According to a recent report from Willis Towers Watson, AI has already positively affected the property and casualty (P&C) insurance market. For example, AI is helping carriers reduce operational costs by automating manual tasks and increasing efficiency. Additionally, AI is assisting companies in delivering better customer experiences. Furthermore, AI detects fraudulent activity, identifies suspicious behavior patterns, and helps insurers prevent fraud and abuse, ultimately saving money.
What Exactly is AI?
AI is a catchall term that covers many types of technology, such as machine learning, natural language understanding, computer vision, speech recognition, robotics, and others. In short, it refers to any software that learns without being explicitly programmed.
Artificial intelligence is simple: machines learn how to make better decisions over time. They use algorithms to analyze large amounts of data and predict what might happen next. Such programs allow businesses to automate processes, reduce errors, and save money.
In recent years, society has seen massive growth in AI adoption. Prime examples include how Amazon uses AI to help customers find products online, while Facebook uses AI to identify people in photos and videos. And now, insurance companies are starting to implement AI into their procedures.
The Growing Presence of AI in the P&C Insurance Business
Insurance companies increasingly turn to artificial intelligence to improve efficiency and streamline operations like automating repetitive tasks like claim processing to increase productivity. A function that helps insurance companies cut costs while maintaining high-quality levels. AI can analyze data from social media posts, online reviews, and text messages to provide customized quotes and recommendations. And importantly, AI can detect fraudulent activity and prevent losses.
The use of AI in insurance is increasing, as indicated in a recent study that found that 50% of insurance firms plan to implement AI within three years. And according to Accenture, the global insurance market is expected to grow to $1.8 trillion by 2025, which AI undoubtedly will help to push the development.
Maximizing AI's Impact on Insurance Operations
AI is already producing results in insurance operations, including underwriting, price setting, claims processing, risk management, and policy administration. With the adoption of AI uses underway, insurers are finding significant opportunities to use AI to enhance their products, processes, and customer experiences. Today many companies are actively implementing AI solutions across multiple areas of their businesses, including product development, data analytics, customer service, and marketing.
In addition to improving operational efficiency, AI can help insurers lower costs and grow revenues. For example, when AI automates repetitive tasks like claim processing, it reduces labor expenses and allows insurers to invest in other critical functions, like sales, retention, and customer service.
The potential benefits of AI extend beyond cost savings and increased revenues. As an example, AI can enable insurers to understand consumer needs and preferences better, leading to more personalized policies and more satisfying customer experiences. In addition, insurers can leverage AI to identify fraudulent activity, helping prevent losses and protect insurers from financial exposure. Finally, AI can provide insight into how consumers interact with insurers, allowing marketers to focus their efforts on those customers who need them most.
How AI-related Trends Affect the P&C Industry
AI is changing virtually everything about our lives – from where we shop to what we eat. And, of course, how we buy insurance. AI is already being used to help insurers develop new products and deliver better customer service. For example, AI enables insurers to offer better coverage and lower costs while providing customers personalized recommendations based on their needs. And new digital tools are helping carriers, MGAs, and wholesalers make sense of data generated from millions of transactions daily.
The following four trends are driving AI adoption across the industry:
AI is transforming how we shop. Insurance companies leverage AI to personalize offerings and reduce friction for consumers. For instance, AI-powered chatbots enable agents to quickly answer questions and resolve issues without requiring a call. Instead, automation gives agents more time to focus on selling policies instead of managing calls.
AI improves the customer experience by enabling insurers to automate repetitive tasks like claims processing, policy renewals, and billing, thus freeing human resources to spend more time interacting with customers.
AI is creating new revenue opportunities by helping insurers improve customer satisfaction and increase loyalty using automatic processes previously done manually. For example, AI assists insurers in creating "smart" auto policies that automatically adjust premiums based on factors like mileage or driver behavior.
AI is making fraud detection easier, which helps insurers detect fraudulent activities before they occur. For example, consider how AI algorithms can analyze social media posts and photos to predict whether a person might pose a security threat. And if so, the insurer can take action before the individual becomes a liability.
AI-enabled technology is also helping insurers streamline administrative tasks, which reduces overhead costs. So, now AI systems are replacing manual calculations with automated formulas that consistently produce accurate results. Not surprisingly, these technologies are just scratching the surface of what's possible with AI. But, as AI continues to evolve, it will continue transforming how insurers do business.
Increased Prevalence of Physical Robotics
Robotics is an emerging industry that will continue to multiply over the next decade. As of 2020, more robots are operating in factories than humans. However, more uses of robotics are in the queue. Within the coming decade, we'll see programmable, autonomous drones, automated farming methods and equipment, and significant surgical procedure enhancements, which are all likely to become commercially viable developments. These changes are due to increased automation that will reduce the number of humans required to operate heavy machinery.
The trend toward increased robotics use will have substantial implications for workers' compensation costs. For example, workers' comp costs are expected to rise due to the need for additional safety measures such as fall protection, guardrails, and other protective devices. In addition, the cost of medical treatment may increase if injuries result from accidents involving robotic machines.
Robotics usage will impact the availability of labor. As manufacturing shifts away from traditional assembly lines, many jobs traditionally performed by factory workers will be replaced by robots. This shift could lead to a decrease in employment, especially among younger workers who may not be able to find comparable work elsewhere. Such changes resulting from AI’s impact portend profound modifications to the P&C insurance market.
Open-Source and Data Ecosystems
The open-source movement began in the 1980s. In those days, people shared ideas and information freely online. Today, we are seeing the rise of a new type of software development and data management called "open-source." This term describes software and data that are free to use, modify, and redistribute under certain conditions.
