There are many technological disruptors that are changing the way we live our lives and conduct business. These include mobile tech, augmented reality, influencer marketing and virtual workgroups to name just a handful. However, if anyone was asked to select just one that is having the most profound influence, most would cite the rise of Artificial Intelligence (AI).
The rise of the machines
AI might sound futuristic and cutting-edge, but in essence, it is simply the next step in what has always been the biggest technical disruptor: Using machines to fulfil tasks traditionally carried out by humans and to do them faster, cheaper and more efficiently. It’s a concept that underpinned the Industrial Revolution and that took manufacturing to a new level in the late 20th century through automation.
The only difference with AI is that instead of automating manual tasks, the technology is taking control of decision-making processes. It’s already being put to effective use in industries ranging from healthcare to logistics. But how is AI changing the insurance sector?
When a client submits a claim, his or her primary requirement is to have it settled with minimum hassle and maximum speed, especially in the case of personal lines. A couple of years ago, Lemonade hit the headlines for settling a claim in a matter of three seconds. Not every claim will be settled as rapidly as that, but the speed at which AI can analyse and process data means that the most important customer metric can be significantly enhanced without increasing the risk to the insurer.
That potential risk comes from the fear that by “rushing through” a settlement, fraud might go undetected. With an estimated $80 billion paid out in fraudulent insurance claims every year, this is an area where enormous savings can be made, and it is the single largest application of AI in the insurance sector. Fraud detection is all about identifying patterns in order to flag up suspicious claims. Insurance firms can use AI to process hard copy data, digitise the information and deliver insights far faster than human analysts. And the more information that is processed, the more accurate those insights become.
Today’s consumers expect a tailored approach to the products and services they receive. With more data available than ever before, insurers can use AI to analyse behaviours such as driving habits and fitness routines from telematics and wearables to better understand risk factors. This in turn allows them to reward lower risk behaviour with lower premia.
Enhanced customer experience
Customer service-based AI has come a long way over the past year or two. Not long ago, automated telephone systems were viewed with ridicule and distain. Today, more than two thirds of customers prefer to deal with a chatbot than a human. As the AI improves, so does the simplicity and convenience. The technology will be able to immediately recognise the customer, personalise the message and speed the authentication and verification processes that customers find so frustrating.
Rewriting the insurance rules
These are just a few of the ways in which AI is revolutionising the insurance and insurtech space, for both personal and commercial carriers. Perhaps the most exciting factor of all, however, is that AI is still in its infancy. Over the coming years, it will continue to develop at an ever-faster pace and will affect our lives in ways we can, as yet, scarcely imagine.