Artificial intelligence in insurance is gaining more and more value. In 2016, the industry spent $76 million on AI-based software. In 2021, spending reached $571 million. Using the power of smart algorithms, insurance companies want to speed up work processes, reduce fraud, and improve customer service. Let’s take a look at how AI apps are helping insurance agents work better and how AI is changing the industry.
Smart and accurate underwriting
An underwriter determines whether a client receives insurance. This specialist needs to examine an application, find out more information about the applicant, and assess the candidate’s reliability and possible risks. They can also contact the applicant’s acquaintances and medical staff to find out more information and assess the client’s financial status more accurately. The underwriter then decides whether an insurance policy can be issued and under what conditions. They also determine the amount of money.
The candidate approval procedure requires great analytical skills and scrupulousness. The underwriter works with a huge amount of data, and the slightest mistake in risk assessment can lead to losses. For example, if a former bankrupt applies for insurance, the underwriter needs to assess the applicant’s current state of affairs. They need to study how long ago the bankruptcy occurred and whether the financial condition of this person has changed. After they have assessed the reliability and solvency of the client, they approve or reject their application. A good underwriter must be able to distinguish between risky and correct decisions. Thus, such an employee directly influences the profitability of a financial software company.
Depending on the complexity of an insurance policy, the underwriting procedure takes from one (for example, life insurance) to seven days (property insurance). This is not easy because underwriters can spend only 30% of their working time on key business responsibilities. The remaining 70% of the working day is dedicated to daily routine tasks (paperwork, filling out spreadsheets, searching for data in PDF files, etc.).
AI can perform time-consuming data analysis, speeding up claim processing and improving the accuracy of risk assessments. A smart algorithm can find even more sources of information about a candidate on the web: their posts on social networks, SEC documents, recently visited Internet resources and visitor actions on these websites. With AI, underwriters get more data on potential risk factors. The smart algorithm also considers the geopolitical situation that can affect someone’s solvency and payment of claims. As a result, it takes several minutes to approve an insurance policy.
As CEO and co-founder of AMPLYFI Chris Ganje put it, AI gives insurers the ability to keep up with the times and process large datasets with unprecedented speed and accuracy. This is one of the key features of a modern developing business.
AI as an insurance fraud detection agent
To get insurance payments illegally, people contrive to commit abhorrent deeds. They feign death, as British teacher John Darwin did in the early 2000s. They can also fake arm amputations, blame restaurants for poor-quality food, set cars on fire, and do other horrifying things. The Coalition Against Insurance Fraud estimates that such scams result in huge losses ($308.6 billion annually).
How to recognize false claims and not pay off incredible amounts of money? Even a most experienced insurance agent is not always able to detect fraud and identify fake documents. AI can fill these gaps in human cognition. For example, a Pan-Asian insurance company protected itself with the Shift AI platform. In the first months after implementation, the software solution helped the firm save $100,000 from fraudulent claims. A smart algorithm drew the attention of insurance agents to 80% of cases that were not previously perceived as suspicious. For example, in situations where drugs covered by insurance are prescribed more often than necessary.
AI analyzes the content of claims, finds anomalies in them, estimates the amount of money to pay (if necessary), and offers options on how to solve problems and strengthen protection against fraud. Thus, a company can stop a scam before making insurance payments. It won’t waste energy on investigating cases, finding criminals, and suing them.
AI reduces human error
An insurance agent carries out numerous procedures and must secure proper coverage so that clients understand which situations are insured events and know if they are protected. This specialist needs to maintain a relationship with a policyholder and provide them with the necessary information. They also renew or expand insurance contracts over time, monitor the payment of insurance premiums, maintain supporting documentation (contracts, invoices, acts), and prepare reports for a specific period. Most of these operations are performed manually, so specialists can make mistakes. Everyone makes mistakes: lawyers, doctors, and researchers. The main thing is that insurance agents have a cure for this “disease”. These are efficient AI-based apps.
AI can take over filling out applications for insurance plans. Agents use optical character recognition systems (OCR) that extract data from paper documents and transfer it to the necessary programs. More than 61% of people prefer to take out auto insurance, medical policy, or life insurance online. Accordingly, a smart algorithm can extract data from photographed documents into a client profile in a few seconds, freeing agents from this routine task.
This means that insurers spend less time migrating and rechecking data and pay more attention to consumers. Enhanced automation can reduce costs for certain operations by up to 80%.
AI helps insurers take better care of their customers
In 2021, 44.5% of organizations regarded customer experience as a key competitive advantage. Approximately the same number of companies rely on AI to improve CX.
Insurance companies are no exception: they also strive to make the customer journey comfortable and enjoyable. After all, up to 40% of consumers stop cooperating with a company due to a poor level of service. Insurance organizations are implementing chatbots on their websites to stay in touch with consumers 24/7. AI-powered virtual assistants answer basic questions, help people sign into their accounts, or ask them to specify details by email so that an insurance agent can answer during business hours. Such a chatbot can also take on the following functions:
- it tells a client about the insurance policy/service they are interested in;
- accepts claims and informs users about their status;
- tells a policyholder how and where to pay insurance premiums;
- offers consumers relevant products;
- provides personalized service.
Using a virtual assistant in insurance is convenient because 43% of people are willing to take out policies through chatbots. Thus, an insurance company serves more people per day, increases their loyalty, and reduces the cost of customer support.
AI streamlines the claims handling process
When an insured event occurs, a person contacts their agent to file a claim. They report the details of the incident and the participants’ contacts and attach the necessary documentation and other supporting certificates or images. After receiving the insurance claim, the agent needs to evaluate the case. They must confirm its authenticity, assess the amount of damage, prepare documentation, and initiate insurance payment. Claim processing takes an average of 30-45 days, so the client needs to be patient and expect compensation.
AI can speed up the desired payout through automation. A smart algorithm can quickly and accurately analyze the data received from a client and assess the real amount of damage. CCC reported that in 2021, AI was used 50% more frequently to process claims compared to 2020. Barrett Callaghan, CCC Executive Vice President, Markets and Customer Success, said that AI is enabling safer, more accurate, and faster decisions throughout the claims process.
Mantra Labs illustrates how an entire 30-day claim approval process can be completed in a 5-minute AI-powered check. See the picture below:
When an insurer receives an application, a smart algorithm begins to extract and analyze data. Then it determines how credible and lawful the claim is. If it is legitimate, the algorithm recalculates the amount of damage and compares it with the figure declared by the user. If their calculations coincide, the claim is sent to the billing system for processing. The lab has shown an example of medical claim processing. However, this applies to other types of insurance activities.
Insurance industry leader EY states that fast claims resolution is an important factor in CX. It determines whether 87% of the insurers will remain with a company. With AI apps in insurance, it is easier to achieve customer recognition and loyalty.
Conclusion
The insurance industry is just getting started with AI. In some companies (for example, Argo Group), underwriters have partially outsourced their responsibilities to smart algorithms. Organizations need to prepare for changes to embrace this cutting-edge technology. They should study information about the latest AI trends and plan how to use it to develop business processes. They should also structure external and internal data. Then advanced insurance workers will cooperate with AI and delegate part of the tasks to it. As you can see, this is a laborious process. But those who carry it out gain a competitive edge.
