How Are Insurance Companies Implementing Artificial Intelligence (AI)?
Artificial intelligence Is a growing buzzword in the insurance industry, and for good reason. This guide will help you understand how insurance companies are implementing artificial intelligence, machine learning in insurance, and what the future of the life insurance industry might hold.
Artificial Intelligence in Insurance
Artificial intelligence, or AI, refers to the tools and technology that can complete tasks that would normally require human input. This includes machine learning, which involves an algorithm that learns from a set of pre-existing data so that it can make predictions when presented with new information.
AI in insurance can be beneficial for everything from conducting business operations cheaper and more effectively to improve the customer experience. Machine learning in insurance allows companies to analyze the large amounts of data that they have collected from their customers so that they can predict their behavior, optimized pricing, and improve product offerings.
The Need for AI in Insurance
So, why is there a need for AI in the insurance industry?
To begin with, insurance companies are in a highly regulated industry which has made them relatively slow to embrace change and new technology. Unfortunately, this means that a lot of processes are paper-based and tend to be slow because they require extensive human intervention.
Even customers experience the burden associated with these outdated processes – sometimes submitting an insurance claim involves so much paperwork and bureaucracy that it can be extremely frustrating. Similarly, customers may pay more for standard insurance policies because they are not created for their specific needs.
Simply put, the insurance industry has one of the lowest customer experience ratings and could significantly benefit from implementing artificial intelligence as part of standard processing. AI in insurance could help them do business cheaper and faster!
According to an estimate by McKinsey, there is a potential value of up to $1.1 trillion if artificial intelligence insurance tools were fully applied to the industry.
Machine learning in insurance also has applications for reducing risk, since neural networks can uncover patterns that will allow companies to recognize fraud and reduce the occurrence of fraudulent claims. This reduction of fraudulent claims could significantly improve insurance companies’ bottom lines since the FBI estimates that this costs the industry over $40 billion per year.
AI Trends Shaping the Insurance Industry
Several AI insurance trends are currently shaping the industry. This includes behavioral pricing, improved customer experiences, and faster claims settlement.
Behavioral pricing capabilities are one of the AI insurance services that are driving companies to invest in this technology. Machine learning algorithms can price insurance policies based on a specific customer’s behavior, allowing the insurance company to provide more competitive and relevant pricing.
For instance, AI in car insurance utilizes sensors to help save drivers pay less than they otherwise would with standardized pricing. This is also known as usage-based insurance, which rewards customers for their lifestyle choices. The insurance company also benefits because they have greater visibility into the risk associated with doing business with a particular customer.
Improved Customer Experience
If implemented properly, AI insurance services can improve the customer experience by making the buying process seamless and user-friendly. Tools like chatbots can collect data that will help customers personalize their coverage and quickly make a decision about the insurance they would like to purchase.
This is known as on-demand insurance, and this trend is starting to shape artificial intelligence in the insurance industry.
Faster Claims Settlement
One of the biggest problems that insurance companies face is the slow process generally associated with processing claims and claim settlement. The move to an online claims process has become more widely encouraged across insurance companies, and virtual claims adjustment makes settling and paying claims much easier.
All a customer has to do is connect with the chatbot that can understand the majority of their inquiry or claim, freeing up more resources for insurers who can then process the claim once all the information has been collected.
Applications of AI for Insurance Companies
As you can imagine, there are endless applications of AI for insurance companies. let’s break these applications down into three main categories: personalized pricing, improved customer onboarding, and fraud detection.
Like we mentioned above, machine learning in insurance allows companies to personalize pricing based on a specific customer’s behavior or needs. This is very prominent when it comes to AI in car insurance, where IoT sensors collect continuous data that is transmitted directly to the insurance company.
Since the data collected allows insurance companies to see how risky a person drives, safer drivers can save on their insurance premiums, or others can choose to pay their policies based on miles driven. Every customer is no longer put into a risk pool based on age or vehicle type – they are paying for their own personal risk level.
The catch to this is that you have to install sensors in your car that allow data to be transmitted to the insurance company. Many firms have implemented this, and customers don’t seem to mind as long as they get their discounts!
Home insurance companies are also utilizing smart home technology to offer discounts for customers that are willing to install sensors and devices that make their home more secure.
So not only do the customers benefit from tailored pricing, but the insurance companies can also save money by eliminating the need to perform costly audits and assessments. They can collect all the risk management information they need right from the sensors.
Improved Customer Onboarding
Another important application of AI for insurance companies is the ability to improve customer onboarding. One of the biggest pain points customers face when interacting with insurance companies is that the process of purchasing a policy, submitting a claim, and communicating with customer service agents is very disconnected.
Artificial intelligence tools like chatbots can instantly recognize you when you log in or access your account online, allowing the conversation to be personalized immediately. You can quickly verify your identity and quote and bind coverage all from your device – without having to call a customer service line and wait on hold or be transferred to different departments.
This personalization also allows you to customize your coverage based on exactly what you are looking for. No more standardized packages that offer way too much – or not enough – coverage.
The same goes for when you submit a claim. For instance, Geico’s Kate chatbot can walk you through the process and help you get your claims submitted quickly and effectively.
Some companies like the startup Lapetus have taken this a step further, to the point where you can buy life insurance from them with just a selfie! Their AI insurance tools utilized facial recognition to assign risk scores based on things like smoking indicators and lifestyle estimates. This quick and easy onboarding is the future of the life insurance industry.
Fraudulent claims are a major problem for insurance companies everywhere. These illicit transactions cause insurance carriers over $80 billion, According to the Coalition Against Insurance Fraud.
With AI and insurance, fraud detection can be automated, and machine learning models can quickly recognize patterns that can help insurance companies prevent and detect fraud.
A popular startup called Shift Technology has helped insurance firms analyze claims and has reviewed over 82 million of them to help prevent fraud.
How AI will Impact Insurance Companies in the Future
The future of the life insurance industry is very bright when artificial intelligence is involved. Most companies have barely scratched the surface with the capabilities that AI provides, so there is no doubt that continuous improvements will be made.
In fact, a study by Accenture found that 79% of insurance executives believe that artificial intelligence will drastically change the way they interact with their customers.
Custom insurance products will allow companies to attract a broader range of customers, and the clients will benefit from more accurate pricing and relevant products. Insurance companies can use the mountains of data they collect to make strategic decisions that will help them build better relationships with customers while improving their bottom line.
Other cost savings will come in the form of improved processes and more efficient claims processing, so employees can focus on more value-added tasks than filing paperwork. This will also make it easier for businesses to interact with their customers, resulting in better customer experience ratings and overall satisfaction.
All in all, artificial intelligence in the insurance industry will make purchasing a policy or submitting a claim as simple as clicking a button.
AI in insurance is poised to transform the industry and provide a wide variety of benefits for both the insurance companies and their customers. While insurance companies can better gauge risk and optimize pricing strategies, customers will enjoy better rates and a fast, seamless experience.
If you are ready to see how an AI platform can transform your insurance company, contact us at LogicPlum today! Our goal is to help your business improve processes by providing end-to-end artificial intelligence platforms that will allow you to make data-driven decisions.