AI and Insurance: The Future is Here
The hype around artificial intelligence (AI) continues to grow—especially within the insurance industry. While the idea of using AI may sound scary at first, the truth is, AI has many practical applications within the insurance world, and these applications have the potential to bring massive change to the industry.
In fact, 75% of executives believe AI will either significantly alter or completely transform the insurance industry in the next three years, according to a report from Accenture’s Technology Vision for Insurance. And insurers are investing big in this technology. Another report from Accenture found that 53% of insurers are already using intelligent technology in one or more business processes.
Here are five ways that AI technology is expected to—or already is—changing the insurance world.
1. The Rise of Behaviour-based Insurance
One of the major ways that AI technology is already being used is when it comes to behaviour-based insurance, or usage-based insurance. Historically, past activity has dictated customers’ premium prices. However, with the rise in telematics and wearable sensors, insurance companies can now collect real-world information about customers in real-time.
For instance, through a driver’s phone or another sensor installed in their car, insurers can gain detailed insight into a customer’s driving habits. These devices can tell insurers detailed information about how someone is driving their car—for instance, how quickly they are accelerating or if they’re going over the speed limit.
Receiving all this data in real-time allows insurers to paint a better picture of a customer’s level of risk and how likely they are to get into an accident, which, in turn, could be used to determine customers’ premiums. Drivers who practise safe driving habits could see their rates drop, while those who practise more risky driving habits could see their rates increase.
While usage-based policies may help insurers assess their risks more accurately and even help some consumers save money, concerns over privacy and the collection and storage of personal data exist. As such, it is important to monitor future regulatory or legislative developments in this area.
2. Faster Customer Service
Another way that AI is expected to have a big impact on the insurance industry is when it comes to customer service and chatbots. Short for chat robots, chatbots are computer programs that simulate human conversation using AI. Chatbots are already being used in many industries as a way for businesses to expand their customer service offerings. Chatbots can assist customers 24/7 and can “speak” with thousands of consumers at the same time.
The insurance industry is already investing heavily in chatbots. According to a study from Tata Consultancy Services, the insurance industry has invested approximately $124 million in AI systems. Many insurers are already using chatbots to help policyholders around the clock with common policy questions.
In addition, in the benefits sphere, companies are working on developing machine-learning algorithms for chatbots to help address patients’ health needs virtually. Using this technology, chatbots could ask patients a series of personalized questions based on their health data to recommend a diagnosis based on their symptoms.
While chatbots can decrease operational costs, poorly designed chatbots can result in a negative customer experience. Despite recent advances in AI, comprehension and accuracy can still be a problem from some bots, so it is important to thoroughly assess your business needs when considering these services.
3. Expedited Claims Settlement
Many insurers are already using AI to expedite the claims process. For instance, customers could use a smartphone app powered by AI to take pictures of their car after an accident or damage to their house after a bad storm. After submitting these pictures, the app could then inform them about the status of their claim—eliminating the need for paperwork and multiple phone calls back and forth.
In 2017, a claims bot from Lemonade, a U.S. tech startup, made headlines nationwide after its AI reportedly settled a claim in three seconds. During this time, the claims bot reviewed the claim, cross-referenced it against the customer’s policy, ran 18 anti-fraud algorithms, approved it, sent wiring instructions to the bank and let the customer know the claim was settled.
4. Better Fraud Detection
Experts also predict that AI could help the insurance industry combat one of its biggest problems—insurance fraud. For instance, auto insurance fraud alone costs Canadians more than $2 billion annually, according to a report from Aviva.
Rather than rely on employees to manually sort through reports to catch inaccurate and fraudulent claims, AI algorithms have the potential to analyze data on a massive scale. For instance, AI could help detect similarities in a pattern of claims and flag any potential fraud for human intervention. While AI development is still in its early stages, Shift Technology, a French startup, has already achieved a 75% accuracy rate for detecting fraudulent claims.
5. More Personalized Coverage Options
In addition, AI is expected to impact the number of coverage options available to consumers. Instead of choosing between a small number of plan options, experts predict that AI-driven algorithms will allow brokerages to offer consumers more customized policies based on their lifestyle, behaviours and spending habits.
AI could also leverage the information collected through chatbot services to suggest certain products based on a user’s conversation history. Leveraging this data and connecting it with brokerage’s insurance agency management software could allow them to deliver a more personalized and unique digital experience for their customers.
While AI is still in its infancy, it has an enormous power to automate and streamline tasks within the insurance industry. Simplifying these more manual tasks could allow brokerages to focus on more complex tasks and deliver more personalized service to their clients.
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