Artificial intelligence (AI) has the potential to change many aspects of society and human life for the better. This is evident in the fact that over $300 million was invested in AI companies in 2014. There is limitless potential and application for machines and software that can imitate human intelligence. The insurance industry is one sector that can benefit tremendously from AI.
Many technological breakthroughs that have occurred in the past ten years are already helping to make insurance faster, more cost-effective, and more efficient. The advent of the internet brought forward an entirely new way for insurers to conduct business. The Insurtech revolution is facilitating a similar disruption. Likewise, AI will improve the insurance industry even further. Here are some of the top ways that AI will transform insurance.
1. Claims Handling
For many insurance policyholders, filing a claim and having it processed can be the most tedious and frustrating part of the entire insurance experience. This frustration can be magnified by the financial loss often suffered by those filing claims.
Breakthroughs in AI make it possible for claims to be reported, damage to be captured, and communications to be facilitated without human interaction, thereby improving the speed and simplicity of the claims process. In fact, one AI system, a chatbot called Jim, from insurer, Lemonade, can settle a claim in 3 seconds.
Speed is critical in times of increased demand such as natural disasters. As Areiel Wolanow, managing director of Finserv Experts, says, AI will “Improve the ability to scale claims handling operations in response to catastrophes and natural disasters.” This is another key benefit of AI.
The result of AI in claims handling will be an improved customer experience. After all, the faster and easier it is for policyholders to get their claims processed, the more satisfied they will be.
2. Fraud Detection
Fraud is a major problem. Cybercrime costs the global economy roughly $400 billion per year and it can be particularly costly in the insurance industry. Fraudulent insurance claims can force insurance companies to pay out large amounts of money that they otherwise wouldn’t, and affects the wellbeing of their customers.
Fraudulent insurance claims can cost insurers large sums and affect the wellbeing of customers.
AI has the potential to detect fraud. Through deep learning and automatic feature engineering, AI systems can use the power of advanced algorithms to detect anomalies. This can improve the rate at which insurers can identify fraudulent claims.
Machine learning techniques are becoming more advanced and helpful in terms of detecting anomalies. For instance, Tokyo-based Fukoku Mutual Life Insurance Co. is now using IBM’s Watson-powered AI system to manage 130,000 annual claims. This AI system will also use machine learning to flag suspicious claims for review by humans.
All of these strategies and more could soon be used by many insurers not just to detect fraud, but to detect it in real time, and with greatly enhanced accuracy. This will be a game changer for the insurance industry.
Advanced machine learning can also be used to facilitate underwriting by providing tremendous insight about a particular party’s risk profile. AI can scan through large volumes of data and analyze information about a particular person, group, or company. This data might include policyholder forms, social media profiles, websites, and much more.
AI-empowered underwriters can collect, analyze, and use this data in profound and significant ways. This helps insurance companies better select policyholders for approval and avoid potential risks that may be overlooked otherwise. This results in significantly reduced default rates and savings for insurers.
AI will also affect auto insurance underwriting due to its use in autonomous vehicles. According to Certified Financial Planner and founder of the website CarInsuranceComparison.com, Joel Ohman, “One of the single biggest ways that AI will affect the insurance industry will be in the major role it plays in autonomous/self-driving vehicles.”
Ohman believes that premiums could go up in the short-term due to uncertainty surrounding autonomous driving, but down in the long-term due to increased safety and reduced accidents. As underwriting evaluates the risk and exposures of potential clients, the role of AI in autonomous vehicles will have drastic implications for this insurance niche.
4. Auto Repair Estimates
The faster and more accurately auto insurance companies can understand the costs of vehicle repairs, the better they can anticipate their liabilities. With AI, estimates can be delivered nearly instantaneously and without human intervention. AI systems can compare images of damage to thousands of other similar accident images and automatically generate a repair estimate.
Our own CEO, Robin Smith, believes that AI will play an important role in the insurance supply chain:
“At WeGoLook, we are excited about the opportunity to participate in this shift to AI. We help insurers capture data on the ground and, in the near future, AI will be able to process all of these images to assess damage instantaneously.”
5. Customer Service
It is estimated that by the year 2020, AI chatbots will handle roughly 85 percent of customer service interactions. AI can be particularly useful for customer service because it can serve many customers simultaneously across different devices. AI chatbots can also scan through volumes of data to help resolve customer issues, and they can do it at lightning speed.
Chatbots will be major assets for insurance companies who are seeking to streamline customer service and sales. In fact, Garrett Hurley, CEO of Brix Wealth Management had this to say about AI systems communicating with customers.
“In the life insurance space, the technology exists to streamline the term insurance buying process - taking away the discomfort of being forced to sit down with a representative and providing the flexibility to do so at a time most convenient to the consumer. As AI becomes more intuitive, and term coverage becomes more commoditized, the retail consumer can streamline their purchasing decision without ever leaving the computer… I expect AI to dramatically change the insurance market as we know it.”
AI is a key innovation that will disrupt the insurance industry and improve the processes of claims handling, fraud detection, underwriting, auto repair estimates, and customer service. As the AI-insurance relationship evolves it will be necessary for insurers to remain nimble. There is a lot to be gained from AI and we are only in the early stages of this ongoing disruption.