The profound impact of AI on insurance, Part 1
For years, artificial intelligence has been helping business owners accelerate and automate their processes. In the insurance industry, AI has proven effective in helping to detect fraud, mitigate the risk of human error, and even perform certain basic tasks. Now, AI is demonstrating a significant capacity to go beyond the underwriting process.
This does not mean that artificial intelligence will replace all jobs in the industry. Quite the opposite, in fact. AI is certainly not at a point where it can completely replace a human employee; rather, it serves to assist us in our daily processes, to take on autonomous tasks, and to free up our time to deal with more urgent issues that require human intelligence.
The crucial point is that artificial intelligence is radically impacting the insurance industry. And it all starts with transforming the way we take out insurance.
What is artificial intelligence?
AI, or artificial intelligence, is the theory and development of computer systems capable of performing tasks that normally require human or "natural" intelligence. AI can use visual perception, decision-making, speech recognition, and even translate languages in no time to solve problems.
One example of AI is an AI-powered chatbot. Many businesses use AI-enabled chatbots to free up phone lines and answer basic questions. Other examples include AI-powered security monitoring, AI-powered speech-to-text features, AI-monitored spam filters, and so on.
The antithesis of artificial intelligence would be the intelligence demonstrated by humans and animals, that is, "natural intelligence." Artificial intelligence is not yet advanced enough to replicate natural intelligence, but it is faster than humans and less prone to error, making it an ideal candidate for businesses and the insurance industry to automate certain simpler tasks, thus freeing up human employees for more urgent tasks requiring the involvement of natural intelligence.
What is underwriting in the insurance sector?
If you're not already aware, underwriting – or "risk assessment" – is the process by which insurers use decades of statistics and compare them to your personal demographic data (and, depending on the product you buy, how you drive, the age of your house, your industry, etc.) to calculate your risk and, consequently, your insurance premiums.
The subscription process can also impact the amount of insurance coverage you are eligible for. Some potential customers are considered higher risk to insure than others, which can make it more difficult for them to qualify for certain insurance coverages. They may also find their insurance more expensive.
For each different insurance product, policyholders look for different elements.
- For home, condominium and auto insurance, i.e. property insurance, policyholders try to calculate the risk of theft, fire, fraud and flooding.
- For life insurance, policyholders can try to calculate the risk of premature death.
- With regard to business insurance, policyholders may attempt to calculate the risk of loss due to physical perils or a lawsuit resulting from an injured or dissatisfied third party.
Here's how artificial intelligence is looking to transform subscriptions.
Artificial intelligence and subscription
Currently, underwriters spend a significant amount of time on non-core activities—tasks that can easily be handled by AI software and that dramatically increase efficiency. As AI continues to mature and its costs decrease to a more reasonable level (reasonable enough for any insurance company, large or small, to purchase AI software), we are seeing that integrating AI into our underwriting processes represents a substantial return on investment.
You see, underwriters used to pull their data from a huge database of statistics, taking into account factors such as age, gender, driving record, and so on, but artificial intelligence goes a step further. Not only can AI automate this process, complete it, and assess the risk in seconds, but it also pulls data from a wider range of sources, including unstructured data from social media platforms, online reviews, chat rooms, and more.
Artificial intelligence and complaints management
Rumor has it that while AI could speed up the underwriting process, it's also likely to begin playing a role in claims handling. This includes managing basic claims, which would otherwise be handled by multiple intermediaries—a potentially lengthy and arduous process. Instead, AI can expedite this process by processing data, analyzing an individual's coverage, and streamlining much of the manual work. This frees up human workers to handle more complex claims.
AI is already involved in claims management. It can manage telephone lines for submitting requests, online portals, and even answer basic questions.
What else do we know about the future of insurance?
To say that AI will be implemented in the "near future" is a lie. AI is not what it was a few decades ago, or even five years ago. AI is being implemented in businesses, the insurance industry, and our personal lives as we walk and talk. It leverages claims data and improves the underwriting process, yes, but it is also much more than that.
Want to learn more about how artificial intelligence is profoundly impacting the insurance industry? Watch the second part of Panda7 on artificial intelligence and insurance to find out what the future of auto, home, condo, and life insurance might look like.