Artificial Intelligence (AI) is taking the world by storm.
Nowadays, AI-powered innovations are providing much-needed help to various sectors and industries around the world. Included in this list is the insurance industry, which could greatly benefit from the additional efficiency and security provided by AI. Leveraging this technology is a must to keep up with an ever-changing world that is slowly preparing for a complete digital transformation.
Here are three ways that AI can transform the insurance industry.
AI improves customer service
Insurance companies can utilise AI technology to improve customer service within the company.
Ari Libarikian, a senior partner with McKinsey & Company in New York whose job includes analysing insurance practices and advanced data within the company, says, “Because of data and AI advancing so much in the industry, carriers can now do a lot more for their customers.”
One good example of AI in customer service is the Lemonade insurance app, which makes use of AI-powered chatbots to assist its customers. Upon signing up, customers are welcomed by the chatbot AI Maya who provides personalised policies to customers in less than two minutes. These policies automatically take a flat fee from the customer’s premium while the rest of the money is set aside to pay insurance claims and repurchase insurance.
Lemonade’s head of content and strategic communications, Yael Wissner-Levy, says that this kind of set-up is perfect for their customer base, which consists of mainly first-time buyers of insurance policies.
“From the kind of feedback we’ve had, they either felt that insurance was too bureaucratic or they thought it was too expensive,” he explains. “Those are two things that we think we’ve solved.”
Aside from this, Libarikian also lists other reasons for companies to use AI for customer service. “They can help monitor risk, they can help predict risk and they can help give advice to customers on how to reduce risk going forward. That means the frequency and severity of losses comes down over time.”
AI helps stop insurance fraud
AI is better equipped in detecting fraud than humans. And fraud is one of the biggest problems for insurance companies, with the FBI estimating around US$40 billion per year lost to insurance fraud.
AI-powered tools can help stop insurance fraud thanks to their ability to instantly detect unusual patterns and activities that the average human reviewer might miss.
In the case of the Lemonade app mentioned above, when a customer makes a claim, another chatbot, AI Jim, take a look and runs the claim through 18 different algorithms designed to catch fraud. Thanks to this bot, it only takes seconds to approve simple claims. More complicated claims, on the other hand, have to be reviewed by a human team at the company. Still, this method saves insurance companies a lot of time and money rather than just doing manual review.
Another fraud detection solution that makes use of AI is Force, a product that can analyse massive amounts of data gathered from multiple sources. The AI uses this data to determine a so-called “fraud score” for each insurance claim, with an accuracy of about 75 per cent. This is much higher than any other automated systems used to detect fraud.
Jeremy Jawish, co-founder and chief executive officer of Shift Technology, the company that created Force, says that optimising the hit rate of automated fraud detections systems is a must.
“You don’t want to falsely suspect claims because you’ll annoy your customers and you don’t want your fraud handlers to spend time on unsuspicious claims,” says Jawish.
Libarikian confirms that insurance companies can expect AI to be able to assist with “every major decision” by the year 2030. However, this does not mean that humans will be automatically taken out of the picture. In fact, he says, “There’s no substitute for good old-fashioned claims and underwriting experience and that will very much still be part of the organisation.”
AI provides better solutions
AI-powered systems can also provide better solutions to many problems encountered in companies, many of which are tedious and mundane.
For example, analysing large amounts of data in a short period of time is something that humans often have trouble with, but that AI can accomplish within seconds.
Due to this, 87 per cent of companies are now investing more than US$5 million each year in AI, including AI-enabled tools and AI-based platforms, according to Genpact. The research also found out that 82 per cent of companies are planning to move their current business processes to AI within the next three years.
Omni:us, an insurtech company based in Berlin that works with all kinds of insurers, says that AI-based products are extremely helpful in streamlining important operations within the business, such as analysing simple and complex documents and extracting vital information from them to aid human employees.
Martin Micko, CEO and founder of Omni:us, says that this is because of the AI’s ability to self-learn through transfer learning, or the kind of learning that makes use of knowledge gained from solving one problem to solve another problem.
“So even with documents the system has never seen, the AI engine processes them correctly in a similar way to a human being,” Micko says.