Artificial intelligence is poised to have a major effect on almost every aspect of our lives – including the way we buy and sell insurance.

Key Takeaways:

  • AI will impact the insurance industry in areas like claims processing, customer service, and risk management.
  • With AI, customers will see rates customized to their specific circumstances.
  • Insurers would be wise to embrace this change, not see it as a threat.

The insurance industry is in the midst of a digital revolution, and AI is having a major impact. With new tools like advanced machine learning algorithms at their fingertips, underwriters now have access to data that helps them estimate risk more accurately and customize pricing based on each customer’s unique circumstances and characteristics. AI can also facilitate a more efficient back-end process that connects potential policyholders with providers more quickly and precisely than ever before.

Insurers need to be ready to embrace these changes, from claims to underwriting, distribution, and pricing. Only then can they build teams that have the natural talent and learned skills to succeed in an AI-powered insurance world.

These innovations will move the insurance sector from its current “detect and repair” process to more of a “predict and prevent” strategy. Brokers, insurers, and customers will all have the benefit of enhanced productivity, reduced costs, and a more consumer-friendly way of doing business. 

Below, we explore this significant change to the industry and the specific areas where it will have an impact on both insurers and policyholders.

Claims processing

Claims assessment is a core part of the insurance industry. In fact, 87 percent of policyholders say that efficient claims processing affects their decision to stay with their provider. The problem for insurers is that claims processing is time-consuming, as claims adjusters have to review each policy individually and sift through every detail to come up with estimates.

AI and machine learning algorithms can speed up this process considerably. They use data unification, analysis, and image recognition to help determine costs. Then a human agent checks to make sure the results are valid and settles the claim. Despite these advantages, however, only 1.33% of insurance companies have made an investment in AI technology.

Customer service

Exceptional customer service is a vital part of the insurance ecosystem. It’s the first impression that potential clients have of a company, and it’s the main reason why current customers leave. According to a 2021 survey, this is one area where AI can have a huge impact. AI-driven chatbots are a crucial tool for improving customer service. They provide policyholders with answers to basic questions, leaving human agents to handle more complex issues. Chatbots also don’t need sleep, so they’re available around the clock, whenever customers need them.

Risk management

In the past, underwriters assessed risk in part by using data provided by applicants themselves, which can be unreliable if not downright dishonest. This made for some inaccurate assessments. Natural language understanding, a type of machine learning, is a technology that allows insurers to verify the accuracy of this data using digital sources like SEC filings, social media postings, and Yelp reviews, to name just a few. This AI-driven technology provides a much clearer picture of the potential risk a carrier may face.

The resulting risk assessments will be more precise, making premiums more equitable. Since insurance companies rely more on price than on products to differentiate themselves in the market, a pricing model that is more accurately tailored to the individual customer could even provide a competitive advantage.

Additionally, AI itself will impact insurance risk as it is implemented in more and more industries:

  • Additive manufacturing (or 3-D printing) will profoundly change how manufacturing works, which will also change related commercial insurance products.
  • 3-D-printed buildings will become far more common, which will likely change risk assessments.
  • Autonomous drones will be employed in industries ranging from farming to health care, each with its own set of risks.
  • Vehicles will also become more autonomous, making waves in the auto insurance market.

The growing presence of AI in many of the most common insurance spaces means carriers will need to educate themselves fairly quickly in order to continue to provide accurate risk assessments and develop new channels and products.

Fraud and cybersecurity

Fraud is one of the top concerns in the insurance industry, and AI has become an invaluable tool in spotting fake claims that human beings might otherwise miss. Shift Technology, an AI startup in France, uses AI to push back against insurance fraud, processing an enormous number of claims with a high accuracy rate. AI can flag suspicious claims and generate potential liability and repair cost assessments. It can also suggest ways to further protect against fraud.

On the horizon are innovations like wearable technology that sends data directly to insurers. Connected auto and home data is also on track to be shared on platforms like Google, Apple, or Amazon to help insurers more quickly identify fraudulent claims.

The future of AI in insurance

Here are just a handful of coming changes to AI’s role in the insurance industry:

  • By 2025, there will be an estimated 30 billion connected devices worldwide. This creates new data that carriers can use to have a deeper knowledge of their policyholders.
  • Cognitive technologies, which mimic the human brain’s ability to learn, will be an increasingly popular way to process this new tidal wave of data and use it to generate new engagement techniques and product categories.
  • New products on the horizon may include usage-based insurance products that can determine rates for an auto policy based on the policyholder’s safety record while driving.
  • Drones will be increasingly used for remote claims inspections. When paired with Image recognition, those findings will help insurers pay claims faster with less cost to settle.
  • Natural language processing, chatbots, and voice recognition will help improve communication with customers, allowing them more access to the products they want and the people who can answer their questions.

Many of these innovations are already making waves in the insurance field, and much more is on the horizon.

Embrace the change

AI is poised to have a monumental impact on the insurance business, whether it’s underwriting, pricing, claims, or customer service. On the whole, this is positive news for customers, leading to more customized plans and pricing that precisely fit their needs. It will also reduce the chance of human error and speed up the claims approval process, something everyone who files a claim will appreciate!

These changes, while positive, can also be disruptive, as consumers and insurers alike adjust to the realities of this new way of doing business.

The good news is that you don’t have to go through this time of change alone. NICRIS Insurance is here to help with a free, personalized review of your policy and needs. Contact us today, and let’s start talking about your insurance future.