Innovating Insurance: How Artificial Intelligence Is Transforming The Insurance Industry Landscape
With a proper understanding of AI’s strengths and limitations, insurance leaders can adapt their firms to the rigors of the new data-driven landscape.
In today's reality, the question of why AI has so much to offer insurers comes down to the benefits offered by AI-powered tools. Ultimately, AI creates efficiencies, either by automating processes or removing the need for them altogether. For instance, AI can automatically classify documents and records based on the type of insurance, policy, location, etc. Additionally, it can generate customized contracts, automatically filling them with customer information.
However, there are certain benefits that AI tools can offer to insurers specifically. For one, AI will allow firms to use an individual’s health data to tailor a policy to their unique behaviors and characteristics. As technology advances, insurance companies will gradually shift away from a reliance on ‘risk pools’ and begin to adjust prices in real-time based on the risk profile of an individual.
Moreover, the way insurance companies assess risks would change radically overnight. Rather than relying on post hoc data aggregation, firms would be able to use AI to predict incidents, using real-time data received from a range of different monitors. This enables a more proactive approach to preventing claims, enhancing health and safety and reducing premiums.
Finally, claims processing, a primary function of insurance providers, could soon be handled entirely by advanced algorithms. This could potentially reduce the time it takes to process a complicated claim from a matter of days to a matter of minutes.
Things for the insurance industry to consider
Despite the huge potential, many in the industry approach the disruptive changes brought about by AI with a degree of trepidation, either because the efficiencies will undermine their importance within the profession or because automating certain processes seems a derogation of their duty to their customers.
However, it’s worth remembering that the ultimate aim of these new AI-enabled technologies is to ensure that firms offer higher quality and more consistent service.
Indeed, We’ve seen the impact that integrating AI has had across several different industries, and we believe it would be unrealistic to expect even the most advanced AI tools to replace competent brokers and actuaries.
Ultimately, AI tools are designed to improve, not replace, insurance professionals by making their lives easier and allowing them to access additional information and utilize new tools. For instance, while there are products that use AI to forecast risk and eliminate paperwork from the insurance process, humans will still be required to manage customer relations and make tough judgment calls in marginal situations.
We know that the primary aim of most developers is simply making business more dynamic and essential services more accessible. Ultimately, AI is malleable, and as it matures, I envisage there being tools specifically designed to complement the work of insurance professionals in every facet of their career.
A brave new world of AI
While AI is set to disrupt the insurance industry hugely over the coming years, this mustn’t be done at the expense of the skills and instincts that have led firms to be successful in the past. Of course, new technologies have always been used to save on labor and resources and AI is just the latest, and most significant, phase in this evolution. It is always exciting to see innovative tools not only being developed but also being integrated into the operations of some of the biggest professional services firms in the world.
The next stage in this development is for insurance firms to begin playing a more active role in the development of new technologies capable of harnessing vast amounts of data in ways that benefit the wider industry. Ultimately, this is not something that can be learned. If firms want to thrive going forward, they have to start adopting a more ambitious mindset, one that sees disruptive technologies as the source of infinite possibilities, not infinite risks.