It’s no secret that AI has had, and continues to have, a tremendous impact on virtually every industry. But for many people, AI is a buzzword without much meaning attached to it. So, what is AI, how is it used in the commercial insurance industry, and what does it mean for the future? We’ll give you those answers and more in this article.
What is AI?
AI, or artificial intelligence, is a term that was first used in 1955 by Stanford Professor John McCarthy. McCarthy described AI as “the science and engineering of making intelligent machines.” Today, AI involves developing computer systems and software that replicate the complex decision-making abilities of the human mind.
Since it’s so diverse and complex, AI can be difficult to define. Most of us use AI in our daily lives, from biometrics and navigation on our cell phones to chatbots online. AI is the driving force behind search engines, social media, Google Translate, Netflix, spell checkers, and much more.
Say you’re looking for a new show on one of your streaming services. You notice there’s a list of recommended programs – that’s AI at work. Perhaps you’re traveling and need to communicate with someone with whom you lack a common language. You could hire a translator, or you could just use an AI-powered app on your phone to automatically do it for you. In essence, AI attempts to replicate human cognition to make our lives more efficient.
How is AI used in the industry now?
Though AI for insurance companies is still relatively young, users recognize its tremendous value in helping them leverage AI. The rise of insurtech spurred the proliferation of AI for insurance companies, taking the insurance industry by storm. Now, it’s virtually impossible to thrive as an organization or user without unwittingly using AI for insurance. Here are two ways insurance organizations are using AI today.
Data Analytics
Insurance carriers often collect swaths of data, but without proper analysis, that data is more harmful than it is helpful. For example, Verisk uses insurance AI to analyze images and assess risks, supporting a more robust underwriting process. Carriers might have access to images of a business or its assets but may lack the resources to analyze them. With insurance AI, the value of those images increases exponentially when computer vision extracts useful data from them.
Fraud Detection and Prevention
Another common use of AI in insurance is to prevent and detect fraud. Insurance fraud is an issue of increasing importance and one that costs businesses and individuals billions of dollars each year. (The Coalition Against Insurance Fraud reports that over $308 billion are stolen each year due to fraud.) To make matters worse, that figure will likely increase, as 3 in 4 insurance companies think these risks are increasing.
What efficiencies are gained by leveraging AI?
Operational efficiencies can save both time and money, freeing up human users to focus on other challenges. By leveraging AI for insurance, organizations and users can be more efficient across the board, particularly with underwriting and claims.
Here’s how organizations can use AI to improve underwriting, pricing, and claims.
Faster, More Efficient Underwriting and Pricing
AI isn’t going to do 100% of the work required to underwrite and price new policies. It can, however, make underwriters more efficient by offering them resources that help them do their jobs faster. In fact, if you’re an underwriter, insurance AI could free up to 40% of your day, said Corey Barker of Accenture. And, though it’s in its early stages, AI can also help insurers set prices by automatically predicting customer behaviors.
More Efficient Claims Handling
Without AI, settling a claim is a process that demands valuable human attention. To file a claim, a policyholder must contact a human representative and wait for a reply before sharing their information. With AI, chatbots can provide an immediate response and coach policyholders through the claims process.
AI can also help claims adjusters, who can benefit from computer vision and other technologies used to assess damage. AI for insurance companies can also play a critical role in fraud detection and prevention. And the addition of insurance AI to the claims process doesn’t just benefit users and organizations. These tools can also help give customers a better, faster claims experience.
How can Agents, Wholesalers, Carriers, and insurtechs use AI?
There are countless ways agents, wholesalers, carriers, insurtechs, and other users in the commercial insurance can effectively use AI. Let’s take a look at one way each of these users can apply AI in insurance to benefit their business.
Wholesalers Can Reduce Errors with Automated Policy-checking
Wholesalers and brokers can save themselves time and reduce errors by leaving the rote task of policy-checking to AI. AI software can sift through hundreds of policy documents in just a few seconds to detect discrepancies and changes. Humans can get tired and make mistakes, especially when it comes to more tedious tasks like reviewing policy documents. AI is tireless and efficient, savings wholesalers and brokers time and money.
Agents Can Supplement Relationships with Customers Using AI Chatbots
An excellent example of how insurance AI can improve operational efficiencies is with insurance chatbots. Originally developed for Allstate agents, ABIE is a chatbot that supports better agent-customer relationships. ABIE is just one example of a chatbot agents can use. Other chatbots include AlphaChat, Botsify, and Quriobot.
Insurtechs
Insurtechs use AI to automate processes, like data analysis. The very fiber of insurtechs is rooted in AI. If an insurtech can perfect its AI capabilities, it can then build customized solutions to cater to different users. For instance, some insurtechs will focus on data analytics for risk assessments. Other insurtechs might allow wholesalers to automatically compare quotes from multiple carriers.
Carriers can evaluate risks faster and more accurately
Insurance carriers have to contend with the challenge of accurate, expedient underwriting. In the commercial insurance industry, that can mean manually reviewing lengthy, paper-based applications. With insurance AI, carriers can empower underwriters to make better, more consistent decisions faster using big data analytics.
The impact AI will have
AI for insurance is already making – and will continue to make – a tremendous impact on the industry. In a 2018 survey, 87% of senior insurance executives reported investing at least $5M annually in AI technologies. Per a 2021 McKinsey article, “AI and its related technologies will have a seismic impact on all aspects of the insurance industry, from distribution to underwriting and pricing to claims. Advanced technologies and data are already affecting distribution and underwriting, with policies being priced, purchased, and bound in near real time.”
Overall, AI has the potential to change every facet of the commercial insurance industry. It’s already changing the way we price and sell insurance, accept payments, manage claims, and detect fraud. If anything, AI has already impacted the industry – now it’s just a matter of users harnessing AI’s full potential.
What you can do now to prepare your business
The future of AI in insurance seems to point toward leveraging technology to provide more personalized, accurately priced coverage. To prepare your business for the future, one of the best things you can do is keep an open mind. Sometimes, that means adopting new processes, which, though uncomfortable, may be necessary to survive.
Think about how AI and automation can help you grow your business and provide better value to your customers. Consider your current pain points and how you can leverage AI for insurance to address and resolve those problems. How efficient is your underwriting process? How accurate is your pricing? How quickly do you handle claims? How well could you manage an influx of inquiries without upsetting customers or prospects? These are the types of questions you should constantly be asking yourself.
As the industry faces new challenges like slimmer profit margins, AI is even more relevant. So, rather than viewing AI as a threat, think of it as an asset. Stay agile, stay open-minded, and always prepare yourself to invest in changing your business for the better.
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