How AI is changing the insurance industry

Insurers are beginning to explore the use of AI.

When Ant Financial was weighing its options to dramatically increase its claims efficiency for Alipay account cash theft insurance, it placed its bets on the latest artificial intelligence (AI) and biometric technology. The gambit to launch self-claim services powered by AI has been paying off for the firm with 83% of its claims completed within 24 hours, the fastest of which are finished in 3 seconds.

AI is already transforming critical insurance processes from customer experience to risk management by bringing higher levels of efficiency and effectiveness, and future applications promise even more impressive boons. But analysts warn insurers not to get too blinded by the promise of AI or they may risk falling into painful planning and implementation traps.

The power of AI
Nowadays, insurers are beginning to explore the use of AI primarily to improve customer experience, distribution, risk management, and operations, says PwC. Many firms have entered the early stages of enhancing and personalising the customer experience by exploiting social data to understand customer needs and sentiments.

Others are also automating their underwriting and claims processes. In the coming years, insurers are expected to use AI to power their machine learning and reality mining techniques, predict what customers will need and do, and tailor customer interactions and offers to match their preferences. Firms are also starting to salivate at the idea of using AI to fuel their trend forecasting which can lead to new sources of revenue, as well as spot emerging risks before they have a chance to threaten the bottom line.

“Given the extraordinary possibilities of AI, it’s no wonder that many insurers are jumping on the bandwagon,” concurs Srinivasan Somasundaram, director, insurance practice at Cognizant Business Consulting. But he points out that, as with any technological investment, there are a handful of clear and present dangers that could undermine AI planning and implementation. This includes feeding a wide variety of customer query and data to AI solutions.

A future with AI
PwC foresees a future where AI systems, fed with a mountain of relevant data, can become so accurate and powerful that they reduce the need for human advisors, underwriters, call center representatives, and claims adjusters.

“AI systems learn from their interactions with the environment and with their human masters. They are likely to become more effective than humans and replace them,” adds PwC. When AI solutions scale up this way and threaten human jobs, insurers will need to carefully manage how to transition their workforce to reduce resistance.