Welcome to the Future: How AI is Transforming Insurance

Whether it’s talking to Siri or asking Alexa to play your favorite song, artificial intelligence has become a part of our daily lives. Looking ahead, it’s coming into play in the insurance industry too. Understanding AI’s benefits and where you might put it to use will ensure that you’re ahead of this next tech wave.

The technology is in limited use so far, primarily powering chat bots and helping automate the claims process. But Brian Hemesath, managing director of the Des Moines-based, Global Insurance Accelerator, says it’s an area ripe with opportunity—one that startups and big tech companies alike are exploring.

The technology could certainly disrupt the insurance business. Hemesath notes that AI’s biggest potential—deriving insights and then making decisions for the benefit of the business, all without human input—has yet to be fully realized. As a broker, you should view AI products as potential resources and tools.

“In the foreseeable future, AI will be more of a complement to what brokers do, not necessarily a threat,” he explains. “Those that find ways to take advantage of it will be able to compete on a bigger scale.”

Understanding Artificial Intelligence

While AI prompts thoughts of robot takeovers, the phrase actually refers to a broad category of machines that can efficiently analyze large amounts of data—and then make decisions based on that analysis. A few different concepts regularly come into play:

Machine learning: An AI application that allows computers to learn from their analysis and then make improvements, without additional programming.

Big data analytics: The process of collecting and analyzing the vast quantities of information that companies can now access.

Internet of Things: The world of connected devices that companies use to gather data.

These technologies are often used in conjunction with each other, and promise to change how you and the rest of the industry operate. Here are five ways AI stands to impact the insurance industry, in some cases sooner rather than later:

1. Personalizing the Customer Experience

Leader’s Edge recently noted that technologies such as Robotic Process Automation will make it possible for you to essentially outsource your more tedious tasks, such as data entry, to computers. AI adds another level of efficiency, insight and possibility, especially when it comes to deepening client engagement, relationships and spurring growth. As a start, insurers have already been using AI to power customer service chat bots that help answer basic questions and route inquiries.

In the future, specialized chat bots that offer personalized advice, whether its fitness related or medical concierge, could even be an added benefit offered by employers. The takeaway, Hemesath notes, is that the technology can automate portions of your jobs, so that you can focus on growing and scaling your business.

2. Understanding Customer Behavior

AI combined with other technologies such as Internet of Things devices and machine learning can also help insurers better understand their customers’ behavior, and ultimately risk. For example, some auto insurers are offering customers the ability to put sensors in their cars to monitor driving, and then providing discounts to those with safe habits.

In the benefits space, health and life insurers are making use of wearables to track subscribers’ daily habits. AI can take these initiatives a step further, drawing on that information to increase engagement or personalize services. For instance, the data might reveal that a client could benefit from some health and nutrition coaching. “We’re at the earliest cusp of discovering how AI can help analyze all that data and then put it use,” Hemesath says.

3. Streamlining the Claims Process

For many companies, the claims process still involves information handled by multiple people. One study from LexisNexis reveals that a traditional auto claim involves three to four touches — that’s human interaction — and takes 10 to 15 days to complete.

A touchless claim process draws on AI and robotic process automation to eliminate people from the equation, from reviewing photos of damage to communicating with customers and issuing payments. The potential for AI to speed up the claims process extends well past auto insurance, into life, disability, health and more.

One tech startup, Captricity, is using AI to help carriers digitize and then analyze the information held in historical claim records, hand written applications, death certificates and other legacy data. Insurers can then draw on that information to optimize their claims process, risk management and revenue.

4. Preventing Fraud

One of the most promising uses of AI across the industry is in preventing fraudulent claims. Thanks to AI and machine learning, computers can determine—and then become better at—identifying fraud.

For example, Shift Technology, a startup based in France, helped a European coalition of insurers analyze 13 million claims. The technology identified 3,000 new cases of potential fraud, including a large organized crime scheme that impacted nearly all the coalition’s members. The scam had “siphoned millions of Euros” from the group’s insurance company members over the span of many years, according to a Shift Technology case study.

5. Improving Underwriting

AI technology also has the potential to disrupt and likely improve the underwriting process. Hemesath offered the example of Tyche, one of the GIA’s portfolio companies, that is using machine learning to analyze unstructured data in the casualty space. There are also potential applications in medical and life insurance according to a report in the Financial Times. Machine learning could replace, and most certainly improve on, traditional statistical models used to assess risk, and potentially save the industry hundreds of millions of dollars.

Ready or not, AI, chat bots and other emerging technologies are primed to impact the insurance industry. Brokers and carriers that embrace these technologies will be able to gain a level of customer insights and engagement not previously available to them. As a result, you will be able to expand your offering beyond benefits to deliver value to existing clients, appeal to new ones and ultimately increase revenue streams.