The profound impacts of AI on insurance, Pt. 1
Artificial intelligence has been helping business owners to expedite and automate their processes for years. In the insurance industry, AI has been proven successful in helping detect instances of fraud, mitigate the risk of human error, and can even man certain basic tasks. Nowadays, AI is showing significant process in its ability to overtake the underwriting process.
This is not to say that AI will one day take over all the jobs within the industry. It’s quite the opposite, really. AI is certainly not at a point right now where it can entirely replace a human employee; instead, it serves to assist us in our daily processes, take on autonomous tasks, and frees up our time to handle more pressing matters instead that require human intelligence.
Here’s the rub: artificial intelligence is radically impacting the insurance industry. And it all begins with transforming how we do underwriting.
What is artificial intelligence?
AI, or artificial intelligence, is the theory and the development of computer systems to complete tasks that would typically require human or “natural” intelligence. AI can use visual perception, decision-making, speech recognition, and even translate languages in no time in order to solve problems.
An example of AI, for instance, is an AI-manned chatbox. Plenty of businesses use AI-manned chatboxes to free up their phone lines and answer basic questions. Other examples might be AI-powered security surveillance, AI voice-to-text features, spam filters monitored by AI, and so forth.
The antithesis of artificial intelligence would be the intelligence that is demonstrated by humans and animals, i.e. “natural intelligence.” Artificial intelligence isn’t so developed that it can replicate natural intelligence, but it works faster than humans and presents less probability for error, making it an ideal candidate for businesses and the insurance industry to take up some simpler tasks and automate them, freeing up human employees to do more pressing tasks that require natural intelligence involvement.
What is underwriting in the insurance industry?
If you’re not already aware, underwriting – or “risk assessment” – is the process by which insurance carriers will use decades of statistics and weigh them against your personal demographics (and, depending on the product you’re purchasing, the way you drive, the age of your home, your business industry…etc.) to calculate your risk and thereby your insurance premiums.
Underwriting can also impact the amount of insurance coverage you’re eligible for. Some prospect policyholders are riskier to insure than others, which may make it more difficult for them to qualify for certain insurance coverages. They may also find their insurance more expensive.
With each different insurance product, underwriters are looking for different things.
- For home, condo, and auto insurance/i.e., property insurance, underwriters are attempting to calculate the risk of theft, fire, fraud, and flood.
- For life insurance, underwriters may attempt to calculate the risk of an early death.
- For business insurance, underwriters may attempt to calculate the risk of a loss due to physical perils or a lawsuit as a result of an injured or dissatisfied third-party.
Here’s how AI seeks to transform underwriting.
Artificial intelligence and underwriting
Currently, underwriters spend much of their time on non-core activities – tasks that can be easily assumed by AI software and significantly boost efficiency. As AI continues to mature and its costs come down to a more reasonable point (reasonable enough to where any insurance company, small or large, could purchase AI software) we see significant ROI in incorporating AI in our underwriting processes.
See, underwriters used to draw their data from a huge base of stats, considering things like age, gender, driving record, etc. and so forth, but AI takes it a step further. Not only can AI automate that process, completing it and gauging risk in a matter of seconds, but it draws from more records, including unstructured data from social media platforms, reviews online, chat boxes, and more.
Artificial intelligence and claims management
Word on the street is that while AI might be able to expedite underwriting, there’s a good chance it could start to play a role in claims management as well. That includes handling basic claims, which would otherwise be tasked to multiple middle-men – which can be a long and arduous process. Instead, AI can expedite that process by processing data, analyzing the individual’s coverage, and expediting a lot of the manual labour. This frees up the human workers to handle more complex claims.
AI is already participating in claims management. It can man claims submission phonelines, online portals, and even answer basic questions.
What else do we know about the future of insurance?
To say that AI will be implemented in “the near future” is somewhat of a lie. See, AI is not the same as it was a few decades ago, or even five years ago. AI is being implemented in businesses, the insurance industry, and our personal lives as we walk and talk. It’s harnessing claims data and improving the underwriting process, yes, but it’s so much more than that, too.
Want to know more about how artificial intelligence is profoundly impacting the insurance industry? See Panda7’s part two for artificial intelligence and insurance and what the future of auto, home, condo, and life insurance might look like.
