How AI Adoption Can Impact The Insurance Industry

William Arsn

Kannan is SVP, Global Head – Insurance and Industry Head – Financial Services at Infosys.

Garry Kasparov, probably the greatest chess player in history, lost to an IBM supercomputer in 1997. But today, he is a strong proponent of artificial intelligence (AI). At a TED talk in 2017, Kasparov said, “Machines have instructions; we have a purpose. We will need intelligent machines to help us turn our grandest dreams into reality.”

AI is all about how machines and humans can collaborate—how machines can take over tasks they can do better and faster, so humans can focus on what only they can do. Many industries have embraced AI technologies and are already experiencing transformative outcomes. However, insurance companies have been slow to expand their digital capabilities.

Covid-19 changed that. A rise in call volumes and an unfortunate increase in medical emergencies, deaths and business interruption claims reinforced the belief that investing in AI-related technologies can pay off. It helps to engage with customers faster, supports distribution, settles claims faster and can help in fraud detection.

But that is only scratching the surface. AI has the power to completely revolutionize how insurance products are experienced. Let’s explore.

Faster And Personalized Experience

If I go online to buy auto insurance, I could get an instant quote and complete the purchase in minutes. As telematics and sensor devices for homes, vehicles and wearables multiply, insurers have more real-time data about customers. This enables them to instantly create risk profiles, price the premiums appropriately for the risk and personalize products.

Until now, insurance products were not always designed to meet the customer’s specific needs. However, now, I believe we will see more usage-based insurance products, such as pay-by-mile and pay-by-stay insurance, better suited for today’s “sharing economy.” So, you can still be covered if you let a friend drive your car.

Furthermore, the use of AI allows you to disaggregate and offer more cost-effective micro-coverage services, such as phone battery insurance, flight delay insurance and separate coverage for your washing machine and dryer. You can customize your basket of insurance products and instantaneously compare prices from various insurers.

Faster Claims Turnaround

Manual claims processing has always been protracted and painful for the customer. As we know, it is often the reason for losing a customer. Using AI to evaluate claims can reduce the processing time from several days to hours or even minutes. For example, in 2017, New York-based Lemonade, an Insuretech innovator company, declared that it paid out the fastest claim in the history of the insurance industry—in only three seconds.

Claim management consumes time, but it also eats into revenues. Being primarily manual claims processing is also prone to errors, which can further drive up insurers’ operating costs. Using AI, an insurance company could reduce their staff hiring spending and payouts and change the underwriting process.

AI-enabled Chatbots

Lemonade could settle its claim instantly because it was handled from start to finish by its chatbot, AI Jim. Powered by AI algorithms, chatbots like Jim don’t just address common inquiries and transactions but also ‘understand’ the nature of claims, ‘detect’ signs of fraud and even ‘nudge’ people to be more honest. This is feasible because AI incorporates years of behavioral economics in chatbots.

However, many customers would still like to speak to a live agent. So, while chatbots can speed up repetitive tasks, the staff can focus on handling more complex queries.

AI in the Fraud-fighting Toolkit

Detecting insurance fraud can be difficult, as it occurs during various points of the insurance lifecycle in multiple forms: application fraud, death fraud and inflation fraud. And now, with cybercrime on the rise, things could turn worse. As thousands of claims are filed daily, insurers cannot investigate each case using traditional computerized systems.

However, AI can help insurance companies spot when things go awry, identify frauds that the human eye could miss, and even recognize potential threats before they cause impact.

Integrating Wellness and Insurance

An insurance company’s profits depend not just on pricing but also on limiting the payouts. And so, health and life insurance companies have a huge incentive to prevent illness. With the help of AI, they are shifting their focus to proactive care in diverse ways. They are launching health apps and medical-grade sensors (utilizing IoT, or the Internet of Things) to help people stay healthy and bundling life insurance policies with health platforms.

Insurers can also improve the bottom line by using AI to price their policies more competitively and personalize them. For example, a home insurance company could use AI to get detailed information about a person’s geographical location and price accordingly.

AI: Future-proofing Insurance

We can see how AI’s role in the insurance industry goes way beyond being a fraud detection tool. According to McKinsey, a global management consulting firm, “The industry is on the verge of a seismic, tech-driven shift. AI implementations could increase productivity in insurance processes and reduce operational expenses by up to 40% by 2030.” Furthermore, AI is set to enhance personnel productivity, customer experience and business resilience.

The world is changing. Autonomous cars, connected houses and private passenger space will soon be a reality. Insurance firms must adapt to these changes through a planned and measured implementation of AI.

Traversing the Automation Journey

However, the journey is not without pitfalls. The workforce has to be retrained. Legacy processes must be worked around. The right technology partner could help provide a road map and circumvent the bumps. The first thing to do is to understand what your organization needs from this transformation. Look for your organization’s immediate goals and automate that process first. Once the objectives are set, you can calculate the expenses and ensure that the process won’t be such a financial burden for the company. It will be easy to find the right technology partner that suits your needs when you have all this information.

Another important aspect of automation is making your employees feel part of the process. Leaders have a huge role to play in this, and they need to train the employees to make the automation process more effortless. The employees should be doing more strategic tasks by the end of the transformation journey. There will be a significant change in the work culture, and the organizations and leaders should be prepared for that. The key to a successful automation journey lies in proper planning and transparency. Once the goals are set, and you find the right technology partner, your job is half done. Make sure to communicate to all parties involved at every stage so you can circumvent any bumps and believe in the process.

If there is a way in which humans and machines can journey together, would it not amplify human ingenuity and create a better world? Where do you think the involvement of AI in future-proofing insurance is headed?


Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?


https://www.forbes.com/sites/forbesfinancecouncil/2022/05/17/how-ai-adoption-can-impact-the-insurance-industry/

Next Post

Cosmetics giant Revlon is preparing to file for bankruptcy

Cosmetics giant Revlon Inc. is preparing to file for Chapter 11 bankruptcy as soon as next week as it battles supply chain problems and a heavy debt load, according to people with knowledge of the matter. Talks around the potential filing aren’t final and could change, said the people, who […]