Artificial Intelligence (AI) in Insurance

Datamation content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.

The insurance field has been investing in artificial intelligence (AI) for some time. In fact, AI in insurance could be considered to be relatively mature, at least on a basic level. Functions like chatbots and AI-based analytics are well-established in the field. But with each passing year, the level of sophistication of AI-based insurance continues to rise. 

The need for AI in insurance is clear. Consider all the houses, cars, and businesses in a country. Now factor in appliances, computers, equipment, and other items which are often insured. The number of insured objects and items is astronomical. It isn’t feasible for a team of agents, clerks, appraisers, and adjusters to manually stay on top of everything. Automation is needed as well as the ability to sift through all of the related data to drive decisions, spot trends, and highlight sales opportunities.

AI in Insurance Today

AI impacts the insurance industry in several ways. It is harnessed in areas such as claims processing, underwriting, fraud detection, and customer service to name a few. But this is a market where AI spending is set to soar.

After all, insurers are already sitting on riches. Over the decades, they have accumulated mountains of data about families, homes, and businesses. However, it is often sitting in silos and not accessible to those on the front lines. AI can change that if the information is integrated and available for analysis. It can piece together this abundance of unstructured data and leverage it to increase customer engagement, improve service personalization, and make marketing messages more meaningful.

According to a PwC survey, a quarter of insurance companies report widespread adoption of AI, up from 18% last year. Another 54% have begun implementing AI and are looking to scale up.  An earlier LexisNexis paper, “Hype or Reality: The State of Artificial Intelligence and Machine Learning in the Insurance Industry,” found that 16 of the top 20 insurance companies were major adopters of AI and machine learning (ML). The percentage dropped to 62% for ranks 21 to 50 and 51% for the rest of the top 100.

5 Key Applications of AI in Insurance

1. Improved customer experience 

Matt Adams, a PwC partner based in New York, said creating a better customer experience (CX) is the biggest area of AI success in insurance.

“Companies are increasingly using AI to customize products for both consumers and business customers, create more continual interaction with clients for greater loyalty and upselling, and analyze more data from more sources (including social media) for better forecasts,” Adams said.

2. Chatbots 

The National Association of Insurance Commissioners (NAIC) notes that many insurers have already invested in virtual assistants like chatbots. These chatbots offer digital services and can hold natural sounding conversations with human beings. 

The goal is to answer questions, route calls, minimize human traffic to only higher-level requests, and be available 24/7 for advice, billing information, and common inquiries and transactions. Insurers such as Geico, Allstate, and Lincoln Financial were among the pioneers of chatbots in insurance. And today, most major companies utilize them. 

Chatbots are also now being used to deal with cybersecurity password issues and provide copies of policies and other basic documentation. This saves enormous amounts of manpower.

3. Claims management 

A startup known as Lemonade has combined machine learning with chatbot technology in different stages of the claim handling process. ML models assess the severity of damage; predict repair costs from historical data, sensors, and images; and settle basic claims. Lemonade boasts that its chatbots, Jim and Maya, can secure a policy for consumers in as little as 90 seconds as well as settle a claim within three minutes.

4. Agent interaction 

Liberty Mutual developed a way for its AI applications to connect with Amazon Alexa to take care of a wide range of functions. This includes answering user questions, providing insurance estimates rapidly, and connecting users with the nearest agent that can satisfy their needs. The company also uses this AI technology to offer advice on managing risk.

5. On-demand insurance 

Consumers, these days, want instant service. They no longer want to call up a 1-800 number, get referred to a local agent, make an appointment, drive to see the agent, wait for paperwork to be prepared, and then sign all the documentation. Instead, they want to do it online or on their smartphones.

Insurance firm Trov, for example, offers an app that can be licensed by insurers that simplifies many aspects of insurance administration. Consumers can turn on or off coverage with a single swipe on their phones, and chatbots are incorporated to automate claims processing. Trov has partnered with firms such as Slice Labs in providing on-demand insurance coverage for homeowners, renters, and small business owners.

Similarly, Bind Benefits allows consumers to customize health insurance coverage based on current needs or life events. Bind partners with United Healthcare as part of its service model.