Every day technology is improving, and this has a direct impact on every industry. It is becoming increasingly clear that AI, blockchain and machine-learning have the potential to change the future of business as well as the way people live and work.
These technologies are being used in the insurance industry already. AI and machine learning are being used by some insurance companies to automate parts of their claims handling process and improve customer services. Blockchain can be used to protect transactions, detect fraud and reduce risk, as well as potentially lower the cost of policies.
These technologies are becoming more common, which could lead to the insurance industry becoming more efficient, secure, and accurate. Insurance companies may reap the benefits of AI and other digital solutions as they continue to implement them. These include auto insurance, homeowners, and life.
What is AI?
Artificial intelligence (AI), has been a buzzword of the digital age. AI is the idea that computers can think, learn, and act like humans. AI can use its learnings to interpret data and perform a wide range of tasks. Machine learning is an application of AI that interprets and analyzes data in a productive manner.
Although AI sounds futuristic, many of its applications are already part of our daily lives. AI is at work when a streaming service like Netflix or Hulu recommends a new show to you based upon your preferences. AI is being used in many industries including healthcare, education and financial services. Most companies using AI use it to improve their business processes and solve problems quicker.
Many hospitals use AI to provide personalized treatment and predict patient readmissions. AI is being used by banks to manage customer portfolios, and identify cybersecurity threats.
In recent years, AI has been integrated into the business processes of insurance companies. Insurance companies are slower than other industries to adopt new technologies. The possibilities for machine learning and AI are almost endless because of the multifaceted nature of the insurance industry.
Artificial intelligence meets the insurance industry
AI is only scratching the surface of the insurance sector. AI could improve a multitude of processes, and it is possible for more insurance companies to use the technology in their business. Pricing, fraud detection and claims handling are just a few of the many applications that AI can help.
- Pricing: This is one of the most promising areas where AI can help improve the insurance industry. Insurance companies can now price policies more affordably and tailor them to each customer using AI. A home insurance agency could use AI for information such as a person’s marital status, whereabouts, and likely likelihood of filing a claim. This would allow them to determine premiums.
- Claim handling: Insurance companies often spend a lot on claims staff. In addition, insurance prices can be increased to reflect case-solving. An insurance company can reduce their staffing costs by using AI to automate many of the tedious processes related to claims management and payments. Processing claims could take less time than it used to, from hours to days or even minutes . This would allow insurers to offer more tailored contracts to customers, based on their individual circumstances.
- Fraud detection: Insurance fraud costs more than $40Billion per year. To make matters worse, many insurance companies are shifting towards total digitization. AI can be used to detect fraud and reduce risk. AI can be used by insurance companies to spot anomalies in claims data. It can also identify false information customers may use to obtain a lower premium and a larger claim payout.
Factors external to AI
AI isn’t just changing the way insurance companies work, it is also impacting other factors. Companies will be able to benefit from AI’s ability to spot patterns and behaviors.
This is evident in AI and self-driving cars, which are two of the most powerful examples. Because autonomous cars are designed to be safe, many people may assume that there will be fewer accidents on the roads when all cars drive themselves. In a world where there are virtually no car accidents, auto insurance policies may not be necessary. Insurance companies might need to reconsider how they price policies, what they include in policies and whether they are able to sustain their business with other types of insurance like life or business insurance.
An AI-based shift towards increased road safety could still be possible. There are still questions about how self-driving cars will be used, and how accidents will handled. An autonomous Uber vehicle was found to be at fault for a collision-related death in 2018. Auto insurers expect to have an adjustment period in order to be able to determine fault, provide the necessary coverages, and manage claims. Liability Insurance will likely continue to be a standard.
As AI and machine learning are more prevalent in the insurance industry, digital car insurance companies like Metromile, or digital home insurance providers like Lemonade, may be more popular.
Let’s discuss trends
Many people will agree that the insurance sector could use an increase, which is precisely the purpose of AI. Technology will have a significant impact on both the insurance industry and those who are involved in it in the near future. These are the trends that you can expect as AI impacts the insurance industry.
Extended reality Extended Reality uses virtual and augmented realities to take people elsewhere. This technology could be used by insurance companies to inspect homes and look at safety features of vehicles before they give a quote.
Data verification: Data verification is about making data more reliable so that it can be used for better business decisions. This will enable insurance companies to detect potential threats and prevent fraud.
Artificial intelligence (AI) can help companies learn about consumer preferences, make useful recommendations, and simplify the way their products are classified and promoted. AI is able to help eliminate friction in consumer behavior. This could help insurance companies to expand their network of partners and improve their legacy systems. AI can give customers more options for policy options through partner providers.
Intelligent distribution systems: Insurance companies will have the ability to improve their IT infrastructure with intelligent distribution systems. This will be a major breakthrough in mobile apps, online tools, and user-friendly websites.
Why does the future feel so far away?
AI is still relatively new technology so there are uncertainties about its potential to improve customer experience and insurance companies’ overall performance. AI isn’t perfect. Computer scientists continue to work out its flaws. These are just a few of the potential consequences AI could have for the insurance industry.
Wellness pricing: AI can collect data about behavior habits, as we have already mentioned. Insurance companies may be able to use this data to determine discriminatory rates. A health insurance company might take someone’s exercise and weight data and calculate a price based upon their presumed health risks.
AI is being used by many insurance companies to help them reduce their staffing costs. Many customers want to speak to a live agent to file a claim or handle other important matters. The AI-based workforce could eliminate millions of jobs in the insurance industry.
Privacy concerns: There is no doubt that personal data is stored in the cloud. Many people don’t like the idea of companies having more access to their data even though it may be used to deliver better personalized experiences.
Nearly 80% of insurance executives believe that AI will revolutionize the way they interact with customers and collect information. McKinsey, an international management consulting firm, claims that AI implementations can increase productivity in insurance processes, and decrease operational expenses by as much as 40% by 2030. More research is needed to determine whether insurance customers are interested in AI’s arrival.
Conclusion
AI has the potential to revolutionize the insurance industry. This is good news for both customers and insurers. Customers will enjoy a seamless user experience with lower rates and a better customer experience. Insurers might be able to save money by offering AI-powered car insurance policies or making their processes more efficient. AI is a powerful tool that offers endless possibilities. It’s only a matter time before we see these benefits.