Data is everywhere, and consumers want to see it all available and beneficial. So the open-source movement is helping the insurance industry share data across multiple platforms. This sharing enables insurers to provide better service to their customers. It also allows them to make smarter decisions when developing new products.
It's possible to find insurers using open-source data to analyze which policies are most likely to result in claims. Then, the company can target these policies with marketing campaigns designed to reduce losses. With these applications, insurers are using open-source technology to improve the way they do business. They're also using it to create innovative ways to connect with customers.
Advances in Cognitive Technologies
Cognitive technologies work by loosely basing programming on how humans think. For example, they allow machines to process vast amounts of information quickly. These technologies are expected to replace many existing software programs.
The term "cognitive computing" refers to the use of computers to mimic human thinking processes. These advancements include artificial intelligence (AI), machine learning (ML), natural language processing (NLP), speech recognition, and text understanding.
Advancements in technologies are underway in computer vision, robotics, and NLP. Computer vision allows machines to understand what objects look like. Robotics uses AI to make robots move around autonomously. Natural Language Processing (NLP) helps machines read and write texts. Speech Recognition is used to convert spoken words into text. Text Understanding is a helpful tool for extracting the meaning from written documents.
The Need for a Coherent Strategic AI Implementation Plan
A coherent strategy is necessary for the successful execution of an AI strategy. In addition to the technological dimension, developing systems incorporating these dimensions is crucial.
Business model – What does your organization want to achieve? How do you intend to make money?
Competitive landscape – Who else is doing what you are trying to do? What are they doing well? What are they doing poorly? Where do you fit into the market?
Customer experience – How do customers interact with your product/service? How does it work? Why do people use it?
Human resources – What skills do you need to execute your strategy? Who needs to be involved?
Creating and Executing Comprehensive Data Strategies
Data strategy encompasses various activities designed to acquire, manage, analyze, and leverage data across multiple channels. Such an approach includes everything from receiving data from partners and customers to developing internal processes and tools to make sense of it. In addition, it involves creating a plan to use that data effectively.
A data strategy aims to ensure that you can take advantage of the wealth of information available today and tomorrow. To do this, you must understand what data exists within your organization and how it relates to your goals. You also need to know where to find it, whether it resides internally or externally. Finally, it will be critical to determine how to utilize it profitably.
A sound data strategy requires a thorough understanding of the current state, potential opportunities, and challenges facing the external environment. If you don't have a data strategy, now is the time to develop one.
Recruit and Train the Right Talent to Create a Tech Infrastructure
The AI industry is snowballing. Companies like Microsoft, Amazon, Facebook, and IBM have poured billions into developing AI capabilities. As a result, insurance carriers must embrace AI and build an intelligent strategy for the challenges ahead.
Insurance companies, MGA’s & wholesalers should focus on building human capital capable of working in a digital environment. In addition, they must invest in training and education programs to equip their employees with the skills needed to operate in a fast-changing world.
Disruptive technologies are changing how people live, work, and shop quickly. Insurance carriers and distributors that embrace these technologies will have an edge in competing against their peers. As a result, many evolving disruptive technologies are already creating massive changes in the insurance industry, leading the businesses that implement them to best their competition.
How AI Drives Efficiency and Value for P&C Carriers
Insurance companies face increased competition, rising costs, and changing consumer behavior. And AI provides solutions as it transforms how some companies operate – and how consumers interact with them.
Streamline Claims Processing and Implementing IoT
Claim processing is a complex task involving many steps. Each step offers opportunities to save money and simplify the process. For example, insurance companies increasingly rely on artificial intelligence and machine learning to automate tedious tasks such as claims processing. These allow insurers to focus on what matters most.
Insurance companies are leveraging the Internet of Things (IoT) to improve operational efficiencies, reduce costs, and deliver real-time insights into how customers interact with their products. For example, insurance carriers use IoT sensors to monitor weather conditions, traffic patterns, and road conditions. They also leverage data analytics to predict future events and optimize claim handling processes. Moreover, they leverage IoT devices to collect data about customer behavior, such as driving habits and vehicle maintenance records. By combining this information with historical data, insurers gain insight into how customers behave and make decisions.
Assessing Risk
Insurance companies have been using Natural Language Processing (NLP) for many years to improve the customer experience. They use it to understand customers better and provide personalized content. And now, AI is being used to help insurers assess risk and predict outcomes. For example, AI models can identify data sets patterns and expect how a policyholder might act under certain circumstances. This situation helps insurance companies determine whether or not they want to offer coverage.
Fraud Detection and Prevention
Fraud detection systems are designed to identify fraudulent activity before it occurs. They typically use data analytics to analyze transactions, compare them against known behavior patterns, and flag suspicious activity. Fraud prevention systems work similarly, but they focus on preventing fraudulent activity before it happens. In addition, these systems often employ artificial intelligence techniques like machine learning and deep learning to determine whether a transaction is legitimate or fraudulent.
Long-Term Benefits from AI Implementation in the Insurance Industry
Artificial intelligence is changing how we think and act in many areas of life. And now, it's impacting the way we buy insurance. The use of artificial intelligence in the insurance industry is expected to grow exponentially over the next five years.
AI will enable new products and solutions. For example, AI could predict risk factors and provide customized coverage based on those risks. This outcome could mean lower premiums and fewer claims.
AI will help companies to understand their customers better. Carriers, MGA’s & wholesalers are leveraging AI to improve customer experience. They can offer personalized recommendations, real-time chat support, and even automated responses. In addition, AI promises to make insurers smarter, faster, and cheaper. By combining data analytics and machine learning, AI enables insurers to automate processes and deliver better outcomes.