The Effectiveness Of AI, Blockchain, And IoT In Managing Insurance Claims
Over the years, for Insurance companies, detecting multiple frauds during the insurance claims management process has been a very taxing process coupled with the typical challenges and unpredictable patterns.
To gain illicit favors from an Insurance company, some individuals may try to be inventive and commit illegal activities under the name of insurance cover. It mainly includes pretended incidents, exaggerated presentations of fake damages, false causes of accidents and more.
It is, therefore, a vital practice to build detection models that maintain a perfect balance between loss prevention savings and investment of false alert detection. Artificial Intelligence, in the most practical way possible, helps in improving the scenario for the Insurance industry.
For instance, the use of machine learning and AI contributes to the following:
- The technology’s smart, case-specific analytics model improves predictive accuracy
- Minimizes the enormous impact of false alerts and the resultant loss
- Intelligently processes various data sets to sense misleading or false claims
Here, we aim to examine a little deeper into different possible situations within the Insurance world and how AI’s superior predictive performance and learning ability come to assist in issue resolutions.
Potential areas to address with AI:
- Misrepresentation of incidents: Includes malpractices from the customer’s end like twisting the context of cover provided, holding accountable the nature of events instead of the irresponsible activities and/or blatant failure to take pre-explained safety measures.
- Soliciting excessive cover: In this scenario, insured individual attempts to cover-up the situation that was not covered in the policy such as driving under influence, reckless acts, and irresponsible behaviors, or illegal activities.
- Exaggerating the aftermath of the incident: Customers solicit excessive favors by exaggerating the impact of the event and request the remittance for fake losses or increase cost against the damage incurred.
The insurance industry grapples with many more intense challenges about fraudulent claims such as:
- Unpleasant impact on customer retention due to delayed payouts or tedious investigation
- Diminished profitability from inconsiderate payouts
- Indirect encouragement to delinquent behaviors from other policyholders
- Compromised process efficiency due to deceit and high premium costs
This goes to indicate how urgent it is to develop an intellectual capacity to recognize potential frauds with higher accuracy and clear, clean cover claims rapidly.
Why depend on Machine Learning for Fraud Detection?
The traditional fraud detection techniques are limited in its reach and effect. Some of the traditional practices are:
- Heuristics for fraud indicators that help make decisions on fraud
- Defining specific rules that determine the need for further investigation
- The examination of scores and claims value to check the need for investigation
Limitations of conventional techniques
- Involves a lot of manual efforts for determining fraud indicators and requires insurers to set and recalibrate thresholds periodically
- Contains a limited set of known parameters of heuristics and excludes many other attributes having the potential to influence the fraud detection process
- Offers a restrictive understanding of the given scenario based on limited parameters and context
- Lacks the typical model of the fraud investigation
- The model has to be adapted to changing behavior and feedback from investigations
To meet these challenges of manual techniques, insurers have started turning to machine learning where the goal is to supply entire data sets to the AI algorithm without the relevance of different elements. Based on identified frauds, through machine learning, the system can then develop an organized model that can be leveraged to make a wise decision.
Blockchain and Insurance
Despite its touch-and-go start, Blockchain has been used by several industries on an experimental basis. When it comes to the Insurtech space, start-up companies especially have embarked on giving Blockchain models an optimistic go. Here’s what Blockchain is capable of doing for the Insurance giants:
4. Creation of the new models: Companies have started using Blockchain for a variety of verticals. E.g., there is a new kind of travel insurance where travelers can insure their flight and, upon experiencing an official delay beyond a certain threshold, use the Ethereum-based cryptocurrency to enable instant payout. Even though this is a small start for some, the impact is enormous nonetheless. Start-ups are the first ones to take the lead in this space and it is fairly evident that Blockchain technology is equipped to accelerate and sophisticate the insurance process.
