AI’s Potential in the Insurance Industry

Artificial intelligence (AI) is disrupting virtually every industry. Fields like advertising, IT and financial services have become inseparable from the technology, despite its relative newness — and that’s just the beginning.

AI promises to revolutionize the future of the insurance sector. (Also read: How AI and IoT are affecting the insurance industry.)

The impact of AI in insurance

Insurance is full of data-heavy, analytics-centric tasks. This kind of work is where AI excels — making the industry ripe for disruption. Insurance firms can automate many of their everyday operations using AI.

Automation has benefits beyond reducing staffing needs and related costs. Repetitive, data-heavy tasks are often challenging for humans to perform, especially with consistent accuracy. AI can handle them with higher accuracy, more consistency and in less time, while freeing up employees to focus on other work streams, increasing overall productivity. (Also read: The top 6 ways AI is improving business productivity.)

Machine learning algorithms can quickly and accurately find patterns in large data sets that humans would have missed. In an industry where attention to detail is just as important – as in insurance – this can yield significant improvements. Some estimates suggest that AI could add as much as $1.1 trillion in annual value to the sector.

Where AI will make the biggest impact in insurance

While insurance AI can transform processes across the industry, some areas will see more dramatic changes than others.

Here are the workflows where AI will make the biggest impact:

AI Claims Processing

One of the most important use cases for AI in insurance is automated claims processing. Managing a claim is typically a time-consuming, error-prone process. Claim writers must review damage in person or analyze photographs, assess the situation surrounding the incident, compare it to the fine print of the coverage and determine the appropriate course of action.

This can take days – but AI can do it in hours, even minutes.

Machine vision algorithms can analyze photos and videos of an accident, while natural language processing (NLP) models review contracts. Technology like this can perform more accurate data analysis much faster, and process a claim in minimal time. This will reduce the workload on insurance companies and reduce waiting times for customers.

Fraud detection

Likewise, AI’s pattern recognition capabilities make it an excellent tool for detecting and preventing fraud. Financial companies are already using AI tools to prevent fraud and the insurance industry could follow suit. While a human might be able to recognize when a claim looks suspicious, AI can do it faster and more accurately.

Machine learning models can analyze large amounts of data simultaneously. This lets them compare customer history, similar incidents, false information and more to detect abnormalities in a matter of minutes, if not seconds. They can then either flag a case and alert human workers to investigate it further or automatically deny the claim. This fast, accurate fraud prevention can save families up to $700 a year by reducing fraud-related high premiums. (Also read: AI in the insurance industry: 26 real use cases.)

Risk Analysis

AI in the insurance industry will also have a significant impact on risk analysis. Insurance firms already collect information such as geospatial data to reveal high-risk routes and areas or driving patterns to determine individual customers’ risk levels. AI can take this data analysis further and offer more personalized plans to benefit consumers and firms.

AI models can also analyze factors such as historical weather patterns and users’ past claim-filing behavior to create personalized home insurance plans. Likewise, they can determine a driver’s risk of an accident by looking at their behavior through telematics and the likelihood of accidents in their area.

Because AI is typically faster and more accurate than humans in these analytical tasks, they can create customized insurance plans that are fairer for customers and less risky for the firm.

Current AI Insurance Use Cases

Although the use of AI in the insurance industry is relatively new, several firms are already using it. As use cases like this become common, it will likely inspire more firms to embrace the technology, ultimately changing the face of the industry.

Here are some examples of insurance firms currently using AI:

Liberty Mutual

Liberty Mutual uses machine learning to determine vehicle damage when customers submit claims on their phones. This streamlines the process and can tell customers whether they need to replace or simply repair their vehicle almost immediately. The firm also uses AI in fraud detection and plan customization, and claims to have seen “significant economic payback” from these technologies, in which it invests $2 billion a year.

All states

Allstate capitalized on another side of AI. The industry giant uses an AI-powered chatbot called ABIE to offer real-time insights and advice to small business owners, using machine learning to learn more about the corporate world and tailor to specific customers.

Originally just an internal tool for Allstate agency owners, ABIE is now available to business owners outside the company as well.

Ensure

AI insurance is also changing the industry for smaller businesses. Tech startup Insurify has consistently seen 250% year-over-year revenue growth thanks to its AI tool.

The machine learning platform analyzes transactions from more than 100 insurers to help consumers find the best plan for their needs. (Also read: How explainable AI is changing the game in commercial insurance.)

The future of AI insurance

As AI technology improves and firms embrace digital transformation, AI insurance will grow even further. Entire fields of the industry could change as AI becomes a standard part of running an insurance firm.

NLP and machine learning tools are likely to automate more and more of the underwriting process. While they require human workers to review final decisions today, they may become fully autonomous in the future. Employees could only manage underwriting for the most sensitive cases and even then AI could perform much of the initial work.

The rise of IoT devices, which provide more data points for AI to analyze, could also expand plan personalization. Home insurance and similar types of coverage can adjust over time with changing conditions, just as vehicle insurance does today with telematics data.

AI chatbots can also improve. These tools are already fairly standard for providing around-the-clock support, but as technology advances, they can personalize responses for each customer. Virtual customer service agents can learn how customers like to communicate, then act and adapt to their ongoing needs to provide the most help in every situation.

AI could define the future of insurance

Insurance AI is a fairly new field, but it’s a growing one.

As more businesses realize the technology’s potential, more will implement it. This trend could redefine the insurance industry over time. That shift will benefit both customers and the insurers they serve, making the industry safer, more accessible and more helpful. (Also read: What hyperautomation can achieve.)