The impact of Artificial Intelligence (AI) is spreading, probably further than many people thought it might. The next industry to be fundamentally transformed by AI is insurance.
From product development, underwriting and claims, to customer service chatbots, risk assessments, and quotations, technology are being deployed across the sector to provide faster, more accurate services.
What is interesting, however, is that while some major insurance companies are investing aggressively in AI, many are moving slowly, unsure of how best to deploy these technologies.
In a recent AI survey, it says only half of the insurance executives consider AI technologies to be ‘extremely’ or ‘very important’ to their company’s success, lower than for any other industry, such as financial services, healthcare, and manufacturing. Looking ahead three years, only 36% felt AI would be very important, again lower than any other industry.
This lack of awareness around the importance of AI is worrying as new entrants to the market start making an impression. These insurtechs, a term used to describe new digitally focused entrants in the market that are using technology innovations to increase savings and efficiencies, are using AI capabilities to introduce a new range of innovative products.
These include instantly customizable life insurance and on-demand property coverage. Consequently, traditional insurance companies are now facing unexpected competition. It is critical that they pick up the pace when it comes to technology investment and adoption, or face being left behind.
Enhancement not replacement
Most insurers already using AI technology have focused their investment on customer service projects such as chatbots. This allows them to automatically capture customer information and respond to inquiries. Our research found that the best applications for chatbots in insurance include product management, marketing, underwriting & policy acquisition, policy servicing, and claims management.
Moreover, the research also found that insurance executives who were familiar with existing AI projects at their companies most often cited ones related to customer service (56%). This is likely because chatbots allow customers to receive personalized product recommendations and quotations almost instantly, giving consumers and business customers the ability to purchase most insurance products online in minutes.
Whilst many may worry about AI taking jobs within the industry, these technologies are actually enhancing many jobs carried out by humans. For example, call-center representatives can receive information based on data from technology to assess the sentiment and mood of a discussion whilst a call is in progress.
Expanding the use of AI to the underwriting process
Across the insurance industry, AI technologies can now also be applied to a wider variety of data sources to improve the accuracy of risk assessments and quotations. For example, these tools can automatically analyze real-time data from security systems or by using drones when underwriting homeowner-insurance applications.
Looking to car insurance, AI tools can be used to conduct analyses of telemetry data and provide insight into driving behavior to inform car insurance quotations, such as how fast the customer drives on average, how quickly they accelerate and whether they drive faster than the speed limit.
Prevention is better than the cure — intelligent claims
The claims process is just another area in which AI can be applied to automatically audit thousands of open claims when action can still be taken, rather than reviewing of a sample of claims after they have closed.
As such, insurers will be able to move beyond the traditional reactive model of paying claims after a loss and be able to adopt a proactive, preventive model of helping customers avoid losses in the first place.
Make the right choice before it is too late
AI can, and is, revolutionizing insurance. It is being used in every function of a business to transform the way organisations operate.
As highlighted, established players have two choices — either ramp up their investment to compete with new, disruptive insurtechs, or partner with this innovative competition to access the technology, unencumbered by legacy systems and processes.
If they want to compete in a market driven by the customer experience, then getting on board the AI bus is the only way to ensure they do not get left behind.