Artificial Intelligence in the Insurance Industry

Like many other industries, the coronavirus pandemic has been bad news for the insurance sector too. The emergence of this novel disease not only claimed lives all over the world and changed business processes dramatically but also caused the insurance industry to lose around $55 billion. A lot of agents lost their jobs, fraudulent claims were at an all-time high, and processing thousands of claims in a short time became near impossible.

That is why it has become super important to use modern technologies and AI in the insurance industry. With artificial intelligence (AI), it is possible to process claims faster, prevent fraudulent claims from occurring, provide personalized insurance plans to customers and automate several repetitive tasks as well. AI is here to stay and here are some of the benefits that strengthen this case.

Benefits of Using AI in the Insurance Industry

Fraud Detection and Prevention

In the United States alone, 29% of car owners have admitted to lying to their insurance companies and providing false information in order to get inflated coverage. Even if health insurance frauds are not considered, $40 billion is being lost by American insurance companies annually due to fraudulent insurance claims.

Most insurance companies are still using outdated rule-based systems that are not equipped to detect elaborate fraud schemes. Luckily, artificial intelligence, machine learning, and predictive analytics can detect fraudulent claims better than humans and can prevent them from causing monetary losses to insurance companies. They can address the limitations of previous applications better and help analysts identify whether a claim is genuine or not.

Claims Assessment and Underwriting

Underwriting is mostly considered a personal decision. The insurer analyzes the risk coefficient and repayment capabilities of a person to determine who is best suited for a claim assessment. This approach is slightly disadvantageous since bias can occur in human decisions. AI-based systems use a more scientific approach to assess the risk of a candidate and review their submissions. Not only does this reduce the chances of inaccurate underwriting, but also speeds up the claims process so that, it can get completed in just minutes if the documents submitted fulfill the criteria.

Streamlined Claims Management

Claims management can be a repetitive and standardized workflow, demanding a lot of attention and time. This can rack up the operational costs for the insurer, making it the perfect candidate for using automation and AI-based solutions. Claims management is a paper-based manual process that is prone to inefficiencies and errors. Insurance companies have increased their focus on using emerging technologies to streamline the claims management process and reduce operational costs a bit.

Machine learning and data analytics can manage customer data efficiently and incorporate it in their underwriting and claims management tasks to provide settlements faster to end consumers or reject unworthy claims. All the data collected also provides insight into customer behavior to the analysts, making their task of assessing candidates a bit easier.

Smart Document Digitization

In this modern world, almost everything is shifting to the digital medium. Now, more than 69% of customers say that they prefer getting insurance for their vehicle online rather than visiting an insurance company’s office. While the demand for completely digital procedures is increasing, several legacy insurers are still using paper-based forms and documents.

However, AI has made it possible for Optical Character Recognition or OCR, to recognize hand-written digits or texts easily without any human intervention. This can be a game-changer as the customers would not have to visit insurance offices physically to submit any form. The person responsible for noting all entries will also be saved from re-typing the information written on the form into the database. The OCR system will automatically recognize what the customer has written, convert it into machine language, and store the entries automatically. This increased speed can lead to 80% cost savings for individual processes.

Presenting Personalized Premiums

People can have different financial capacities for paying premiums, might want different coverage for the same vehicle, or apply for different term plans depending on their requirements. And this can make it difficult for an insurance company to manually allot representatives who can talk to different candidates to understand their requirements and provide customized plans.

Predictive cost analysis, driver performance monitoring, real-time accident support, and other AI-based solutions are better at presenting personalized premiums to different candidates based on their needs. Insurers can make better decisions about insurance premium rates for a specific customer segment, can consider a driver’s past driving records to provide higher or lower coverage, and can even assess the damage caused due to an accident to provide an accurate claim amount. In 2021, using AI in the insurance industry means enjoying a whole host of benefits. Especially, new companies are utilizing advanced AI technologies to streamline insurance processes, prevent losses from deceitful claims, improve underwriting processes and do a lot more. It is now becoming a necessity more than just a trend and a nice-to-have feature and insurance companies leveraging AI are bound to outsmart their competitors.