view, bringing all of this together will help us create an even better, more efficient and more personalized customer experience.

Takeaways for the industry

In an uncertain market, customers need to be educated on what coverages are right for them—and what their policies actually cover.

Predictive AI and automation should be used to create smarter and more efficient processes, but this will not replace the need for human consultation in finding the best available coverages.

Insurance players who think they can replace independent agents with AI are likely getting in the way of greater growth. Instead, they should view AI as a tool that can augment human knowledge, making their relationships with expert agents even more powerful.

The Plain Language Imperative: Leveraging Generative AI for Life Insurance Customer Communications

Belen Tokarski // Belen Tokarski is the President and Chief Operating Officer of Mylo, an InsurTech that enables companies and agencies to connect individuals and business owners with top-rated insurance products from 100+ carriers, across business, auto, home, small group benefits, life and individual health. With a passion for leveraging technology to empower business operations, she is responsible for optimizing Mylo’s leading-edge technology platform Amplifi. Tokarski is a recognized leader and pioneer in the InsurTech industry with 25 years of leadership in commercial operations and insurance automation strategy. Previously, she was the president of Platform Solutions for Insureon and vice president of Automation Strategy and Agency Solutions at CNA Insurance.

Leave a Comment