Regarded as a trending technology story for all industries currently, Artificial Intelligence (AI) is finding its way into every aspect of our lives, with many industries undergoing a drastic digital transformation. Adobe predicts that about 80 percent of all emerging technologies will have some AI foundations by the end of 2021. The wide adoption of AI across industries has facilitated the creation and management of better and more streamlined processes across organizations. The technology has the instinctive capability to provide high quality customer experiences thereby making a company’s operations in a more structured and systematic manner. The evolution of artificial intelligence technology has gained momentum within the insurance industry wherein critical processes like data entry, insurance claim settlements, personalization of user interfaces and fraud detection can be vastly improved in terms of speed, accuracy and relevance. Data is an important aspect in the insurance segment. In fact, insurance companies are looking out for smarter ways to analyze tons of data efficiently. The need for speedy data transmission has led companies to rely on data conversion services to handle critical data entry and analytics needs.
The Need or Role of AI in the Insurance Sector
Being a highly regulated industry, insurance companies have been slower to embrace technological changes, when compared to other industries. Many processes within the insurance sector have been steeped in manual, paper-based processes that are slow and require human intervention. However, over the past few years, with an increase in competition and new players entering the market, insurance companies are effectively implementing artificial intelligence (AI)-powered tools to stay ahead. A global push by insurance companies to augment their technological capabilities to do business faster and securely to ensure customer satisfaction is visible. According to Google Trends, there has been an increasing interest in AI-powered insurance applications during 2012 -2019.
With better knowledge and resources about the game-changing influence of AI in the Insurance industry, the initial hesitations and shallow distress around its implementation are now fading quickly. The industry has analyzed the numerous opportunities brought forward by artificial intelligence and machine learning. Right from document processing to smart chatbots, insurance providers leverage or implement a wide array of machine learning technologies in their day-to-day tasks, including claims and appeals processing, personalized insurance pricing, and fraud detection that spruce up the processes to achieve reduced costs and improved customer experience. The importance of AI in the insurance sector is discussed below –
- High Potential for Automation – As the sector involves a wide range of manual tasks that need to be automated, AI technology can offer faster services with fewer errors. As per recent estimates from Mckinsey, about 25 percent of the insurance industry is expected to become automated by 2025 – thanks to AI and other machine learning technologies.
- Better Pricing and Profitability – With a higher popularity in the number of consumer connected devices, the amount of consumer data rapidly increases. A growing volume of data allows insurance companies to evaluate their customers’ risk profile more accurately. This will result in less risky customers enjoying cheaper services and riskier customers required to pay more, increasing profitability and potentially expanding the market.
- Improved Insurance Businesses – As per Juniper research, car, property, life, and health insurers will increase their annual savings by more than 4 times in 2023 by investing in these emerging AI technologies.
Primary Use Cases of AI in Insurance
Insurers around the world are implementing AI to improve their bottom line as well as the customer experience. In addition, implementing AI in insurance processes also saves significant time and cost and increases profitability (due to more accurate customer pricing and reduced fraudulent claims). Let’s take a close look at the major areas in the insurance sector that would benefit from Artificial Intelligence (AI) implementation –
- Claims Processing – Speedy and successful settlement of claims is one of the crucial factors that determine the overall efficiency of an insurance business. Claims processing includes multiple tasks like – detailed review, investigation, adjustment, remittance or denial. While performing these tasks, numerous issues like – manual or inconsistent processing, varying data formats and changing regulations may crop up. As customers make claims when they are in an uncomfortable position, customer experience and speed are critical in these processes. Introduction of AI dramatically boosts insurance claims data entry. Insurance companies handle large volumes of documents (for claims processing tasks, detect fraudulent claims, and check if claims fit regulations). The crucial need for effective data processing and fast transmission has led these companies to hire data processing services which help process all important documents into digital formats. AI can help generate structured sets of data to organize claims and process them faster. These advanced solutions offer templates for incoming claims, assisting insurers to capture all data in one single step. With the support of an AI device, speech-based claims can be converted to written text, making documentation and claims management easier.
