In our modern world, technology is constantly advancing, its development finding applications in a variety of industries around the world. Artificial Intelligence (AI) is one such branch of technology that is currently revolutionising the way many businesses work at a basic level. Insurance is one such industry that has begun embracing the advancements in AI in all of its forms, such as Machine Learning, Deep Learning, Natural Language Processing, and Convolutional Neural Networks, all of which are transforming the industry from the ground up.
Before industry leaders fully commit to integrating artificial intelligence into the inner workings of their businesses, they first must ask the question, “What problems exist that we think AI can solve?” But first, let’s take a look at what AI is and how it works.
What Exactly is AI?
Just a decade ago, the idea that AI could find its way into consumer industries and our everyday lives would be hard for most people to imagine. The concept of AI is still transforming as we find applications for this maturing technology.
At its heart, AI or Artificial Intelligence is the technological concept that we can build machines that think like humans. At its most basic a computer can look at a situation and produce a response based on data that it has available.
You may have heard of the computer Deep Blue, the chess computer that can beat any human player. It’s able to evaluate a chessboard based on the current pieces and come up with the optimum move based on the current board. Deep Blue did not evaluate any moves past the current board, it simply reacted to the current layout.
AI adapted for the insurance industry works in a similar manner. Claims and adjustments can be subdivided into data markers that an AI can evaluate rapidly without prejudice, making it faster and far more efficient than a human doing the same task.
When AI Meets the Insurance Industry
While it is still early in the process of AI development, the technology is viable and can be put to use in a multitude of ways. Many experts believe that industry leaders are moving from a “detect and repair” philosophy to a “predict and mitigate” direction. This shift can be accomplished efficiently with artificial intelligence.
The machine learning and language processing capabilities of AI make it an indispensable tool to raise standards and quality across the board in any industry. Some examples include:
· Streamline Processes
· Eliminate Redundancies
· Remove Mistakes & User Error
Aside from the more general improvements that AI can offer across a wide range of industries, there are specific applications within the insurance industry — some of which have already been implemented — making significant improvements in routine processes.
In total, these improvements can save companies a lot of money in redundancies and waste and, in turn, saving consumers a substantial amount of money on their insurance premiums. The benefits of AI will only increase as the use of this technology becomes more widespread.
Fraud Detection & Prevention
Unsurprisingly, insurance fraud is a common occurrence in the industry, costing companies more than $40 billion per year. Fraud not only adversely affects companies themselves but increased costs and loss of revenue is passed onto the consumer instead of being swallowed by the company.
As insurance companies move more and more toward complete digitisation, the use of AI can help detect abnormalities and mitigate risk by analysing more data and swiftly implementing protections than any department of human fraud prevention specialists ever could.
Claims Management / Customer Service
AI has been instrumental in the implementation of chatbot services and automated assistance to cut the high cost of maintaining round-the-clock customer service representatives. These AI customer service reps can answer simple questions and handle basic complaints without the need for human interaction. Claims personnel eat up an enormous portion of insurance companies’ overhead, raising the prices of insurance premiums overall. With the aid of AI, the number of insurance claims can be reduced as well as automated, lowering the processing time from days to mere minutes.
Not only does faster claims processing improve the overall customer experience but, on a large scale, it can lower the cost of insurance premiums for customers across the board.
Despite concerns about phasing out human operators for a customer-facing AI, several studies have shown that the majority of consumers who use AI are either comfortable or completely indifferent as long as their problems have been solved.
Pricing & Renewals
With the implementation of AI, insurance companies can better customise policies for their customers’ individual needs and price them more competitively for the marketplace.
AI can even help to facilitate smaller niche insurance companies such as music insurance subscriptions and ongoing renewals. This technology is so versatile that it can collect data from any number of sources to create a data set and holistic risk assessment for practically any category of insurance coverage.
Consumer data is at the heart of the insurance agency, collecting information and evaluating risk. Learning about customer needs and creating a unique product based on the individual is the goal of good insurance coverage.
What was once done manually by human researchers and data analysts can now be accomplished by lightning-fast AI. Beyond that, AI technology can actually be connected to a number of existing devices (such as cars, fitness trackers, home assistants, smartphones, and smartwatches), constantly collecting data and improving risk assessment in real-time.
The Future of Insurance
As you can see, the applications of AI in the insurance industry are manifold. While some are wary to jump into new waters, others have started heavily investing in this technology.
AI has already proven invaluable to multiple industries, especially in customer-facing roles. In a 2020 report, over 50% of consumers interacted with an AI on a daily basis, and the trend points towards that number increasing as AI becomes more powerful and versatile.
It does not seem a far reach to speculate that the implementation of AI will become the norm in the very near future. Companies that are slow to conform may be pushed out of the marketplace, unable to compete with the new standards set by AI.
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