Long before the COVID-19 pandemic, insurers were investing in digital transformation, spurred by the rise of startups. Those investments took on new urgency as the pandemic forced businesses across industries to move to digital operations to stay afloat.
Over the long term, no technology will prove as vital to insurers’ agility and success as artificial intelligence, whose far-reaching impact will define the next wave of insurtech innovation.
Legacy players and nascent startups alike will leverage AI and machine learning to enhance customer service, speed claims processing and improve the accuracy of underwriting – enabling insurers to match customers to the right products, operate with greater efficiency and achieve better results.
Though insurance is often cast as slow to embrace technology and innovation, in a certain respect AI is very much within the industry’s wheelhouse. Since the first actuaries began their work in the 17th century, insurance has relied heavily on data – and as AI empowers insurers to do even more with vast swaths of data, the benefits will redound to providers and policyholders alike.
Bringing Customer Service to the Next Level
In today’s digital economy, personalization is all the rage. Customers crave tailored, relevant experiences, offers and promotions that reflect their unique backgrounds, needs and interests – and they increasingly expect businesses to deliver these experiences as a basic standard of service.
While personalization is often discussed in the context of sectors like e-commerce, the insurance industry is no exception to this trend. According to an Accenture survey, 80% of customers expect their insurance providers to customize offers, pricing and recommendations.
Of course, delivering bespoke experiences requires an abundance of customer data – and customers are more than willing to provide it in exchange for personalized service; 77% told Accenture that they’d share their data to receive lower premiums, quicker claims settlement or better coverage recommendations.
Because personalization can only deliver on its promise if it’s holistic and omnichannel, the most successful insurers will be those that don’t view personalized engagements as one-offs – a tailored email here, a promotion there – but that consistently provide personalization at every stage of the customer journey.
What will that look like in practice? AI chatbots will become a lot more “chat” and a lot less “bot,” not only providing 24/7 customer service but also using cutting-edge methods like natural language processing (NLP) to better understand what customers actually need and to conduct more natural, intuitive conversations. Underwriting will become much more precise as machines crunch massive sets of data – reams of usage and behavioral data generated by customers and their IoT devices, as well as relevant geographic, historic and other information – to create customized policies that reflect a policyholder’s true level of risk.
See also: Insurtechs’ Role in Transformation
From Cumbersome to Swift
Harnessing the power of AI, insurers can also streamline claims processing as part of a comprehensive digital strategy. Forward-thinking providers will increasingly integrate automated customer service apps into their offerings. These apps will handle most policyholder interactions through voice and text, directly following self-learning scripts that will be designed to interface with the claims, fraud, medical service and policy systems.
As a McKinsey analysis noted, with automated claims processing, the turnaround time for settlement and claims resolution will start to be measured in minutes rather than days or weeks. Meanwhile, human claims management associates will be free to shift their focus to more complicated claims, where their insights, experience and expertise are truly needed.
These transformative applications of AI will unlock revenue opportunities, improve risk management and help insurers deliver a new level of personalized customer service. But if AI will act as the great enabler, what will enable AI itself?
The answer lies in a robust digital core, which is vital to facilitating efficient business processes, maintaining resilience in an unpredictable world and supporting the rollout of new products and business offerings. Whether insurers manage to achieve that kind of digital agility will determine their ability to survive and thrive in a landscape that’s shifting faster than ever.