- Fraud Detection – To combat fraud, insurers utilize AI-driven predictive analytics software to process thousands of claims. By analyzing the claims in milliseconds (based on set rules and indicators), AI can help insurance organizations enquire about the alleged events of an accident while processing claims. AI can identify or reduce the number of fraudulent claims – claims which may or may not be legitimate – better than a human adjuster. These indicators include things such as frequency of claims, past behavior and credit score. For example, if a car driver claims their vehicle broke down due to bad weather, the AI software can easily confirm the weather reports and check whether asserted claims are true or not.
- Appeals Processing – Once claims get processed, some claims can result in appeals that can be automated with the combination of AI and other automation technologies. Automation of appeals processing would change based on the type and complexity of appeals. Hyperautomation is a trending technology that automates end-to-end processes such as claims processing, appeal processing or redaction.
- Application Processing – Application processing involves extracting information from a high volume of documents. Performing this task manually can consume more time and lead to errors. With AI technology, insurance companies can automatically extract relevant data from application documents and accelerate insurance application processes with fewer errors thus ensuring improved customer satisfaction.
- Customer Profiling and Segmentation – Insurance companies are enhancing their customer profiling capabilities by automating and applying advanced technologies in the data collection processes. By having the power to consolidate data (from both internal and external sources), insurers can build a more comprehensive picture of their customers related to their insurance needs, interests and life stages – which help in more effective targeting. Depending on these attributes, companies can segment their audience and use deep learning to predict the conversion rate of these segments. This in turn can help insurers to give valuable and relevant product recommendations for each customer segment. Insurance companies are enhancing customer profiling with AI-enabled voice and facial recognition. This helps create biological customer profiles for fast and accurate verification, as well as the tracking of behaviors and attributes.
- Interactive Power of Insurance Chatbots – Customers often feel confused even at the mere idea of settling for an insurance policy, due to the lengthy document processing, complex policies and regulation and tedious instructions. Customers always look for friendly human-like interactions that enable smooth transactions. Intelligent chatbots act as virtual assistants and help build up the initial communication with customers. By using AI and machine learning, chat bots can interact with customers effortlessly. Customers can either type or use their voice to communicate their concerns pertaining to different policies which chatbots can process to deliver personalized solutions. Beginning with basic questions related to claims, chatbots can assist a lot more on areas like product recommendations, promotions, lead generation or customer retention. In fact, these bots can be integrated with the channel of your choice (Website, Facebook, Twitter etc.) to guide customers with quotes, policy explanations and purchase of insurance covers. For an in-depth understanding of customer queries, chatbots should have NLP support along with sentiment analysis to assess a customer’s reaction and resolve issues accordingly. In short, this approach enables moving the complete interaction between the company and the clients online, considerably reducing operational costs and lowering the price of premiums.
- Advanced Underwriting – Using AI and machine learning can help insurers save a lot of time and resources involved in the underwriting process and automate the process. IoT and tracking devices give valuable data which can be utilized to make the process of determining insurance premium regulated. Fitness and vehicle tracking systems (both in health and auto insurance sector) offer intelligent underwriting algorithms that smartly control the way premium is dictated.
- Product and Policy Design – Insurance companies are using AI is to inform their product and policy design. By streamlining the analysis of massive data from owned channels, third-party sources and agents, insurers can use machine learning to discover customer trends and interests in real time. These insights are later being used to develop and improve product and policy design.
Right from claims processing, fraud detection to underwriting, Artificial Intelligence (AI) technologies are literally transforming every single facet of the booming insurance industry. AI has the potential to change the insurance experience for customers from frustrating and technical to something fast, on-demand, and more affordable. Companies by applying AI technology to a huge volume of data at their disposal will soon start to experience flexible insurance such as on-demand pay-as-you-go insurance, and premiums that automatically adjust in response to accidents, customer health. This will not only help improve the overall customer experience, but can also provide valuable savings by reducing risks. By reducing these risks and streamlining processes, AI can help companies drive efficiencies and deliver more personalized products and services – the key to future success. Error-free data entry services along with AI can help consolidate data, reduce expenses, improve customer experience, and reduce fraud.