5 ways AI is transforming the insurance industry

In much the same way, AI is expected to revolutionise insurance, with McKinsey noting that the technology will have a “seismic impact on all aspects of the insurance industry”. Much the same as in other industries, AI is helping the insurance industry to gain better insights from data, better understand customers, analyse and protect against risk, and become more operationally efficient.

But, while holding a well of potential for good, the technology also has the capacity to be harmful. AI presents a new array of risks and concerns in the form of safety, privacy, ethics, and the potential to exacerbate bias and discrimination.

The insurance industry is facing an increasingly competitive and disruptive marketplace, leading to an increased need to transform the way insurers do business. As such, we need to look at whether the benefits of AI indeed outweigh its risks and examine just how this ever-evolving technology will impact the future of insurance.

So, here are five ways that AI is, and has the potential to redefine insurance:

Side-by-side Comparison
AI is providing the insurance industry with static tools that are helping to dynamically and more intelligently compare insurance products according to inputs. This enables customers to better weigh their options, not only by understanding which insurance offers better premiums but being able to compare the features and benefits of each policy in order to find the right fit that meets your needs.

Quick Access to Advice
One of the more interesting manifestations of AI in the insurance industry is in the adoption of AI-powered chatbots that enable customers to gain access to information and answers to frequently asked questions as quickly and easily as possible. By making use of these intelligent bots throughout the customer purchasing journey, insurers will be able to proactively provide advice to customers relevant to what they are looking at, recommend the best policies, answer queries, simplify the entire insurance process and provide assistance to customers at any time of the day.

Fraud Detection
One of the biggest challenges in the insurance industry is fraud, which comes at a high cost not only to the insurer but also to customers as well who ultimately end up paying higher to offset the risk of fraud. Additionally, detecting fraud can be a costly affair as well requiring vast resources with the process taking a long time to complete. Meanwhile, intentional fraudsters are becoming more innovative and sophisticated, making it difficult for the industry to keep up.

However, AI and machine learning are helping to detect fraud much faster and easier by enhancing risk assessments and providing more insight into insurance applicants by combing through greater data sets. More than this, AI can be used to identify and flag applications that have been created using other AI tools with the purpose of committing fraud.

Intelligent Underwriting
AI is not only helping to streamline underwriting processes but, by leveraging the underutilised volumes of data collected by the insurance industry, is also helping insurers gain more actionable insights for underwriting. This will play a key role in remaining competitive in the industry as it will allow insurers to offer more tailored insurance coverage plans and pricing to customers, simplify the customer journey, and ultimately improve customer satisfaction.

Improved Claims
Effective claims management not only saves insurance companies time and money, but ensures a better and enhanced experience for customers during what can often be the most anxiety-ridden interaction with an insurer for customers. Luckily, AI is helping to improve the claims experience by removing human error and reducing risks. The technology has the ability to analyse images, such as a broken item you want to make a claim on, and let the customer know immediately if the claim will be paid out, how much will be paid out, and what the excess would be. In some cases, AI could even authorise the payment and automatically pay out the claim.

It also has the capacity to analyse real-time data such as the weather or accidents and determine whether a claim will need to be made before a customer has even filed one. For example, an AI model that is able to predict flight delays would enable customers who purchased insurance when buying their plane ticket to instantly receive a payout with no need to claim.

Artificial Intelligence is playing a significant role in helping to transform the insurance industry, enabling a historically traditional industry to modernise and become more digital, more innovative, and more future-forward. And, while it has the potential to positively impact and add value to the entire insurance value chain while bringing significant benefits to customers, it’s clear that these benefits will never be fully realised if the risks and challenges of these powerful AI tools are not carefully considered and mitigated.

NB: Vis Govender is co-founder of Everything.Insure and Group CEO of FirstEquity Group