We live in a world of inflation, geopolitical crises, and cyber threats. To offer better protection from new risks, the insurance industry must rely on digital technology. According to a paper by The Geneva Association, artificial intelligence will bring about fresh insurance opportunities and risks. It will also lead to the fading of some current markets.
The use of advanced AI technology like quantum computing is a distant reality. However, insurance companies are using predictive algorithms and telematics insurance. These AI programs help insurance companies in conducting risk analysis. They also provide virtual customer solutions and help underwrite policies.
Here are some ways insurance companies are using AI:
Data-driven fraud prevention
According to the Coalition Against Insurance Fraud (CAIF), the U.S. insurance industry loses over $300 billion to insurance fraud every year. Many fraudulent cases go undetected due to the advanced techniques fraudsters use.
Manual checks cannot sufficiently deal with such complexities. Here’s where AI steps in. Its deep-learning systems help perform fraud checks and behaviors. Machine learning helps predict future fraud patterns to identify and end such behaviors.
According to Areiel Wolanow, Managing Director at Finserv Experts, “Professional criminals will keep abreast of industry-leading fraud indicators and adapt their behavior to suit. Human data scientists will need to iterate their analysis over time to keep pace, while machine learning algorithms train themselves over time based on observable changes in the underlying data.”
AI-assisted underwriting
Research from St. John’s University points out that the insurance industry has evolved from a “detect and repair” mindset to a “predict and prevent” mode. This is true for the underwriting process, which has undergone a shift thanks to AI.
Automated underwriting is the new way of doing things. Earlier, companies relied on employees to analyze risk scenarios. Traditional workflows and rule-based models were the norm. Today, risks have become more complex. As such, they demand an airtight approach.
The use of AI in underwriting helps predict risk scenarios. AI can analyze massive amounts of data with speed and precision, helping establish tighter policies and better risk prediction.
Lee Sarkin, Chief Analytics Officer for Life & Health at Munich Re said, “Automated underwriting rule engines (UREs) have been the starting point for life insurers to improve the overall customer experience and operational efficiency.”
Faster and more accurate claims management
Gone are the days when claim settlement was a tedious manual process. According to a white paper by Fujitsu, AI can assess a simple auto-insurance claim in a few seconds. Meghana Nile, the Insurance Chief Technology Officer at Fujitsu, says that AI-led customer service also simplifies the claims process.
Many insurance companies have tools like Natural Language Processing (NLP) at their disposal. With these tools, companies deploy chatbots to address basic customer queries related to claims. This gives human agents the time and scope to deal with serious claims requests.
AI uses technology like robotic process automation (RPA) to investigate claims quickly. Claim requests often involve the processing of vast amounts of data. Machine-learning algorithms can process them in half the time. Internet of Things (IoT) devices, such as fitness trackers and wearables, also help with data collection. For example, car insurance companies employ AI software for risk reduction purposes.
To summarize, automation is integral to the future of the insurance industry. A report by McKinsey predicts an annual worth of $1.1 trillion for AI-powered insurance.
Thanks to AI, insurance companies will experience lower costs, fewer risks, and seamless operations. Combining human efforts with machine learning can help standardize claims processes. It can also reduce wait times for processing claims without compromising accuracy.
Brogan Woodburn is a contributing writer for MarketWatch Guides and has written about auto warranties and insurance.