The 4 Top Ways AI Will Transform the Insurance Industry

May 23, 2017

Few industry sectors are as suited to benefit from Augmented Intelligence (AI) capabilities as Insurance. Still largely operating with traditional paperwork and riddled with duplicative processes, Insurance is also one of the largest repositories of customer data thanks to two known issues: adverse selection and moral hazard. An example of adverse selection is when a prospective policyholder withholds information from an insurance company to avoid higher life insurance premiums. Moral hazard describes a sinister policyholder who takes advantage of the terms of their policy because the insurance company will incur the cost. Both adverse selection and moral hazard arise from incomplete or falsified data. In an effort to reduce the incidents of both, insurance companies offer premium discounts to those who offer as much information as possible, either through questionnaires or devices. Consequently, insurance companies have massive amounts of structured and unstructured data but lack the necessary capabilities to access and use all of their stores of information.

1. Simplify the insurance agent experience

For insurers, in practical terms, employee experience means claims processing, the primary function of agents. And although claims processing is at the core of insurance’s business processes, it has yet to experience a complete digital transformation. The vast majority of firms still require that their agents manually match a claims request with customer information from various systems and databases. AI-enhanced systems integrate information to create seamless claims handling and faster straight-through processing, which ultimately enables insurers to shorten their claims cycles.

2. Improve insurance customer experience 

With so much of the insurance industry relying on legacy systems, departments are siloed with no connection across marketing, service, and sales to exchange customer data. To close the gap between insurance customer expectations and customer experience, AI can help to create an omni-channel experience across mobile, email, and social media, from the contact center to the claims agent. With easy access to information and quick data sharing between communication channels, insurers have a 360º customer view to deliver consistent, personalized customer experience, quickly.

3. Reduce the cost of fraud

Fraudulent claims cost the insurance industry $30 billion annually, and often, fraud analysis doesn’t happen until after the fact. AI is able to analyze activities and behavior, identify recurring trends, and provide actionable insights based on probability to help recognize fraudulent claims while they’re in progress of being perpetrated. Its contextual understanding capabilities, combined with the ability to connect with other systems, enables insurers to monitor the complete communication history of each customer to quickly spot anomalies and categorize cases that pose a higher risk of fraud before they occur.

4. Redefine the uninsurable 

Who’s a safer bet and who’s at risk of cashing in on their policy? To answer that key question, insurers are increasingly using sensor-driven data collection, via in-home monitors and wearables, for example, to determine policy terms and rates. Real-world use cases include auto insurers using in-vehicle devices, tracking policyholders’ driving behavior to offer reduced premiums in exchange for providing real-time data, and health insurers using AI algorithms to adjust premiums, favorably and unfavorably, based on a person’s exercise habits tracked by a wearable device. With AI, insurers are able to perform more accurate risk assessment and adjust premiums, accordingly to cut costs to themselves and customers.

It is only a matter of time before every form of insurance makes the transition to integrating AI into their systems.

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