September 13, 2019
How AI Changes Everything
So far, the main areas of AI use in insurance include customer experience, process optimization and product innovation.
Insurers already collect heaps of data; with artificial intelligence, they can use it to its full potential and improve at every level, from automating call center request processing to helping make accurate assessments and executive-level decisions. Through its power to recognize patterns and anticipate actions, AI can provide a predictive environment where risks are anticipated and hedged.
So far, it seems that the main areas of AI application in insurance include customer experience (58%), process optimization (43%) and product innovation (19%), according to a 2018 study by Everest Global.
AI could also be applied to fraud, which a report by the FBI shows costs more than $40 billion per year. The insurance industry is prone to multiple fraud schemes. However, most fraudsters follow well-known patterns that AI can identify in minutes. The need to address fraud will become even more critical in coming years when more policies will be issued and handled exclusively online, and AI will be able to highlight any abnormal patterns during claims.
Right now, the insurance sector requires a lot of staff for processing and inspecting claims. This makes policies more expensive and case-solving more cumbersome. These manual tasks can be at least partially replaced with a chatbot to record the claim, verify the details, make sure there is not a fraud attempt and pass the claim along. Through computer vision, the chatbot can also analyze the evidence and assess the damage.
The complaint about insurance policies is typically their price. AI can create personalize rates based on the client’s actual choices and lifestyle. Factors such as the distance traveled, diseases, financial stability and more can create dynamically priced policies. Metromile, for instance, uses an AI-enhanced sensor system to monitor the driver’s behavior and any incidents.
A similar solution could be created for life insurance based on data provided by fitness trackers and medical records. This is called behavioral premium pricing, and it’s about paying for what risks you take. You are no longer just a data point in a statistic; you are paying for your actions. It’s not about approximating but about taking responsibility.
Better Marketing and Customer Experience
An enhanced online profiling tool can help insurance companies tailor products for a wide array of client segments.
Using natural language processing and scanning comments from online platforms and forums can lead to the creation of innovative insurance products that are more adapted to the modern client’s needs. It’s listening to the client’s voice but in a new, AI-powered way.
Customer experience is all about speed and reliability. The time to settle a claim is a key performance metric, and it can in many cases be reduced from days to minutes.
The next step of using AI is not so much about innovating but about integrating. We have different services providing us with insurance for health, car and home, but we can hope to see universal insurance models that are customized to the client’s needs and priced dynamically according to the perceived risk.
A McKinsey report, Insurance 2030, describes a fictional client who uses his digitally powered AI assistant to do some daily chores, while insurance premium is computed on the go, based on the client’s decisions and lifestyle.
People will become more careful and try to prevent claims instead of repairing or treating. Until now, joining an insurance pool was about sharing risks, but AI is making us more responsible for our own actions.
Is the Public Ready?
Any new technology is just as good as the adoption rate. The good news is that Accenture has found that as many as 74% of customers are willing to use computer-generated insurance advice through easy-to-use channels, such as messengers and voice.
In the era when a selfie is enough to buy insurance, like in the case of Lapetus Solutions, the customer gets much more than an insurance policy. The customer gets healthcare advice, possible savings, and dedicated products.
The downside of this approach has to do with privacy. In a world where your insurance company can determine what you did last night and if you took your medication, do you feel safe or do you feel part of a Big Brother system? What is the perfect balance between customization and intrusion?