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Impact of Artificial Intelligence on The Insurance Industry

Team AckoJan 17, 2024

InsurTech companies are leveraging Artificial Intelligence (AI) to conquer more ground in today’s digital world. AI has evolved over the years and has had far-reaching consequences on most tech-driven operations, including the insurance industry. AI is enabling insurers to apply machine learning, data modeling, and predictive analysis to the entire insurance value chain, and the results have been favorable in the form of an increased bottom line and enhanced customer satisfaction. Read ahead to know the impact AI has and will have on the now digitally-oriented insurance industry.

Contents

Understanding AI
AI and Insurance
Usage-based Insurance
Enhanced Customer Experience
Efficient Underwriting
Reducing Fraud
Building Trust

Understanding AI

AI makes machines intelligent. It is an umbrella term given to a bundle of technological advancements that have helped humans to program machines to perform certain activities. AI has become extremely popular because of its ability to automate tasks performed by humans and complete them in a short span of time without fatigue or errors.

AI and Insurance

Like every other field, the insurance industry is using AI to streamline its operations, engage with the audience in an effective manner and facilitate sales. AI has not only challenged legacy product lines but also supported InsurTech companies to garner venture capital. Primarily, AI has saved a lot of money for the insurers and has made life simpler for the policyholders.

Usage-based Insurance

AI has been instrumental in introducing behavioral policy pricing. The traditional model of arriving at an insurance premium based on statistical records has given way for analytical, individual-based data for determining the accurate premium. This has been possible because of the Internet of Things (IoT). Its examples are – wearable devices, objects with sensors, sensors based on one’s location, and systems that record geographic data with the help of satellites.

Enhanced Customer Experience

Customers do not want jargons, they want simplified information that will add value to them. AI-powered chatbots come in handy in order to offer simple solutions to customer’s complex queries. Chatbots have evolved from being a glorified ‘Frequently Asked Questions’ assimilator to identifying customers’ faces and selling them policies. For example, an insurance company offers life insurance based on a selfie! AI is also useful in fast-forwarding the claim process thanks to automation.

Efficient Underwriting

Data analysis performed by AI scores over human analysis when the data volume is large. With AI applications, the underwriter can focus on the strategy and portfolio management aspect rather than scrutinize the data manually. AI’s algorithms can perform tedious underwriting tasks more efficiently. Sometimes, a combination of AIs is used to arrive at a formidable underwriting plan.

Reducing Fraud

Frauds arising out of identity theft are common in the insurance industry. AI has the ability to identify gaps in the process that leave the claims process vulnerable to fraud. Machine learning algorithms can scan through historical data and find out if there is anything out of place. Certain patterns can be highlighted, resulting in alerting against a fraudulent activity. It is not plausible to expect such an intense level of scrutiny just from the human eye, but the human eye coupled with AI can work wonders.

Building Trust

Ultimately, what the policyholders want is a swift claim process. An insurance company’s performance shall be judged by the customer after the claim is settled. Time taken to settle the claim is one of the important metrics on which the customer rates an insurance company, smooth claim settlement being the most important one.

Trust plays a crucial role throughout the insurance process. AI should resonate trust within current and future policyholders. Policyholders shouldn’t see AI’s development as a tool to deprive policyholders of an honest claim reimbursement; they should see it as a medium that facilitates it.

Also, read: Vehicle Scrappage Policy in India