5. Blockchain-enabled smart contracts: Smart contracts aids in underwriting and claims management. If a person wishes to purchase a health policy and wants to negotiate on a premium rate, Blockchain can come up with the best possible solution. The person can give access to his health-related data including lifestyle habits, age, eating choices, exercise routine, employment type, and past and current medical records. This entire information will be uploaded and encrypted onto the insurer’s Blockchain which processes all the data for calculating a premium. The rate will be modified every quarter based on rules set in the smart contract and thus, Blockchain smartens the health insurance premium process for both insurers and customers.
6. Automating Claims Process: Using Automating Claims Processes on benefits analysis, claims management will be at the top with the lowest barriers to implementation. Blockchain-based claims will process much faster than what brokers and insurers are engaged in currently by eliminating multiple manual verifications, duplications, and delays, ensuring easy availability of all the relevant data.
According to a report, with all of the customer’s health and medical information consolidated through Blockchain encryption, the process of life insurance, underwriting and applications will be accelerated to real-time completion. Although the revolutionary implementation of Blockchain will require existing insurers to adjust their processes and systems and invest significantly, forward-thinking newcomers believe that it will disrupt the insurance system for better.
Going from predictable behavior to actual behavior
The next decade of insurance market ought to adapt to the change that involves a tremendous shift from likely behavior to the actual behavior of individuals when it comes to determining policy prices. The move from the proxy to source data will redefine customer experience as well.
Wearables for better health plans
Consumers are also willing to support data analysis and accuracy with facial and biometric data. It was found out that almost half of the consumers today send data from their wearables to insurers for health insurance.
AI interfaces for coverage personalization and customer onboarding
The three critical ways for AI technology to enhance insurance cover purchase experience are:
Chatbots: To truly personalize the conversation, chatbots can use advanced image recognition and social data. It was discovered that 68% of business owners depend on chatbots in some segments of their business.
Platforms: Custom platforms can automate personal identity verification and accelerate authentication for policy quotes.
Carriers: Through machine learning, customers can have customized coverage and receive a fully online app-based insurance purchase experience. Customer delight is central to successful e-commerce.
AI’s potential to settle claims faster and curb fraud cases
Customer satisfaction in the insurance industry depends on speed, experience, and efficiency. AI improves customer satisfaction by:
- Accelerating claim settlement: The rate at which claims are settled will be equivalent to customer delight. The time taken to pass claims will be an essential key to increasing customer retention as well.
- AI offers a competitive advantage and enhances performance metrics by increasing claim settlement speed.
- AI is set to transform the insurance market ever so drastically. Most of the insurance executives carry a positive belief that AI will revolutionize the information and interactions flowing between insurers and customers.
- Controlling fraudulent activities: The significant decrease in fraudulent cases with intelligent solutions will bring terrific benefits to insurance companies in the long run.
- Fraud detection is one substantial area where AI tech is rapidly adopted in the insurance domain. More than 75% of the insurance industry has reportedly used an automated fraud detection system since 2016.
- The inevitable human touch: Despite the dominant role of modern technologies like AI, IoT, and Blockchain, it is important to cherish the pivotal role insurance agents play in the process. When consumers decide to protect their valuables, they do care to ensure they have a trustworthy human advisor to support and shepherd them down the path.
Looking at the modern-day scenario, we can firmly conclude that in the coming years, the confluence of Artificial Intelligence, IoT and Blockchain is going to make the Insurance industry automated, frictionless and highly controlled. Despite being a newcomer in the insurance business, it is nice to see the way insurance companies have already begun embracing these technologies; it is clear that Blockchain-based products, IoT and AI solutions are likely to be explored more in the future to build custom products.
Inmediate is using the latest technology such as Artificial intelligence, Distributed Ledger and NLP so that we can provide insurance processing fast, cheap and flexible. That makes for better processes, lower costs, improved time to market and new revenue opportunities.
Our extensive experience in insurance and technology positions us as the best to run your flexible new technology solutions. While you focus on the business we have your back so you can be competitive and successful.