By Patrick Thompson
Artificial intelligence (AI) has already left its mark on the insurance industry for good. AI involves computers and their associated systems performing tasks that historically only humans were capable of accomplishing. One of the driving forces behind the rise of AI within the insurance industry is the evolution of big data, which allows insurance companies to access more information about customers, their behaviors, industry trends, risk factors and other quantifiable information that helps insurers set rates, adjust them, perform underwriting tasks, and assess claims.
How IoT Data Affects the Insurance Industry
Internet of Things (IoT) data refers to information collected from interconnected smart devices, which all have unique identifying numbers to track the data source. Data is exchanged between these devices without any additional human input and can be later analyzed to understand trends and patterns. The enhanced ability to gather massive amounts of data from a wide range of sources is fueling the development of AI in running more detailed and responsive algorithms to explain and predict customer behavior.
Improving Risk Mitigation
One of the most immediate results of access to big data in the insurance industry is improved risk mitigation. Insurance companies are able to more accurately assess the risk of individual drivers and create more precise risk pools. This improvement in the underwriting process eventually leads to fewer losses, which means that insurance premiums will be less expensive for responsible drivers. They will shoulder less of the burden of drivers who pose a higher risk of being involved in an auto accident but would not have been identified as such in the underwriting process prior to the advent of big data.
Machine Learning to Spot Trends
One of the most applicable facets of AI to the insurance industry is the process of machine learning. This is how computers begin to identify trends and patterns in data and recalibrate to predict likely outcomes. The ability of computers to take this extra step in interpreting data and applying it to future scenarios is revolutionary in the insurance industry because it protects against instances of unexpected losses.
How AI Can Spot and Stop Insurance Fraud
Unfortunately, insurance fraud is rampant in the industry and requires costly resources to uncover. Insurance fraud investigators traditionally have had to cull through mountains of paperwork and travel great lengths to examine suspected cases of insurance fraud. There is almost no deterrent for potential fraudsters because they are well aware of how difficult and expensive it has been for insurance companies to scope out fraudulent claims. Thus, very few cases of insurance fraud actually result in legal prosecution, which amounts to more hidden costs in premiums for insured drivers.
Reducing Fraud Investigation Costs
Insurance companies are starting to rely on AI to spot inconsistencies in claim submissions as well as claim information that appears to be an outlier. This allows insurance companies to cast a wider net at the outset for compiling instances of potential fraud. Once potentially fraudulent claims are identified, insurance companies can then assign claims inspectors to manually follow up on cases that appear to be clear examples of malfeasance. Claim investigators will have much smaller caseloads of potentially fraudulent claim submissions, which means they can devote more attention to investigating the obviously egregious and costly cases.
Improving Customer Experience
While cost savings are certainly reason enough to look forward to the enhancements in the insurance industry that AI-powered automation can deliver, insurance customers stand to benefit from these advances in many other ways.
Saving Time with Less Paperwork
Insurance software development based on AI is disrupting the traditional ways that customers communicate with their insurance companies for the better. Instead of having to spend a long time waiting on hold to call an insurance representative about their policies, customers can access their policy information online or on their mobile devices to make any changes or send payments. Customers appreciate saving time and frustration by being able to bypass meeting with their insurance representative in person or talking to them over the phone.
More Streamlined Interactions with Insurance Company Representatives
Additionally, automated processes are centralizing the customer experience so that they do not have to interact with multiple different representatives to resolve their issues. This streamlines the flow of information and reduces customer frustration in having to double back and explain their issue several times to different representatives to obtain an answer. An additional benefit is that there are fewer opportunities for human error in signing up for a new policy, processing payments, reviewing claim information, making changes to an insurance policy or resolving a claim. Overall, customers will have easier access to information about their coverage and claims.
AI-Powered Automated Claim Support
The main advantage of AI-powered claim support is that fewer human interactions will be necessary to submit and process claims. Insured drivers can submit vital claim information from their mobile devices, and this information will be quickly scanned by bots to detect fraud, assess claim value and determine the next steps for resolution. This will drastically reduce the time that it takes to settle each claim and the required effort on the part of insurance workers to reach a payout.
Automated claim support results in immediate cost savings for insurance companies. They will have lower administrative costs because smart devices allow for seamless collection and communication of claim information, which means less paperwork for claims administrators to process. Workforce demands will also be reduced, resulting in lower human capital management costs. These cost savings could be passed on to the insured with lower premium costs.
The positive disruptions to the insurance industry that are occurring as a result of AI-powered automation include more efficiency and accuracy in the underwriting process, an improved customer experience, more streamlined claims processing, better fraud detection, and cost savings all around. Insurance companies that embrace this potential for improvement will be well-suited to dominate the industry for decades to come.
Chetu is a premium provider of customized software development solutions to start-ups, small to mid-sized businesses and Fortune 500 companies across the globe. With nearly two decades of experience in developing effective insurance software solutions, Chetu is the software development company that insurance companies turn to when they need flexible, convenient and reliable software solutions.